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Capital One Reports Third Quarter EarningsEPS Increased Four Percent Over Third Quarter 2005
MCLEAN, Va., Oct. 18 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced that its earnings for the third quarter of 2006 were $587.8 million, or $1.89 per share (diluted), compared with $491.1 million, or $1.81 per share (diluted), for the third quarter of 2005, and $552.6 million, or $1.78 per share (diluted), for the second quarter of 2006. "Capital One delivered solid profit and loan growth in the third quarter, reflecting strong performance across our business segments, a continuing favorable credit environment, and expected seasonal patterns," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We continue to execute on our strategy of bringing together national scale lending and local banking businesses, and we look forward to continuing to drive our strategy with the acquisition of North Fork." As previously announced, Capital One and North Fork expect the acquisition of North Fork by Capital One will close in the fourth quarter of 2006, pending the receipt of approval of the merger by the Federal Reserve Board, and the expiration of all regulatory waiting periods. Capital One and North Fork have not yet set a definitive election deadline by which North Fork stockholders can elect whether they would prefer to receive cash or Capital One common stock in the merger. The election deadline, which is expected to be approximately five business days prior to the expected closing date, will be announced at least five business days in advance of the deadline. "We expect full year earnings per share (diluted) for 2006 to be at the higher end of the $7.40 to $7.80 range," said Gary L. Perlin, Capital One's Chief Financial Officer. "This includes an estimated 30 cent per share dilutive impact resulting from the expected fourth quarter close of the North Fork acquisition." Managed loans at September 30, 2006 were $112.2 billion, up $27.5 billion, or 32 percent, from September 30, 2005, including $16.3 billion of loans acquired with the acquisition of Hibernia in November 2005. Managed loans increased $3.8 billion, or four percent, from the previous quarter. The company experienced growth across all of its North American businesses, most notably in its US Card segment. The company expects that managed loans will grow at a rate of between seven and nine percent during 2006, excluding the impacts of the North Fork acquisition. The managed charge-off rate for the company decreased to 2.92 percent in the third quarter of 2006 from 4.14 percent in the third quarter of 2005 but rose from 2.75 percent in the previous quarter. The company increased its allowance for loan losses by $75 million in the third quarter of 2006, driven primarily by higher loan balances in the quarter. The managed delinquency rate (30+ days) decreased to 3.29 percent as of September 30, 2006 from 3.73 percent as of the end of September 30, 2005 but increased from 3.05 percent as of June 30, 2006. Third quarter marketing expenses increased $24.8 million to $368.5 million from $343.7 million in the third quarter of 2005, and increased $11.8 million from the second quarter of 2006 expense of $356.7 million. Annualized operating expenses as a percentage of average managed loans increased to 4.92 percent in the third quarter of 2006 from 4.88 percent in the third quarter of 2005 but decreased from 4.99 percent in the previous quarter. This quarter's results also include resolution of certain IRS tax issues resulting in an $18.7 million reduction of tax expense. Capital One's managed revenue margin decreased to 10.95 percent in the third quarter of 2006 from 12.54 percent in the third quarter of 2005, primarily due to the addition of Hibernia's loan portfolio. The company's managed revenue margin rose 18 basis points from 10.77 percent in the second quarter of 2006. The company continues to expect stability in its annual return on managed assets, as lower revenue margins on higher credit quality loans are offset by reductions in provision and also by reductions in operating and marketing expenses as a percent of assets. Segment results The US Card segment's net income in the third quarter of 2006 was $461.6 million, compared with $481.8 million in the third quarter of 2005, and $421.8 million in the second quarter of 2006. Overall performance in the segment continues to be driven by strong credit and solid loan growth. Managed loans at September 30, 2006 were $51.1 billion, up $4.8 billion or 10.4 percent, from September 30, 2005, and up $2.4 billion, or 4.9 percent from the prior quarter. The managed charge-off rate decreased to 