Capital One Reports First Quarter Earnings
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MCLEAN, Va., April 20 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced that its earnings for the first quarter of 2006 were $883.3 million, or $2.86 per share (diluted), compared with $506.6 million, or $1.99 per share (diluted), for the first quarter of 2005, and $280.3 million, or $0.97 per share (diluted), for the fourth quarter of 2005.
"Capital One delivered record results in the first quarter across our diversified portfolio of businesses," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We're pleased with the results of our new banking segment. The integration of Hibernia Bank is on track and our de novo branches in Texas continue to deliver great results. The addition of North Fork, expected in the fourth quarter, will further diversify our balance sheet and provide us with a premier growth platform in the largest deposit market in America."
The managed charge-off rate for the company decreased to 2.65 percent in the first quarter of 2006 from 4.13 percent in the first quarter of 2005 and from 4.53 percent in the previous quarter. The company decreased its allowance for loan losses by $115.0 million in the first quarter of 2006, driven largely by decreasing delinquencies and lower loan balances in the quarter. The managed delinquency rate (30+ days) decreased to 2.92 percent as of March 31, 2006 from 3.45 percent as of the end of March 31, 2005 and from 3.24 percent as of December 31, 2005.
Managed loans at March 31, 2006 were $103.9 billion, up $22.3 billion, or 27 percent, from March 31, 2005. This includes organic growth as well as $16.3 billion of loans acquired through Hibernia in November 2005. Managed loans decreased $1.6 billion, or two percent from the previous quarter due to normal seasonality of credit card loan balances. The company expects that managed loans will grow at a rate of between seven and nine percent during 2006, excluding the loan growth that will come with the acquisition of North Fork.
Capital One's managed revenue margin decreased to 11.30 percent in the first quarter of 2006 from 12.50 percent in the first quarter of 2005, primarily due to the addition of Hibernia's loan portfolio. The company's managed revenue margin was 12.06 percent in the fourth quarter of 2005. Return on managed assets for the first quarter of 2006 was 2.62 percent versus 2.04 percent in the first quarter of 2005, and 0.94 percent in the fourth quarter of 2005.
First quarter marketing expenses increased $12.0 million to $323.8 million from $311.8 million in the first quarter of 2005, and decreased $123.6 million from the fourth quarter of 2005. Annualized operating expenses as a percentage of average managed loans decreased to 4.78 percent in the first quarter of 2006 from 4.98 percent in the first quarter of 2005 and from 5.27 percent in the previous quarter.
First quarter pre-tax income was positively impacted by the $83.8 million sale of a combination of company originated and previously purchased charged- off loan portfolios. Additionally, the company realized a $34.9 million tax benefit related to resolution of a federal tax audit for the years 2000 through 2002.
"We are affirming our earnings guidance of between $7.40 and $7.80 per share (diluted) for 2006, taking into account both strong first quarter earnings and the expected close of the North Fork acquisition in the fourth quarter," said Gary L. Perlin, Capital One's Chief Financial Officer. "We continue to expect stability in return on managed assets in 2006 as decreases in revenue margin are expected to be offset by reductions in provision expense and operating expenses as a percent of assets."
Segment results
The US Card business net income in the first quarter of 2006 was $602.8 million, compared with $458.2 million in the first quarter of 2005, and $237.0 million in the fourth quarter of 2005. Overall performance in the segment was driven principally by continued improvement in credit trends. Managed loans at March 31, 2006 were $47.1 billion, up $512.9 million, or one percent, from March 31, 2005, and down $2.3 billion, or five percent from the prior quarter, reflecting the normal seasonality of credit card loan balances. The managed charge-off rate decreased to 2.93 percent in the first quarter of 2006 from 4.73 percent in the first quarter of 2005 and 5.70 percent in the previous quarter. We expect credit card charge-offs to return to more normal levels late in the year as the effects of the bankruptcy filing spike dissipate.
Results in the auto business segment this quarter reflect continued growth and strong credit, and the addition of the $2.9 billion Hibernia auto portfolio. Net income in the first quarter of 2006 was $69.4 million, compared with $35.6 million in the first quarter of 2005, and $8.0 million in the fourth quarter of 2005. Auto loan originations during the quarter were $2.9 billion, up $907.4 million, or 45 percent, from the prior year's first quarter, and up $377.2 million, or 15 percent from the fourth quarter 2005. The managed charge-off rate decreased to 2.35 percent in the first quarter of 2006 from 2.89 percent in the first quarter of 2005 and 3.32 percent in the previous quarter.
