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-- Managed revenue increased $482.0 million, or 11.6 percent, relative to
the second quarter.
-- Provision expense increased $296.4 million, due to an anticipated
increase in charge-offs as well as a modest allowance build of $31.7
million in the third quarter.
-- Allowance as a percentage of reported loans rose to 5.08 percent in the
third quarter of 2009 from 4.84 percent in the second quarter of 2009.
-- Tangible common equity to tangible managed assets, or "TCE ratio,"
increased to 6.2 percent, up 52 basis points from the June 30, 2009
ratio of 5.7 percent, and Tier 1 capital rose to 11.8 percent.
Capital One Financial Corporation (NYSE: COF | Quote | Chart | News | PowerRating) today announced net income for the third quarter of 2009 of $425.6 million, or $0.94 per common share (diluted), versus second quarter 2009 net income of $224.2 million, or $0.53 per common share (diluted), before taking into account the impact from the repayment of the government's TARP preferred share investment. In the third quarter of 2008, the company reported $374.1 million, or $1.00 per common share (diluted). "We've worked for years to position our company to be resilient, and our third quarter results demonstrate that resiliency in the midst of the most challenging economic cycle we've seen in generations," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We are successfully weathering the storm, but the storm is not over. Therefore, we will continue to take the decisive actions necessary to place our company in the best position to navigate the downturn and drive shareholder value over the cycle." Total Company Results
-- Total managed revenue in the third quarter of 2009 was $4.6 billion, an
increase of $482.0 million, or 11.6 percent, relative to the second
quarter. Net interest income increased $298.3 million in the third
quarter, or 10.1 percent, while non-interest income increased $183.7
million, or 15.4 percent. The increase in revenue was driven primarily
by higher yields in Domestic Card, lower funding costs, a sequential
improvement in valuation adjustments to retained securitization
interests, and opportunistic moves in the investment portfolio that
resulted in gains from securities sales.
-- Provision expense increased $296.4 million quarter over quarter, due to
an anticipated increase in charge-offs as well as a $31.7 million
allowance build in the third quarter compared to a second quarter
release of $166.2 million. The total company allowance build was a
result of a significant increase in the Commercial Banking allowance
partially offset by releases in both the Credit Card and Consumer
Banking allowances.
-- Credit Card total allowance release of $78 million
-- Domestic credit card release of $89 million
-- International credit card build of $11 million
-- Consumer Banking total allowance release of $124 million
-- Auto release of $190 million
-- Other Consumer Banking build of $66 million
-- Commercial Banking total allowance build of $256 million
-- Allowance as a percentage of reported loans rose to 5.08 percent in the
third quarter of 2009 from 4.84 percent in the second quarter of 2009
and from 3.59 percent from the third quarter of 2008, excluding the
effect of Chevy Chase Bank.
-- Average deposits decreased by $3.7 billion in the quarter to $115.9
billion, or 3.1 percent, over the prior quarter.
-- The cost of managed interest-bearing liabilities decreased from 2.40
percent in the second quarter to 2.28 percent in the third quarter as
the company benefited from lower interest rates and continued to replace
the run off of higher cost funding with lower cost Consumer Banking and
Commercial Banking deposits. The total cost of funds declined 12 basis
points to 2.28 percent in the third quarter.
-- Average assets held for investment decreased $4.9 billion in the
quarter, driven primarily by reductions in loans outstanding.
-- Non-interest expenses declined $119.3 million in the third quarter of
2009, driven primarily by the absence of the FDIC special assessment
that impacted the second quarter as well as modestly lower marketing and
restructuring expenses. The managed efficiency ratio decreased to 38.36
percent in the third quarter of 2009 from 45.28 percent in the second
quarter of 2009, driven largely by increasing revenue.
-- The company's TCE ratio increased to 6.2 percent on September 30, 2009,
an improvement of 52 basis points from the second quarter level of 5.7
percent. The Tier 1 risk-based capital ratio of an estimated 11.8
percent, increased 2.1 percentage points, and continues to be well above
the regulatory well-capitalized minimum.