3.39 percent in the third quarter of 2006 from 4.69 percent in the third quarter of 2005 but increased from 3.29 percent in the previous quarter. The company now expects credit card charge-offs to return to more normal levels in 2007 following the impacts of last year's bankruptcy legislation. Results in the Auto Finance segment this quarter reflect continued growth in originations and seasonal impacts in credit. Net income in the third quarter of 2006 was $35.3 million, compared with a net loss of $7.7 million in the third quarter of 2005, and net income of $95.1 million in the second quarter of 2006. Managed loans at September 30, 2006 were $21.2 billion, up $5.4 billion, or 34.5 percent, from September 30, 2005, and up $.6 billion, or 2.9 percent from the prior quarter. The managed charge-off rate decreased to 2.34 percent in the third quarter of 2006 from 2.54 percent in the third quarter of 2005 but increased from 1.54 percent in the previous quarter. Results in the Global Financial Services segment continue to reflect strong performance in its North American businesses offset by ongoing challenges in the UK. Net income in the third quarter of 2006 was $107.2 million, compared with $81.9 million in the third quarter of 2005, and $51.2 million in the second quarter of 2006. Managed loans at September 30, 2006 were $26.6 billion, up $3.9 billion, or 16.9 percent, from the prior year's third quarter, and up $.7 billion, or 2.7 percent, from the second quarter of 2006. The managed charge-off rate decreased to 3.70 percent in the third quarter of 2006 from 4.09 percent in the third quarter of 2005 and from 3.90 percent in the previous quarter. The Banking segment delivered stable performance, with net income in the third quarter of 2006 of $46.2 million, up $2.9 million, or 6.8 percent, from the second quarter of 2006. Total deposits at the end of the quarter were $35.7 billion, relatively flat with $35.3 billion at the end of the second quarter of 2006. The company opened nine new branches in the quarter, bringing the year-to-date total to 19 new branches. The company is in various stages of construction on 23 additional de novo branches targeted to open in 2006, although some of these openings might spill over into early 2007. Integration continued to progress smoothly during the quarter with the conversion of the Banking segment's core processing platform, among other systems and processes. The company is on track to complete Hibernia-related integration projects in early 2007. The company generates earnings from its managed loan portfolio, which includes both on-balance sheet loans and securitized (off-balance sheet) loans. For this reason, the company believes managed financial measures to be useful to stakeholders. In compliance with Regulation G of the Securities and Exchange Commission, the company is providing a numerical reconciliation of managed financial measures to comparable measures calculated on a reported basis using generally accepted accounting principles (GAAP). Please see the schedule titled "Reconciliation to GAAP Financial Measures" attached to this release for more information. Forward looking statements The company cautions that its current expectations in this release, in the presentation slides available on the company's website and on its Form 8-K dated October 18, 2006 for third quarter earnings, return on assets, loan growth rates, operating costs, 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 exact timing of the close of the North Fork transaction and the magnitude of market-driven purchase accounting adjustments related to the close; the risk that the company's acquired businesses will not be integrated successfully and that the cost savings and other synergies from such acquisitions may not be fully realized; continued intense competition from numerous providers of products and services which compete with Capital One's businesses; changes in our aggregate accounts and balances, and the growth rate and composition thereof; the success of the company's marketing efforts; general economic conditions affecting interest rates and consumer income, spending, and savings which may affect consumer bankruptcies, defaults, and charge-offs and deposit activity; the long-term impact of the 2005 Gulf Coast hurricanes on the impacted regions; and the company's ability to execute on its strategic and operational plans. A discussion of these and other factors can be found in Capital One's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the fiscal year ended December 31, 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 filed with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-4 that included a