Solid results in the Global Financial Services segment were led by strong growth and credit performance in its North American businesses. Net income in the first quarter of 2006 was $113.5 million, compared with $70.5 million in the first quarter of 2005, and $7.0 million in the fourth quarter of 2005. Managed loans during the quarter were $23.7 billion, up $2.0 billion, or nine percent, from the prior year's first quarter, and up $346.0 million, or two percent from the fourth quarter of 2005. The managed charge-off rate increased to 3.63 percent in the first quarter of 2006 from 3.55 percent in the first quarter of 2005 and decreased from 4.33 percent in the previous quarter.
Capital One's new banking segment includes most of the historical business of Hibernia and Capital One's branchless deposit business, as well as integration expenses, corporate allocations, and purchase accounting impacts. It specifically excludes, however, Hibernia originated auto loans, which are now reported in our auto business segment. Banking segment net income in the first quarter of 2006 was $43.3 million. Total deposits at the end of the quarter were $35.4 billion. The company opened three new branches in the quarter and remains on track to open 40 new branches in 2006. During the first quarter, the company made great progress on the integration of Hibernia and remains poised to complete the brand conversion next week. It continues to expect integration costs and synergies to be greater than original estimates.
The company generates earnings from its managed loan portfolio, which includes both on-balance sheet loans and securitized (off-balance sheet) loans. For this reason, the company believes managed financial measures to be useful to stakeholders. In compliance with Regulation G of the Securities and Exchange Commission, the company is providing a numerical reconciliation of managed financial measures to comparable measures calculated on a reported basis using generally accepted accounting principles (GAAP). Please see the schedule titled "Reconciliation to GAAP Financial Measures" attached to this release for more information.
Forward-looking statements
The company cautions that its current expectations in this release, in the presentation slides available on the company's website and on its Form 8-K dated April 20, 2006 for first quarter earnings, return on assets, loan growth rates, operating costs, revenue margins, charge-off rates, branch growth, integration costs and synergies, and the benefits of the business combination transaction involving Capital One and North Fork, including future financial and operating results, and the company's plans, objectives, expectations and intentions are forward-looking statements and actual results could differ materially from current expectations due to a number of factors, including: the ability to obtain regulatory approvals of the proposed acquisition of North Fork on the proposed terms and schedule; the failure of Capital One or North Fork stockholders to approve the transaction; the risk that the businesses from previous or pending acquisitions will not be integrated successfully and that the cost savings and other synergies from such acquisitions may not be fully realized; continued intense competition from numerous providers of products and services which compete with Capital One's businesses; changes in our aggregate accounts and balances, and/or number of customers, and the growth rate and composition thereof; the company's ability to access the capital markets at attractive rates and terms to fund its operations and future growth; changes in the reputation of the credit card industry and/or the company with respect to practices or products; the success of the company's marketing efforts; the company's ability to execute on its strategic and operating plans; and general economic conditions affecting interest rates and consumer income, spending, and savings which may affect consumer bankruptcies, defaults, and charge-offs and deposit activity; the long-term impact of the Gulf Coast hurricanes on the impacted regions, including the amount of property and credit losses, the amount of investment, including deposits, in the region, and the pace and magnitude of economic recovery in the region. A discussion of these and other factors can be found in Capital One's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the fiscal year ended December 31, 2005.
Additional Information About the Capital One - North Fork Transaction
In connection with the proposed merger of Capital One and North Fork Bancorporation, Inc., Capital One will file with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-4 that will include a joint proxy statement of Capital One and North Fork that also constitutes a prospectus of Capital One. Capital One and North Fork will mail the joint proxy statement/prospectus to their respective stockholders. Investors and security holders are urged to read the joint proxy statement/prospectus regarding the proposed merger when it becomes available because it will contain important information. You may obtain a free copy of the joint proxy statement/prospectus (when available) and other related documents filed by Capital One and North Fork with the SEC at the SEC's website at http://www.sec.gov. The joint proxy statement/prospectus (when available) and the other documents may also be obtained for free by accessing Capital One's website at http://www.capitalone.com under the heading "Investors" and then under the heading "SEC & Regulatory Filings" or by accessing North Fork's website at http://www.northforkbank.com under the tab "Investor Relations" and then under the heading "SEC Filings."
Participants in the Capital One - North Fork Transaction
Capital One, North Fork and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from stockholders in favor of the merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the stockholders in connection with the proposed merger will be set forth in the joint proxy statement/prospectus when it is filed with the SEC. You can find information about Capital One's executive officers and directors in Capital One's definitive proxy statement filed with the SEC on March 23, 2006. You can find information about North Fork's executive officers and directors in their definitive proxy statement filed with the SEC on March 30, 2005. You can obtain free copies of these documents from the Capital One or North Fork using the contact information above.