"Despite continued credit pressures, Capital One posted solid growth in both revenues and bottom-line profits in the third quarter," said Gary L. Perlin, Capital One's Chief Financial Officer. "Our strong balance sheet is supported by healthy reserve levels and a tangible common equity ratio that grew to 6.2 percent, which positions the company against downside risk while enabling future growth." Segment Results During the third quarter of 2009, the company realigned its business segment reporting structure to better reflect the manner in which the performance of the company's operations is evaluated. The company now reports the results of its business through three operating segments: Credit Card, Commercial Banking, and Consumer Banking. Credit Card Highlights For details on the sub-segments' results, please refer to the Financial Supplement. The Credit Card segment reported net income in the third quarter of $291.7 million, an increase of $119.1 million, or 69.0 percent, from second quarter net income $172.6 million. Improving revenue margin in the Domestic Credit Card sub-segment drove the improved profitability despite higher provision expense.
-- Revenues improved $296.4 million, or 11.0 percent, to $3.0 billion in
the third quarter of 2009.
-- Domestic Card - revenues up $271.6 million, or 11.4 percent from the
second quarter
-- International Card - revenues up $24.7 million, or 7.9 percent from
the second quarter
-- Revenue margin in the Domestic Card sub-segment improved to
approximately 16.8 percent in the third quarter, up from 14.5 percent in
the second quarter. The company expects Domestic Card revenue margin to
remain above 16 percent in the fourth quarter. In 2010, the company
expects Domestic Card quarterly revenue margin to moderate modestly, but
remain close to its fourth quarter 2009 level.
-- Period-end loans in the Credit Card segment were $70.4 billion, a
decline of $3.0 billion, or 4.1 percent, from the second quarter of
2009.
-- Domestic Card - loans declined $2.9 billion, or 4.4 percent from the
second quarter. The continuing run-off of nationally-originated
Installment Loans drove approximately 40 percent of the decline,
although they comprise only 13 percent of the Domestic Card loan
balances.
-- International Card - loans declined $0.2 billion or 1.9 percent from
the second quarter
-- The managed net charge-off rate for the Credit Card segment increased 35
basis points to 9.59 percent in the third quarter of 2009 from 9.24
percent in the second quarter of 2009, primarily as a result of the
continuing difficult credit environment.
-- Domestic Card - net charge-offs increased to 9.64 percent in the
third quarter from 9.23 percent in the second quarter. The increase
was driven by declining balances, the implementation of the OCC
minimum payment policies, and the absence of the one-time second
quarter benefit from a change in bankruptcy processing partially
offset by favorable seasonal trends and a modest improvement in the
underlying charge-off rate.
-- International Card - net charge-offs decreased to 9.19 percent in
the third quarter from 9.32 percent in the second quarter.
-- The delinquency rate for the Credit Card segment increased 54 basis
points to 5.53 percent in the third quarter of 2009 from 4.99 percent in
the second quarter of 2009.
-- Domestic Card - delinquencies increased to 5.38 percent in the third
quarter from 4.77 percent in the second quarter, reflecting seasonal
patterns as well as revenue enhancements taken earlier in 2009.
-- International Card - delinquencies remained basically flat,
decreasing to 6.63 percent in the third quarter from 6.69 percent in
the second quarter.
Commercial Banking highlights For more lending information and statistics on the segment results, please refer to the Financial Supplement. The Commercial Banking segment consists of commercial and multi-family real-estate, middle market lending, and specialty lending, which are summarized under Commercial Lending, and small ticket commercial real estate. The total segment reported a net loss of $130.2 million in the third quarter, down from a profit of $29.8 million in the prior quarter, driven by a $252.6 million increase in the loss provision relative to the second quarter. The provision expense increased primarily as a result of a large allowance build in anticipation of future credit losses. The two most important drivers of the allowance build were the significant decline in collateral values, particularly in the company's construction portfolio, and recognizing the effects of higher charge-offs.