joint proxy statement of Capital One and North Fork that also constitutes a prospectus of Capital One. Capital One and North Fork mailed the definitive joint proxy statement/prospectus to their respective stockholders on or about July 14, 2006. Investors and security holders are urged to read the definitive joint proxy statement/prospectus regarding the proposed merger because it contains important information. You may obtain a free copy of the definitive joint proxy statement/prospectus 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 definitive joint proxy statement/prospectus 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." About Capital One Headquartered in McLean, Virginia, Capital One Financial Corporation (http://www.capitalone.com/) is a financial holding company, with more than 342 locations in Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto Finance, Inc., and Capital One, N.A., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $48.2 billion in deposits and $112.2 billion in managed loans outstanding as of September 30, 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: Third quarter 2006 financial results, SEC Filings, and third quarter earnings conference call slides are accessible on Capital One's home page (http://www.capitalone.com/). Choose "Investors" on the bottom of the home page to view and download the earnings press release, slides, and other financial information. Additionally, a webcast of today's 5:00 pm (ET) earnings conference call is accessible through the same link. CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY REPORTED BASIS
2006 2006 2005
(in millions, except per share
data and as noted) Q3 Q2 Q3
Earnings (Reported Basis)
Net Interest Income $1,294.5 $1,197.1 $910.2
Non-Interest Income 1,761.4 (3) 1,709.9 (3) 1,594.6 (1)
Total Revenue(5) 3,055.9 2,907.0 2,504.8
Provision for Loan Losses 430.6 362.4 374.2 (1)
Marketing Expenses 368.5 356.7 343.7
Operating Expenses 1,358.1 1,324.2 1,021.9
Income Before Taxes 898.7 863.7 765.0
Tax Rate 34.6 %(7) 36.0 % 35.8 %
Net Income $587.8 $552.6 $491.1
Common Share Statistics
Basic EPS $1.95 $1.84 $1.88
Diluted EPS $1.89 $1.78 $1.81
Dividends Per Share $0.03 $0.03 $0.03
Book Value Per Share (period
end) $54.79 $52.31 $41.40
Stock Price Per Share (period
end) $78.66 $85.45 $79.52
Total Market Capitalization
(period end) $23,944.1 $25,968.3 $21,200.0
Shares Outstanding (period end) 304.4 303.9 266.6
Shares Used to Compute Basic EPS 301.6 300.8 260.9
Shares Used to Compute Diluted
EPS 310.4 310.0 270.7
Reported Balance Sheet
Statistics (period avg.)
Average Loans $62,429 $58,833 $38,556
Average Earning Assets $81,297 $79,026 $53,453
Average Assets $92,575 $89,644 $59,204
Average Interest Bearing
Deposits $43,019 $42,797 $26,618
Average Non-Interest Bearing
Deposits $4,458 $4,412 $85
Average Equity $16,310 $15,581 $10,802
Return on Average Assets (ROA) 2.54 % 2.47 % 3.32 %
Return on Average Equity (ROE) 14.42 % 14.19 % 18.19 %
Reported Balance Sheet
Statistics (period end)
Loans $63,612 $60,603 $38,852
Total Assets $95,457 $89,530 $60,425
Loan growth $3,009 $2,484 $241
% Loan Growth Y Over Y 64 % 57 % 10 %
Revenue & Expense Statistics
(Reported)
Net Interest Income Growth
(annualized) 33 % (3)% 17 %
Non Interest Income Growth
(annualized) 12 % (32)% 3 %
Revenue Growth (annualized) 20 % (21)% 8 %
Net Interest Margin 6.37 % 6.06 % 6.81 %
Revenue Margin 15.04 % 14.71 % 18.74 %
Risk Adjusted Margin (8) 13.22 % 13.22 % 16.18 %
Operating Expense as a % of
Revenues 44.44 % 45.55 % 40.80 %
Operating Expense as a % of Avg
Loans (annualized) 8.70 % 9.00 % 10.60 %
Asset Quality Statistics
(Reported)
Allowance $1,840 $1,765 $1,447 (1)
30+ Day Delinquencies $2,060 $1,772 $1,497
Net Charge-Offs $369 $296 $342
Allowance as a % of Reported
Loans 2.89 % 2.91 % 3.72 %
Delinquency Rate (30+ days) 3.24 % 2.92 % 3.85 %
Net Charge-Off Rate 2.36 % 2.01 % 3.55 %
(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 a $20.5 million gain in Q2 2006 as a result of the
MasterCard, Inc. initial public offering and losses of $20.8 million
in Q2 2006 and $9.4 million in Q3 2006 related to the derivative
entered into in April 2006 to mitigate certain exposures we face as a
result of our expected acquisition of North Fork.
(4) 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.
(5) In accordance with the Company's finance charge and fee revenue
recognition policy, the amounts billed to customers but not recognized
as revenue were as follows: Q3 2006 - $226.3, Q2 2006 - $215.0,
Q1 2006 - $170.9, Q4 2005 - $227.9 and Q3 2005 - $255.6.
(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 resolution of IRS tax issues resulting in $18.7 million
reduction of tax expense.