About Capital One
Headquartered in McLean, Virginia, Capital One Financial Corporation (http://www.capitalone.com) is a financial holding company, with more than 316 locations in Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto Finance, Inc., and Hibernia National Bank (http://www.hibernia.com), offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $47.8 billion in deposits and $103.9 billion in managed loans outstanding as of March 31, 2006. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.
NOTE: First quarter 2006 financial results, SEC Filings, and first quarter earnings conference call slides are accessible on Capital One's home page (http://www.capitalone.com). Choose "Investors" on the bottom left corner of the home page to view and download the earnings press release, slides, and other financial information. Additionally, a webcast of today's 5:00 pm (ET) earnings conference call is accessible through the same link.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY REPORTED BASIS
2006 2005 2005
(in millions, except per share
data and as noted) Q1 Q4 Q1
Earnings (Reported Basis)
Net Interest Income $ 1,206.9 $ 1,037.0 $ 860.5
Non-Interest Income 1,858.3 1,665.5(2) 1,516.0
Total Revenue(4) 3,065.2(3) 2,702.5 2,376.5
Provision for Loan Losses 170.3(3) 565.7 259.6
Marketing Expenses 323.8 447.4 311.8
Operating Expenses 1,249.7 1,241.7(5) 1,016.1
Income Before Taxes 1,321.4 447.7 789.0
Tax Rate 33.2 % 37.3 % 35.8 %
Net Income $ 883.3 $ 280.3 $ 506.6
Common Share Statistics
Basic EPS $ 2.95 $ 1.01 $ 2.08
Diluted EPS $ 2.86 $ 0.97 $ 1.99
Dividends Per Share $ 0.03 $ 0.03 $ 0.03
Book Value Per Share (period end) $ 50.06 $ 46.97 $ 35.62
Stock Price Per Share (period end) $ 80.52 $ 86.40 $ 74.77
Total Market Capitalization
(period end) $24,397.6 $25,989.1 $18,849.5
Shares Outstanding (period end) 303.0 300.8 252.1
Shares Used to Compute Basic EPS 299.3 278.8 244.0
Shares Used to Compute Diluted
EPS 309.1 287.7 255.2
Reported Balance Sheet Statistics
(period avg.)
Average Loans $ 58,142 $ 48,701 $ 38,204
Average Earning Assets $ 78,148 $ 66,624 $ 50,898
Average Assets $ 88,895 $ 74,443 $ 56,288
Average Equity $ 14,612 $ 12,528 $ 8,568
Return on Average Assets (ROA) 3.97 % 1.51 % 3.60 %
Return on Average Equity (ROE) 24.18 % 8.95 % 23.65 %
Reported Balance Sheet Statistics
(period end)
Loans $ 58,119 $ 59,848 $ 37,959
Total Assets $ 89,273 $ 88,701 $ 55,632
Loan growth $ (1,729) $ 20,996 $ (257)
% Loan Growth Y Over Y 53 % 57 % 14 %
Revenue & Expense Statistics
(Reported)
Net Interest Income Growth
(annualized) 66 % 56 % 39 %
Non Interest Income Growth
(annualized) 46 % 18 % (1)%
Revenue Growth (annualized) 54 % 32 % 12 %
Net Interest Margin 6.18 % 6.23 % 6.76 %
Revenue Margin 15.69 % 16.23 % 18.68 %
Risk Adjusted Margin(6) 14.15 % 13.52 % 16.08 %
Operating Expense as a % of
Revenues 40.77 % 45.95 % 42.76 %
Operating Expense as a % of Avg
Loans (annualized) 8.60 % 10.20 % 10.64 %
Asset Quality Statistics (Reported)
Allowance $ 1,675 $ 1,790 $ 1,440
30+ Day Delinquencies $ 1,559 $ 1,879 $ 1,319
Net Charge-Offs $ 301 $ 451 $ 330
Allowance as a % of Reported
Loans 2.88 % 2.99 % 3.79 %
Delinquency Rate (30+ days) 2.68 % 3.14 % 3.47 %
Net Charge-Off Rate 2.07 % 3.70 % 3.46 %
(1) Includes a $15.6 million write-down for retained interests and a $28.5
million build in the allowance for loan losses related to the impact
of the Gulf Coast Hurricanes. This also includes a $48.0 million
write-down for retained interests and a $27.0 million build in the
allowance related to the spike in bankruptcies experienced immediately
before The Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 became effective in October 2005.