-- Commercial Banking revenue increased $16.8 million, or 5.2 percent, to
$340.8 million in the third quarter of 2009, while non-interest expenses
increased $10.5 million, or 6.7 percent, to $166.0 million.
-- Average loans declined $391.6 million, or 1.3 percent, to $30.1 billion
during the third quarter from $30.5 billion during the second quarter of
2009.
-- Commercial Lending - declined $320.5 million, or 1.1 percent, to
$27.6 billion
-- Small ticket commercial real estate - declined $71.1 million, or 2.8
percent, to $2.5 billion
-- Average deposits increased $739.9 million, or 4.3 percent, to $17.8
billion during the third quarter from $17.0 billion during the second
quarter of 2009, while the deposit interest expense was effectively
stable at 75 basis points.
-- The managed net charge-off rate for Commercial Banking increased 53
basis points in the third quarter of 2009 to 1.42 percent from 0.89
percent in the second quarter of 2009.
-- Commercial Lending - 1.08 percent, an increase of 28 basis points
over the second quarter of 2009
-- Small ticket commercial real estate - 5.19 percent, an increase of
333 basis points over the second quarter of 2009
-- Non-performing loans as a percentage of loans held for investment for
Commercial Banking was 2.64 percent, an increase of 32 basis points from
2.32 percent at the end of the second quarter of 2009.
Consumer Banking highlights For more lending information and statistics on the segment's results, please refer to the Financial Supplement. Consumer Banking reported net income for the third quarter of $184.6 million. Revenue increased $56.5 million in the quarter, with improvements across the Consumer Banking segment. Provision expense declined $46.0 million, driven by an allowance release in the auto finance business. Non-interest expense declined $43.4 million.
-- Average loans declined $1.7 billion, or 4.0 percent, to $41.3 billion
during the third quarter. Auto finance loans declined as a result of the
company's earlier efforts to retrench and reposition the auto finance
business. Mortgage loans fell as the company continued to experience
expected run off in the portfolio.
-- Auto - declined $667.3 million, or 3.3 percent, to $19.6 billion
-- Mortgages - declined $857.3 million, or 5.0 percent, to $16.2
billion
-- Retail banking - declined $211.4 million, or 3.7 percent, to $5.5
billion
-- Average deposits in the Consumer Banking segment declined $1.0 billion,
or 1.4 percent, to $73.3 billion during the third quarter from $74.3
billion during the second quarter of 2009. Improved deposit mix and
favorable interest rates drove an 18 basis point improvement in the
deposit interest expense rate in the third quarter.
-- The managed net charge-off rate for Consumer Banking increased 46 basis
points in the third quarter of 2009 to 2.67 percent from 2.21 percent in
the second quarter of 2009.