(8) 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 2006 2005
(in millions) Q3 Q2 Q3
Earnings (Managed Basis)
Net Interest Income $2,217.8 $2,140.8 $1,931.2
Non-Interest Income 1,275.4 (4) 1,199.4 (4) 1,099.8 (2)
Total Revenue(6) 3,493.2 3,340.2 3,031.0
Provision for Loan Losses 867.9 795.6 900.4 (2)
Marketing Expenses 368.5 356.7 343.7
Operating Expenses 1,358.1 1,324.2 1,021.9
Income Before Taxes 898.7 863.7 765.0
Tax Rate 34.6 %(8) 36.0 % 35.8 %
Net Income $587.8 $552.6 $491.1
Managed Balance Sheet Statistics
(period avg.)
Average Loans $110,512 $106,090 $83,828
Average Earning Assets $127,601 $124,067 $96,696
Average Assets $140,114 $136,351 $103,913
Return on Average Assets (ROA) 1.68 % 1.62 % 1.89 %
Managed Balance Sheet Statistics
(period end)
Loans $112,239 $108,433 $84,768
Total Assets $143,527 $136,819 $105,743
Loan Growth $3,806 $4,526 $1,817
% Loan Growth Y over Y 32 % 31 % 12 %
Tangible Assets (9) $139,223 $132,527 $105,007
Tangible Capital (10) $13,514 $12,094 $10,400
Tangible Capital to Tangible Assets
Ratio 9.71 % 9.13 % 9.90 %
% Off-Balance Sheet Securitizations 43 % 44 % 54 %
Revenue & Expense Statistics
(Managed)
Net Interest Income Growth
(annualized) 14 % (17)% 22 %
Non Interest Income Growth
(annualized) 25 % (7)% (16)%
Revenue Growth (annualized) 18 % (14)% 8 %
Net Interest Margin 6.95 % 6.90 % 7.99 %
Revenue Margin 10.95 % 10.77 % 12.54 %
Risk Adjusted Margin (11) 8.42 % 8.42 % 8.95 %
Operating Expense as a % of
Revenues 38.88 % 39.64 % 33.71 %
Operating Expense as a % of Avg
Loans (annualized) 4.92 % 4.99 % 4.88 %
Asset Quality Statistics (Managed)
30+ Day Delinquencies $3,693 $3,306 $3,164
Net Charge-Offs $806 $729 $868
Delinquency Rate (30+ days) 3.29 % 3.05 % 3.73 %
Net Charge-Off Rate 2.92 % 2.75 % 4.14 %
(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 a $20.5 million gain in Q2 2006 as a result of the
MasterCard, Inc. initial public offering and losses of $20.8 million
in Q2 2006 and $9.4 million in Q3 2006 related to the derivative
entered into in April 2006 to mitigate certain exposures we face as a
result of our expected acquisition of North Fork.
(5) 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.
(6) In accordance with the Company's finance charge and fee revenue
recognition policy, the amounts billed to customers but not
recognized as revenue were as follows: Q3 2006 - $226.3,
Q2 2006 - $215.0, Q1 2006 - $170.9, Q4 2005 - $227.9 and
Q3 2005 - $255.6.
(7) 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.
(8) Includes resolution of IRS tax issues resulting in $18.7 million
reduction of tax expense.
(9) Includes managed assets less intangible assets.
(10) Includes stockholders' equity and preferred interests less intangible
assets. Tangible Capital on a reported
and managed basis is the same.