(2) Includes a $34 million gain from the sale of previously purchased
charged-off loan portfolios.
(3) Includes the impact of the sale of charged-off loans resulting in a
$76.8 million increase to various revenue line items, the majority of
which was recorded to other non-interest income and a $7.0 million
reduction to the provision for loan losses through an increase in
recoveries for the sale of charged-off loans originated by the Company
and not securitized.
(4) 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: Q1 2006 -- $170.9, Q4 2005 -- $227.9, Q3
2005 -- $255.6, Q2 2005 -- $259.8, and Q1 2005 -- $243.9.
(5) Includes a $28.2 million impairment charge related to our insurance
business in Global Financial Services and a $20.6 million prepayment
penalty for the refinancing of the McLean Headquarters facility.
(6) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY MANAGED BASIS(1)
2006 2005 2005
(in millions) Q1 Q4 Q1
Earnings (Managed Basis)
Net Interest Income $ 2,235.0 $ 2,075.2 $ 1,818.8
Non-Interest Income 1,222.2 1,243.4(3) 1,071.4
Total Revenue(5) 3,457.2(4) 3,318.6 2,890.2
Provision for Loan Losses 562.3(4) 1,181.8 773.3
Marketing Expenses 323.8 447.4 311.8
Operating Expenses 1,249.7 1,241.7(6) 1,016.1
Income Before Taxes 1,321.4 447.7 789.0
Tax Rate 33.2 % 37.3 % 35.8 %
Net Income $ 883.3 $ 280.3 $ 506.6
Managed Balance Sheet Statistics
(period avg.)
Average Loans $ 104,610 $ 94,241 $ 81,652
Average Earning Assets $ 122,403 $ 110,096 $ 92,477
Average Assets $ 134,797 $ 119,406 $ 99,283
Return on Average Assets (ROA) 2.62 % 0.94 % 2.04 %
Managed Balance Sheet Statistics
(period end)
Loans $ 103,907 $ 105,527 $ 81,592
Total Assets $ 134,530 $ 133,786 $ 98,724
Loan Growth $ (1,620) $ 20,759 $ 1,731
% Loan Growth Y over Y 27 % 32 % 14 %
Tangible Assets(7) $ 130,211 $ 129,484 $ 97,976
Tangible Capital(8) $ 11,016 $ 9,994 $ 8,940
Tangible Capital to Tangible
Assets Ratio 8.46 % 7.72 % 9.12 %
% Off-Balance Sheet Securitizations 44 % 43 % 53 %
Revenue & Expense Statistics
(Managed)
Net Interest Income Growth
(annualized) 31 % 30 % 28 %
Non Interest Income Growth
(annualized) (7)% 52 % (10)%
Revenue Growth (annualized) 17 % 38 % 13 %
Net Interest Margin 7.30 % 7.54 % 7.87 %
Revenue Margin 11.30 % 12.06 % 12.50 %
Risk Adjusted Margin (9) 9.03 % 8.18 % 8.85 %
Operating Expense as a % of Revenues 36.15 % 37.42 % 35.16 %
Operating Expense as a % of Avg
Loans (annualized) 4.78 % 5.27 % 4.98 %
Asset Quality Statistics (Managed)
30+ Day Delinquencies $ 3,039 $ 3,424 $ 2,812
Net Charge-Offs $ 693 $ 1,067 $ 844
Delinquency Rate (30+ days) 2.92 % 3.24 % 3.45 %
Net Charge-Off Rate 2.65 % 4.53 % 4.13 %
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule -- "Reconciliation to GAAP Financial Measures."
(2) Includes a $15.6 million write-down for retained interests and a $28.5
million build in the allowance for loan losses related to the impact
of the Gulf Coast Hurricanes. This also includes a $48.0 million
write-down for retained interests and a $27.0 million build in the
allowance related to the spike in bankruptcies experienced immediately
before The Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 became effective in October 2005.
(3) Includes a $34 million gain from the sale of previously purchased
charged-off loan portfolios.
(4) Includes the impact of the sale of charged-off loans resulting in a
$66.4 million increase to various revenue line items, the majority of
which was recorded to other non-interest income and a $17.4 million
reduction to the provision for loan losses through an increase in
recoveries for the sale of charged-off loans originated by the
Company.