(11) 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 2006 2005
(in thousands) Q3 Q2 Q3
Segment Statistics
US Card:
Interest Income $1,734,459 $1,628,144 $1,659,178
Interest Expense 554,708 507,722 451,346
Net interest income $1,179,751 $1,120,422 $1,207,832
Non-interest income 881,304 803,083 851,036
Provision for loan losses 451,782 413,701 483,759
Non-interest expenses 899,062 860,874 833,925
Income tax provision (benefit) 248,574 227,125 259,414
Net income (loss) $461,637 $421,805 $481,770
Loans receivable $51,127,654 $48,736,483 $46,291,468
Average loans $50,131,562 $47,856,045 $46,405,569
Loan Yield 13.84% 13.61% 14.30%
Net charge-off rate 3.39% 3.29% 4.69%
Delinquency Rate (30+ days) 3.53% 3.30% 3.86%
Purchase Volume (2) $21,450,024 $20,878,732 $18,932,798
Number of Accounts (000s) 37,483 37,199 37,863
Auto Finance:
Interest Income $591,711 $563,734 $436,058
Interest Expense 227,053 207,497 135,956
Net interest income $364,658 $356,237 $300,102
Non-interest income 4,846 13,839 3,005
Provision for loan losses 161,145 74,714 185,219
Non-interest expenses 154,014 149,115 129,719
Income tax provision (benefit) 19,021 51,186 (4,141)
Net income (loss) $35,324 $95,061 $(7,690)
Loans receivable $21,158,797 $20,558,455 $15,730,713
Average loans $20,812,533 $20,187,631 $15,104,464
Loan Yield 11.37% 11.17% 11.55%
Net charge-off rate 2.34% 1.54% 2.54%
Delinquency Rate (30+ days) 5.18% 4.55% 4.65%
Auto Loan Originations (3) $3,158,481 $3,107,409 $3,217,209
Number of Accounts (000s) 1,558 1,525 1,187
Global Financial Services:
Interest Income $768,262 $725,256 $661,420
Interest Expense 307,518 279,804 237,791
Net interest income $460,744 $445,452 $423,629
Non-interest income 311,439 297,080 273,067
Provision for loan losses 249,448 296,614 217,032
Non-interest expenses 358,806 365,149 356,254
Income tax provision (benefit) 56,771 29,614 41,521
Net income (loss) $107,158 $51,155 $81,889
Loans receivable $26,623,519 $25,935,716 $22,770,803
Average loans $26,364,992 $24,910,879 $22,373,995
Loan Yield 11.58% 11.58% 11.78%
Net charge-off rate 3.70% 3.90% 4.09%
Delinquency Rate (30+ days) 2.86% 2.82% 2.93%
Number of Accounts (000s) 10,135 10,130 9,774
(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 2006 2005
(in thousands) Q3 Q2 Q3
Segment Statistics
Banking:
Interest Income $719,207 $682,679
Interest Expense 461,009 433,451
Net interest income $258,198 $249,228
Non-interest income 115,526 114,039
Provision for loan losses 5,495 6,632
Non-interest expenses 297,080 289,996
Income tax provision (benefit) 24,902 23,324
Net income (loss) $46,247 $43,315
Loans receivable $13,326,088 $13,189,112
Average loans $13,171,414 $13,115,534
Loan Yield 8.02% 7.63%
Net charge-off rate 0.48% 0.45%
Delinquency Rate (30+ days) 0.36% 0.38%
Core Deposits(2) 27,547,964 27,857,265
Total Deposits 35,714,468 35,281,970
Number of Active ATMs 623 586
Number of locations(3) 342 325
Other:
Net interest income $(45,529) $(30,510) $(368)
Non-interest income (37,706) (28,709) (27,301)
Provision for loan losses 27 3,950 14,324
Non-interest expenses 17,667 15,763 45,740
Income tax provision (benefit) (38,402) (20,183) (22,913)
Net income (loss) $(62,527) $(58,749) $(64,820)
Loans receivable $2,488 $13,673 $(25,301)
Total:
Interest Income $3,595,874 $3,414,411 $2,907,775
Interest Expense 1,378,052 1,273,582 976,580
Net interest income $2,217,822 $2,140,829 $1,931,195
Non-interest income 1,275,409 1,199,332 1,099,807
Provision for loan losses 867,897 795,611 900,334
Non-interest expenses 1,726,629 1,680,897 1,365,638
Income tax provision (benefit) 310,866 311,066 273,881
Net income (loss) $587,839 $552,587 $491,149
Loans receivable $112,238,546 $108,433,439 $84,767,683
(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) Q3: Number of locations includes 329 branches and 13 other customer
centers and excludes 7 branches that remain closed due to hurricane
damage. Q2: Number of locations includes 312 branches and 13 other
customer centers and excludes 16 branches that remain closed due to
hurricane damage. Q1: Number of locations includes 303 branches and 14
other customer centers and excludes 18 branches that remain closed due
to hurricane damage.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended September 30, 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 $1,294,515 $923,307 $2,217,822
Non-interest income $1,761,385 $(485,976) $1,275,409
Total revenue $3,055,900 $437,331 $3,493,231
Provision for loan losses $430,566 $437,331 $867,897
Net charge-offs $368,656 $437,331 $805,987
Balance Sheet Measures
Loans $63,612,169 $48,626,377 $112,238,546
Total assets $95,457,365 $48,069,798 $143,527,163
Average loans $62,428,789 $48,083,477 $110,512,266
Average earning assets $81,297,372 $46,304,077 $127,601,449
Average total assets $92,575,211 $47,538,556 $140,113,767
Delinquencies $2,059,777 $1,633,477 $3,693,254
(1) Income statement adjustments reclassify the net of finance charges of
$1,357.3 million, past-due fees of $229.0 million, other interest
income of $(55.5) million and interest expense of $607.5 million; and
net charge-offs of $437.3 million from Non-interest income to Net
interest income and Provision for loan losses, respectively.
(2) The managed loan portfolio does not include auto loans which have been
sold in whole loan sale transactions where the Company has retained
servicing rights.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
As of As of As of
September 30 June 30 September 30
2006 2006 2005
Assets:
Cash and due from banks $1,461,132 $1,388,384 $812,330
Federal funds sold and resale
agreements 3,340,809 339,613 2,409,392
Interest-bearing deposits at other
banks 1,348,327 870,049 1,380,880
Cash and cash equivalents 6,150,268 2,598,046 4,602,602
Securities available for sale 13,960,709 15,292,446 9,436,667
Loans 63,612,169 60,602,803 38,851,763
Less: Allowance for loan losses (1,840,000) (1,765,000) (1,447,000)
Net loans 61,772,169 58,837,803 37,404,763
Accounts receivable from
securitizations 5,617,113 4,818,512 6,126,282
Premises and equipment, net 1,532,006 1,467,922 768,198
Interest receivable 529,104 526,267 367,757
Goodwill 3,964,177 3,933,621 736,058
Other 1,931,819 2,055,569 982,190
Total assets $95,457,365 $89,530,186 $60,424,517
Liabilities:
Non-interest-bearing deposits $4,695,792 $4,487,837 $91,684
Interest-bearing deposits 43,467,977 42,698,976 26,772,538
Senior and subordinated notes 8,701,794 5,490,690 6,651,891
Other borrowings 17,619,817 16,836,398 11,613,179
Interest payable 387,000 349,091 350,842
Other 3,908,008 3,770,131 3,907,156
Total liabilities 78,780,388 73,633,123 49,387,290
Stockholders' Equity:
Common stock 3,065 3,060 2,682
Paid-in capital, net 7,237,785 7,151,376 3,979,525
Retained earnings and cumulative
other comprehensive income 9,551,504 8,857,963 7,124,900
Less: Treasury stock, at cost (115,377) (115,336) (69,880)
Total stockholders' equity 16,676,977 15,897,063 11,037,227
Total liabilities and
stockholders' equity $95,457,365 $89,530,186 $60,424,517
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
September 30 June 30 September 30(1)
2006 2006 2005
Interest Income:
Loans, including past-due fees $1,814,803 $1,616,937 $1,228,160
Securities available for sale 160,198 167,804 87,978
Other 90,070 112,416 88,477
Total interest income 2,065,071 1,897,157 1,404,615
Interest Expense:
Deposits 442,571 416,232 285,611
Senior and subordinated notes 96,300 84,707 98,309
Other borrowings 231,685 199,136 110,476
Total interest expense 770,556 700,075 494,396
Net interest income 1,294,515 1,197,082 910,219
Provision for loan losses 430,566 362,445 374,167
Net interest income after provision
for loan losses 863,949 834,637 536,052
Non-Interest Income:
Servicing and securitizations 1,071,091 1,025,506 993,788
Service charges and other customer-
related fees 459,125 413,398 355,871
Interchange 150,474 131,538 125,454
Other 80,695 139,471 119,503
Total non-interest income 1,761,385 1,709,913 1,594,616
Non-Interest Expense:
Salaries and associate benefits 554,504 536,465 414,348
Marketing 368,498 356,695 343,708
Communications and data processing 183,020 172,734 144,321
Supplies and equipment 111,625 113,028 86,866
Occupancy 49,710 52,753 39,426
Other 459,272 449,222 336,969
Total non-interest expense 1,726,629 1,680,897 1,365,638
Income before income taxes 898,705 863,653 765,030
Income taxes 310,866 311,066 273,881
Net income $587,839 $552,587 $491,149
Basic earnings per share $1.95 $1.84 $1.88
Diluted earnings per share $1.89 $1.78 $1.81
Dividends paid per share $0.03 $0.03 $0.03
Nine Months Ended
September 30 September 30(1)
2006 2005
Interest Income:
Loans, including past-due fees $5,044,362 $3,602,294
Securities available for sale 493,102 269,387
Other 303,346 221,102
Total interest income 5,840,810 4,092,783
Interest Expense:
Deposits 1,262,412 829,074