(5) In accordance with the Company's finance charge and fee revenue
recognition policy, the amounts billed to customers but not recognized
as revenue were as follows: Q1 2006 -- $170.9, Q4 2005 -- $227.9, Q3
2005 -- $255.6, Q2 2005 -- $259.8, and Q1 2005 -- $243.9.
(6) Includes a $28.2 million impairment charge related to our insurance
business in Global Financial Services and a $20.6 million prepayment
penalty for the refinancing of the McLean Headquarters facility.
(7) Includes managed assets less intangible assets.
(8) Includes stockholders' equity and preferred interests for all periods
presented, 80% of mandatory convertible securities for all periods
prior to Q2 2005, less intangible assets. Tangible Capital on a
reported and managed basis is the same.
(9) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY -- MANAGED BASIS(1)
2006 2005 2005
(in thousands) Q1 Q4 Q1
Segment Statistics
US Card:
Net interest income $ 1,221,101 $ 1,183,794 $ 1,250,638
Non-interest income 775,413 844,286 779,415
Provision for loan losses 224,438 767,103 489,036
Non-interest expenses 844,729 892,521 836,142
Income tax provision (benefit) 324,573 131,415 246,706
Net income (loss) $602,774 $237,041 $458,169
Loans receivable $47,142,650 $49,463,522 $46,629,763
Average loans $48,217,926 $46,857,527 $47,547,749
Net charge-off rate 2.93% 5.70% 4.73%
Delinquency Rate (30+ days) 3.31% 3.44% 3.66%
Purchase Volume (2) $18,015,669 $21,209,357 $15,598,314
Number of Accounts (000s) 37,258 37,645 38,255
Auto Finance:
Net interest income $ 348,830 $ 314,024 $ 249,507
Non-interest income 391 (1,358) 11,339
Provision for loan losses 107,805 161,651 92,313
Non-interest expenses 134,655 138,412 113,765
Income tax provision (benefit) 37,366 4,512 19,169
Net income (loss) $ 69,395 $ 8,091 $ 35,599
Loans receivable $19,848,190 $16,372,019 $13,292,953
Average loans $19,440,128 $16,095,793 $12,733,831
Net charge-off rate 2.35% 3.32% 2.89%
Delinquency Rate (30+ days) 3.57% 5.71% 3.51%
Auto Loan Originations (3) $ 2,940,540 $ 2,563,372 $ 2,033,162
Number of Accounts (000s) 1,480 1,438 1,033
Global Financial Services:
Net interest income $ 438,249 $ 432,335 $ 412,733
Non-interest income 283,352 250,349 233,841
Provision for loan losses 217,365 263,664 188,316
Non-interest expenses 330,172 410,670 351,476
Income tax provision (benefit) 60,520 1,299 36,309
Net income (loss) $ 113,544 $ 7,051 $ 70,473
Loans receivable $23,732,515 $23,386,490 $21,683,102
Average loans $23,668,326 $23,129,203 $21,353,653
Net charge-off rate 3.63% 4.33% 3.55%
Delinquency Rate (30+ days) 2.90% 2.83% 3.04%
Number of Accounts (000s) 10,013 9,928 9,420
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule -- "Reconciliation to GAAP Financial Measures."
(2) Includes all purchase transactions net of returns and excludes cash
advance transactions.
(3) Includes all organic auto loan originations and excludes auto loans
added through acquisitions.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY -- MANAGED BASIS(1) CONTINUED
2006 2005 2005
(in thousands) Q1 Q4 Q1
Segment Statistics
Banking:
Net interest income $ 244,924
Non-interest income 104,485
Provision for loan losses 9,821
Non-interest expenses 272,987
Income tax provision (benefit) 23,310
Net income (loss) $ 43,291
Loans receivable $ 13,169,792
Average loans $ 13,283,515
Net charge-off rate 0.38%
Delinquency Rate (30+ days) 0.75%
Core Deposits(2) 27,996,290
Total Deposits 35,396,221
Number of ATMs 669
Number of locations(3) 316
Other:
Net interest income $ (18,134) $ 145,043 $ (94,118)
Non-interest income 58,553 150,153 46,806
Provision for loan losses 2,877 (10,631) 3,627
Non-interest expenses (9,064) 247,583 26,449
Income tax provision (benefit) (7,729) 30,109 (19,709)
Net income (loss) $ 54,335 $ 28,135 $ (57,679)
Loans receivable $ 13,629 $ 16,305,460 $ (13,826)
Total:
Net interest income $ 2,234,970 $ 2,075,196 $ 1,818,760
Non-interest income 1,222,194 1,243,430 1,071,401
Provision for loan losses 562,306 1,181,787 773,292
Non-interest expenses 1,573,479 1,689,186 1,327,832
Income tax provision (benefit) 438,040 167,335 282,475
Net income (loss) $ 883,339 $ 280,318 $ 506,562
Loans receivable $103,906,776 $105,527,491 $81,591,992
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule -- "Reconciliation to GAAP Financial Measures."