Senior and subordinated notes 275,361 317,382
Other borrowings 604,563 303,084
Total interest expense 2,142,336 1,449,540
Net interest income 3,698,474 2,643,243
Provision for loan losses 963,281 925,398
Net interest income after provision
for loan losses 2,735,193 1,717,845
Non-Interest Income:
Servicing and securitizations 3,250,201 2,923,768
Service charges and other customer-
related fees 1,308,254 1,117,467
Interchange 401,503 380,962
Other 369,591 270,394
Total non-interest income 5,329,549 4,692,591
Non-Interest Expense:
Salaries and associate benefits 1,607,113 1,289,950
Marketing 1,048,964 932,501
Communications and data processing 524,958 426,056
Supplies and equipment 322,837 256,973
Occupancy 151,840 97,536
Other 1,325,293 1,026,071
Total non-interest expense 4,981,005 4,029,087
Income before income taxes 3,083,737 2,381,349
Income taxes 1,059,972 852,520
Net income $2,023,765 $1,528,829
Basic earnings per share $6.73 $6.05
Diluted earnings per share $6.53 $5.82
Dividends paid per share $0.08 $0.08
(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 9/30/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $62,428,789 $1,814,803 11.63%
Securities available for sale 14,587,307 160,198 4.39%
Other 4,281,276 90,070 8.42%
Total earning assets $81,297,372 $2,065,071 10.16%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $619,460 $4,816 3.11%
Money market deposit accounts 11,237,206 103,073 3.67%
Savings accounts 3,911,765 28,604 2.92%
Other Consumer Time Deposits 14,325,784 153,881 4.30%
Public Fund CD's of $100,000 or
more 1,022,465 13,046 5.10%
CD's of $100,000 or more 8,302,487 95,229 4.59%
Foreign time deposits 3,564,708 43,922 4.93%
Total Interest-bearing deposits $42,983,875 $442,571 4.12%
Senior and subordinated notes 6,544,768 96,300 5.89%
Other borrowings 18,010,737 231,685 5.15%
Total interest-bearing liabilities $67,539,380 $770,556 4.56%
Net interest spread 5.60%
Interest income to average earning
assets 10.16%
Interest expense to average earning
assets 3.79%
Net interest margin 6.37%
Reported Quarter Ended 6/30/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $58,833,376 $1,616,937 10.99%
Securities available for sale 14,364,402 167,804 4.67%
Other 5,827,923 112,416 7.72%
Total earning assets $79,025,701 $1,897,157 9.60%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $597,406 $4,052 2.71%
Money market deposit accounts 11,093,056 89,076 3.21%
Savings accounts 3,919,465 26,237 2.68%
Other Consumer Time Deposits 13,980,892 145,401 4.16%
Public Fund CD's of $100,000 or
more 971,511 11,332 4.67%
CD's of $100,000 or more 8,878,461 100,094 4.51%
Foreign time deposits 3,355,924 40,040 4.77%
Total Interest-bearing deposits $42,796,715 $416,232 3.89%
Senior and subordinated notes 5,576,041 84,707 6.08%
Other borrowings 16,928,273 199,136 4.71%
Total interest-bearing liabilities $65,301,029 $700,075 4.29%
Net interest spread 5.31%
Interest income to average earning
assets 9.60%
Interest expense to average earning
assets 3.54%
Net interest margin 6.06%
Reported Quarter Ended 9/30/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $38,555,575 $1,228,160 12.74%
Securities available for sale 9,535,858 87,978 3.69%
Other 5,361,490 88,477 6.60%
Total earning assets $53,452,923 $1,404,615 10.51%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ - $ - -
Money market deposit accounts 3,592,402 30,180 3.36%
Savings accounts - - -
Other Consumer Time Deposits 10,415,635 109,658 4.21%
Public Fund CD's of $100,000 or
more 97,728 802 3.28%
CD's of $100,000 or more 9,977,047 111,876 4.49%
Foreign time deposits 2,535,660 33,095 5.22%