(2) Includes domestic non-interest bearing deposits, NOW accounts, money
market deposit accounts, savings accounts, certificates of deposit of
less than $100,000 and other consumer time deposits.
(3) Number of locations includes 302 branches and 14 other customer
centers and excludes 18 branches that remain closed due to hurricane
damage.
CAPITAL ONE FINANCIAL CORPORATION (COF)
Banking Segment Compilation
The Company is including this schedule to provide additional information regarding the composition of our new Banking segment.
Hibernia's
Q1 2006 Capital One's Indirect Auto
Branchless Lending
(in thousands) Banking(1) Deposits(1) Business(2)
Net interest income $ 240,472 $ 25,649 $ (23,420)
Non-interest income 105,365 814 (680)
Provision for loan losses 18,000 - (8,179)
Non-interest expense 207,528 21,838 (10,087)
Income tax provision
(benefit) 42,109 1,619 (2,042)
Net income (loss) $ 78,200 $ 3,006 $ (3,792)
Loans Receivable $16,072,735 $(2,902,943)
Total Deposits $22,255,080 $14,096,111
Q1 2006 Purchase
Accounting Other Banking
(in thousands) Adjustments(3) Adjustments(4) Segment
Net interest income $ 12,956 $ (10,733) $ 244,924
Non-interest income - (1,014) 104,485
Provision for loan losses - - 9,821
Non-interest expense 23,188 30,520 272,987
Income tax provision (benefit) (3,582) (14,794) 23,310
Net income (loss) $ (6,650) $ (27,473) $ 43,291
Loans Receivable $13,169,792
Total Deposits $ (954,970) $35,396,221
(1) Transferred from the Other caption in Q1.
(2) Transferred to the Auto Segment in Q1.
(3) Includes allocations for loan discount accretion, deposit premium
amortization, and CDI and other intangible amortization resulting from
the Hibernia acquisition.
(4) Income statement adjustments represent adjustments for investments and
match funding, brand and corporate cost allocations, and other
integration costs. Deposit adjustment represents Hibernia brokered
deposits transferred to the Other caption.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended March 31, 2006
(dollars in thousands)(unaudited)
The Company's consolidated financial statements prepared in accordance with generally accepted accounting principles ("GAAP") are referred to as its "reported" financial statements. Loans included in securitization transactions which qualified as sales under GAAP have been removed from the Company's "reported" balance sheet. However, servicing fees, finance charges, and other fees, net of charge-offs, and interest paid to investors of securitizations are recognized as servicing and securitizations income on the "reported" income statement.
The Company's "managed" consolidated financial statements reflect
adjustments made related to effects of securitization transactions qualifying
as sales under GAAP. The Company generates earnings from its "managed" loan
portfolio which includes both the on-balance sheet loans and off-balance sheet
loans. The Company's "managed" income statement takes the components of the
servicing and securitizations income generated from the securitized portfolio
and distributes the revenue and expense to appropriate income statement line
items from which it originated. For this reason the Company believes the
"managed" consolidated financial statements and related managed metrics to be
useful to stakeholders.
Total Total
Reported Adjustments(1) Managed(2)
Income Statement Measures
Net interest income $ 1,206,877 $ 1,028,093 $ 2,234,970
Non-interest income $ 1,858,251 $ (636,057) $ 1,222,194
Total revenue $ 3,065,128 $ 392,036 $ 3,457,164
Provision for loan losses $ 170,270 $ 392,036 $ 562,306
Net charge-offs $ 300,467 $ 392,036 $ 692,503
Balance Sheet Measures
Loans $58,118,659 $45,788,117 $103,906,776
Total assets $89,273,079 $45,257,154 $134,530,233
Average loans $58,142,418 $46,467,782 $104,610,200
Average earning assets $78,147,484 $44,255,018 $122,402,502
Average total assets $88,894,594 $45,902,460 $134,797,054
Delinquencies $ 1,558,880 $ 1,480,278 $ 3,039,158
(1) Includes adjustments made related to the effects of securitization
transactions qualifying as sales under GAAP and adjustments made to
reclassify to "managed" loans outstanding the collectible portion of
billed finance charge and fee income on the investors' interest in
securitized loans excluded from loans outstanding on the "reported"
balance sheet in accordance with Financial Accounting Standards Board
Staff Position, "Accounting for Accrued Interest Receivable Related to
Securitized and Sold Receivables under FASB Statement 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," issued April 2003.