Total Interest-bearing deposits $26,618,472 $285,611 4.29%
Senior and subordinated notes 6,683,533 98,309 5.88%
Other borrowings 10,698,216 110,476 4.13%
Total interest-bearing liabilities $44,000,221 $494,396 4.49%
Net interest spread 6.02%
Interest income to average earning
assets 10.51%
Interest expense to average earning
assets 3.70%
Net interest margin 6.81%
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 9/30/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $110,512,266 $3,401,130 12.31%
Securities available for sale 14,587,307 160,198 4.39%
Other 2,501,876 34,546 5.52%
Total earning assets $127,601,449 $3,595,874 11.27%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $619,460 $4,816 3.11%
Money market deposit accounts 11,237,206 103,073 3.67%
Savings accounts 3,911,765 28,604 2.92%
Other Consumer Time Deposits 14,325,784 153,881 4.30%
Public Fund CD's of $100,000 or
more 1,022,465 13,046 5.10%
CD's of $100,000 or more 8,302,487 95,229 4.59%
Foreign time deposits 3,564,708 43,922 4.93%
Total Interest-bearing deposits $42,983,875 $442,571 4.12%
Senior and subordinated notes 6,544,768 96,300 5.89%
Other borrowings 18,010,737 231,672 5.15%
Securitization liability 47,648,021 607,510 5.10%
Total interest-bearing liabilities $115,187,401 $1,378,053 4.79%
Net interest spread 6.49%
Interest income to average earning
assets 11.27%
Interest expense to average earning
assets 4.32%
Net interest margin 6.95%
Managed (1) Quarter Ended 6/30/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $106,089,894 $3,195,827 12.05%
Securities available for sale 14,364,402 167,804 4.67%
Other 3,612,502 50,780 5.62%
Total earning assets $124,066,798 $3,414,411 11.01%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $597,406 $4,052 2.71%
Money market deposit accounts 11,093,056 89,076 3.21%
Savings accounts 3,919,465 26,237 2.68%
Other Consumer Time Deposits 13,980,892 145,401 4.16%
Public Fund CD's of $100,000 or
more 971,511 11,332 4.67%
CD's of $100,000 or more 8,878,461 100,094 4.51%
Foreign time deposits 3,355,924 40,040 4.77%
Total Interest-bearing deposits $42,796,715 $416,232 3.89%
Senior and subordinated notes 5,576,041 84,707 6.08%
Other borrowings 16,928,273 199,136 4.71%
Securitization liability 46,827,712 573,507 4.90%
Total interest-bearing liabilities $112,128,741 $1,273,582 4.54%
Net interest spread 6.47%
Interest income to average earning
assets 11.01%
Interest expense to average earning
assets 4.11%
Net interest margin 6.90%
Managed (1) Quarter Ended 9/30/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $83,827,465 $2,784,301 13.29%
Securities available for sale 9,535,858 87,978 3.69%
Other 3,333,021 35,496 4.26%
Total earning assets $96,696,344 $2,907,775 12.03%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ - $ -
Money market deposit accounts 3,592,402 30,180 3.36%
Savings accounts - - -
Other Consumer Time Deposits 10,415,320 109,658 4.21%
Public Fund CD's of $100,000 or
more 97,728 802 3.28%
CD's of $100,000 or more 9,977,047 111,876 4.49%
Foreign time deposits 2,535,975 33,095 5.22%
Total Interest-bearing deposits $26,618,472 $285,611 4.29%
Senior and subordinated notes 6,683,533 98,309 5.88%
Other borrowings 10,698,216 110,476 4.13%
Securitization liability 44,814,893 482,184 4.30%
Total interest-bearing liabilities $88,815,114 $976,580 4.40%
Net interest spread 7.63%
Interest income to average earning
assets 12.03%
Interest expense to average earning
assets 4.04%
Net interest margin 7.99%
(1) The information in this table reflects the adjustment to add back
the effect of securitized loans.
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