(2) The Managed loan portfolio does not include auto loans which have been
sold in whole loan sale transactions where the Company has retained
servicing rights.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
March 31 December 31 March 31
2006 2005 2005
Assets:
Cash and due from banks $ 1,434,804 $ 2,022,175 $ 761,234
Federal funds sold and resale
agreements 2,763,746 1,305,537 12,283
Interest-bearing deposits at
other banks 1,099,025 743,555 446,793
Cash and cash equivalents 5,297,575 4,071,267 1,220,310
Securities available for sale 14,659,166 14,350,249 9,460,688
Loans 58,118,659 59,847,681 37,959,203
Less: Allowance for loan losses (1,675,000) (1,790,000) (1,440,000)
Net loans 56,443,659 58,057,681 36,519,203
Accounts receivable from
securitizations 5,293,392 4,904,547 5,605,009
Premises and equipment, net 1,387,302 1,191,406 806,411
Interest receivable 512,136 563,542 259,350
Goodwill 3,941,128 3,906,399 747,756
Other 1,738,721 1,656,320 1,012,839
Total assets $89,273,079 $88,701,411 $55,631,566
Liabilities:
Non-interest-bearing deposits $ 4,476,351 $ 4,841,171 $ 79,525
Interest-bearing deposits 43,303,134 43,092,096 25,854,025
Senior and subordinated notes 5,726,109 6,743,979 6,876,432
Other borrowings 16,544,698 15,534,161 10,243,235
Interest payable 353,882 371,681 242,464
Other 3,699,659 3,989,409 3,356,155
Total liabilities 74,103,833 74,572,497 46,651,836
Stockholders' Equity:
Common stock 3,051 3,028 2,536
Paid-in capital, net 7,032,073 6,848,544 2,878,237
Retained earnings and cumulative
other comprehensive income 8,245,186 7,384,144 6,166,070
Less: Treasury stock, at cost (111,064) (106,802) (67,113)
Total stockholders' equity 15,169,246 14,128,914 8,979,730
Total liabilities and
stockholders' equity $89,273,079 $88,701,411 $55,631,566
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
March 31 December 31 March 31
2006 2005 2005(1)
Interest Income:
Loans, including past-due fees $ 1,612,622 $ 1,408,545 $ 1,184,036
Securities available for sale 165,100 119,189 90,164
Other 100,860 106,364 62,068
Total interest income 1,878,582 1,634,098 1,336,268
Interest Expense:
Deposits 403,609 344,063 264,025
Senior and subordinated notes 94,354 103,836 114,480
Other borrowings 173,742 149,200 97,242
Total interest expense 671,705 597,099 475,747
Net interest income 1,206,877 1,036,999 860,521
Provision for loan losses 170,270 565,674 259,631
Net interest income after
provision for loan losses 1,036,607 471,325 600,890
Non-Interest Income:
Servicing and securitizations 1,153,604 1,021,415 933,937
Service charges and other
customer-related fees 435,731 376,223 401,186
Interchange 119,491 133,234 123,440
Other 149,425 134,642 57,416
Total non-interest income 1,858,251 1,665,514 1,515,979
Non-Interest Expense:
Salaries and associate benefits 516,144 459,788 433,501
Marketing 323,771 447,437 311,759
Communications and data processing 169,204 154,936 142,819
Supplies and equipment 98,184 98,761 86,446
Occupancy 49,377 54,554 17,901
Other 416,799 473,710 335,406
Total non-interest expense 1,573,479 1,689,186 1,327,832
Income before income taxes 1,321,379 447,653 789,037
Income taxes 438,040 167,335 282,475
Net income $ 883,339 $ 280,318 $ 506,562
Basic earnings per share $ 2.95 $ 1.01 $ 2.08
Diluted earnings per share $ 2.86 $ 0.97 $ 1.99
Dividends paid per share $ 0.03 $ 0.03 $ 0.03
(1) Certain prior period amounts have been reclassified to conform to the
current period presentation.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Reported Quarter Ended 3/31/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $58,142,418 $ 1,612,622 11.09%
Securities available for sale 15,045,469 165,100 4.39%
Other 4,959,597 100,860 8.13%
Total earning assets $78,147,484 $ 1,878,582 9.62%
Interest-bearing liabilities:
Interest-bearing deposits $43,356,518 $ 403,609 3.72%
Senior and subordinated notes 6,097,711 94,354 6.19%
Other borrowings 16,074,344 173,742 4.32%
Total interest-bearing liabilities $65,528,573 $ 671,705 4.10%
Net interest spread 5.52%
Interest income to average
earning assets 9.62%
Interest expense to average
earning assets 3.44%
Net interest margin 6.18%
Reported Quarter Ended 12/31/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $48,700,689 $ 1,408,545 11.57%
Securities available for sale 11,683,013 119,189 4.08%
Other 6,240,217 106,364 6.82%
Total earning assets $66,623,919 $ 1,634,098 9.81%
Interest-bearing liabilities:
Interest-bearing deposits $34,737,934 $ 344,063 3.96%
Senior and subordinated notes 6,707,285 103,836 6.19%
Other borrowings 13,703,303 149,200 4.36%
Total interest-bearing liabilities $55,148,522 $ 597,099 4.33%
Net interest spread 5.48%
Interest income to average
earning assets 9.81%
Interest expense to average
earning assets 3.58%
Net interest margin 6.23%
Reported Quarter Ended 3/31/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $38,203,914 $ 1,184,036 12.40%
Securities available for sale 9,654,437 90,164 3.74%
Other 3,039,304 62,068 8.17%
Total earning assets $50,897,655 $ 1,336,268 10.50%
Interest-bearing liabilities:
Interest-bearing deposits $25,654,741 $ 264,025 4.12%
Senior and subordinated notes 6,908,505 114,480 6.63%
Other borrowings 10,698,085 97,242 3.64%
Total interest-bearing liabilities $43,261,331 $ 475,747 4.40%
Net interest spread 6.10%
Interest income to average
earning assets 10.50%
Interest expense to average
earning assets 3.74%
Net interest margin 6.76%
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed(1) Quarter Ended 3/31/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $104,610,200 $ 3,232,530 12.36%
Securities available for sale 15,045,469 165,100 4.39%
Other 2,746,833 39,199 5.71%
Total earning assets $122,402,502 $ 3,436,829 11.23%
Interest-bearing liabilities:
Interest-bearing deposits $ 43,356,518 $ 403,609 3.72%
Senior and subordinated notes 6,097,711 94,354 6.19%
Other borrowings 16,074,344 173,742 4.32%
Securitization liability 46,018,001 530,154 4.61%
Total interest-bearing liabilities $111,546,574 $ 1,201,859 4.31%
Net interest spread 6.92%
Interest income to average
earning assets 11.23%
Interest expense to average
earning assets 3.93%
Net interest margin 7.30%
Managed(1) Quarter Ended 12/31/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $ 94,241,240 $ 3,001,361 12.74%
Securities available for sale 11,683,013 119,189 4.08%
Other 4,171,939 55,410 5.31%
Total earning assets $110,096,192 $ 3,175,960 11.54%
Interest-bearing liabilities:
Interest-bearing deposits $ 34,737,934 $ 344,063 3.96%
Senior and subordinated notes 6,707,285 103,836 6.19%
Other borrowings 13,703,303 149,200 4.36%
Securitization liability 45,085,090 503,665 4.47%
Total interest-bearing liabilities $100,233,612 $ 1,100,764 4.39%
Net interest spread 7.15%
Interest income to average
earning assets 11.54%
Interest expense to average
earning assets 4.00%
Net interest margin 7.54%
Managed(1) Quarter Ended 3/31/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $81,652,485 $ 2,631,751 12.89%
Securities available for sale 9,654,437 90,164 3.74%
Other 1,170,566 17,672 6.04%
Total earning assets $92,477,488 $ 2,739,587 11.85%
Interest-bearing liabilities:
Interest-bearing deposits $25,654,741 $ 264,025 4.12%
Senior and subordinated notes 6,908,505 114,480 6.63%
Other borrowings 10,698,085 97,242 3.64%
Securitization liability 43,215,671 445,080 4.12%
Total interest-bearing liabilities $86,477,002 $ 920,827 4.26%
Net interest spread 7.59%
Interest income to average
earning assets 11.85%
Interest expense to average
earning assets 3.98%
Net interest margin 7.87%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
SOURCE Capital One Financial Corporation
CONTACT: Investor Relations: Mike Rowen, +1-703-720-2455, or Media
Relations: Tatiana Stead, +1-703-720-2352, or Julie Rakes, +1-804-284-5800,
all of Capital One Financial Corporation