-- Auto - 4.38 percent, an increase of 73 basis points over the second
quarter
-- Mortgages - 0.68 percent, an increase of 26 basis points from the
second quarter
-- Retail Banking - 2.44 percent, an increase of 3 basis points from
the second quarter
The company generates earnings from its managed loan portfolio, which includes both on-balance sheet loans and securitized (off-balance sheet) loans. For this reason, the company believes managed financial measures to be useful to stakeholders. In compliance with Regulation G of the Securities and Exchange Commission, the company is providing a numerical reconciliation of managed financial measures to comparable measures calculated on a reported basis using generally accepted accounting principles (GAAP). Please see the schedule titled "Reconciliation to GAAP Financial Measures" attached to this release for more information. Forward looking statements The company cautions that its current expectations in this release, in the presentation slides available on the company's website and in its Form 8-K dated October 22, 2009, including those regarding Domestic Card revenue margin in the fourth quarter of 2009 and in 2010; and the company's plans, objectives, expectations, and intentions, are forward-looking statements. Actual results could differ materially from current expectations due to a number of factors, including: general economic conditions in the U.S., the UK, or the company's local markets, including conditions affecting consumer income, confidence, spending, and savings which may affect consumer bankruptcies, defaults, charge-offs, deposit activity, and interest rates; changes in the labor and employment market; changes in the credit environment; the company's ability to execute on its strategic and operational plans; competition from providers of products and services that compete with the company's businesses; increases or decreases in the company's aggregate accounts and balances, or the growth rate and/or composition thereof; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; financial, legal, regulatory, tax or accounting changes or actions, including with respect to any litigation matter involving the company; and the success of the company's marketing efforts in attracting or retaining customers. A discussion of these and other factors can be found in the company's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, the company's reports on Form 10-K for the fiscal year ended December 31, 2008 and reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009. About Capital One Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $114.5 billion in deposits and $209.7 billion in total managed assets outstanding as of September 30, 2009. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index. NOTE: Third quarter 2009 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 5:00 pm (ET) earnings conference call is accessible through the same link.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
REPORTED BASIS
(in millions, except per 2009 2009 2008
share data and as noted) Q3 Q2 Q3
------------------------- -- -- --
Earnings (Reported Basis)
Net Interest Income $2,050.7 $1,946.6 $1,806.6
Non-Interest Income (2) 1,552.4 1,231.7(5) 1,696.9
------- ------- -------
Total Revenue (1) 3,603.1 3,178.3 3,503.5
Provision for Loan Losses 1,173.2 934.0 1,093.9
Marketing Expenses 103.7 134.0 267.4
Restructuring Expenses 26.4 43.4 15.3
Operating Expenses (3) 1,672.4 1,744.4(8) 1,527.5
------- ------- -------
Income (Loss) Before Taxes 627.4 322.5 599.4
Tax Rate 25.2% 28.6% 35.6%
Income (Loss) From
Continuing Operations,
Net of Tax $469.2 $230.2 $385.8
Loss From Discontinued
Operations, Net of Tax (43.6) (6.0) (11.7)
----- ---- -----
Net Income (Loss) $425.6 $224.2 $374.1
------ ------ ------
Net Income (Loss)
Available to Common
Shareholders (F) $425.6 $(275.5)(10) $374.1
-------------------- ------ ------- ------
Common Share Statistics
Basic EPS: (G)
Income (Loss) From
Continuing Operations $1.04 $(0.64) $1.03
Loss From Discontinued
Operations $(0.09) $(0.01) $(0.03)
------ ------ ------
Net Income (Loss) $0.95 $(0.65) $1.00
Diluted EPS: (G)
Income (Loss) From
Continuing Operations $1.03 $(0.64) $1.03
Loss From Discontinued
Operations $(0.09) $(0.01) $(0.03)
------ ------ ------
Net Income (Loss) $0.94 $(0.65) $1.00
Dividends Per Common Share $0.05 $0.05 $0.375
Tangible Book Value Per
Common Share (period end) $27.02 $25.34 $31.63
Stock Price Per Common
Share (period end) $35.73 $21.88 $51.00
Total Market Capitalization
(period end) $16,064.2 $9,826.3 $19,833.9
Common Shares Outstanding
(period end) 449.6 449.1 388.9
Shares Used to Compute
Basic EPS 449.4 421.9 372.9
Shares Used to Compute
Diluted EPS 453.7 421.9 374.3
---------------------- ----- ----- -----
Reported Balance Sheet
Statistics (period average) (A)
Average Loans Held for
Investment $99,485 $105,278 $98,778
Average Earning Assets $145,410 $151,400 $133,277
Average Assets $173,348 $177,589 $156,958
Average Interest Bearing
Deposits $103,105 $107,040 $84,655
Total Average Deposits $115,883 $119,611 $95,328
Average Equity $25,999 $27,658(7),(9) $25,046
Return on Average Assets
(ROA) 1.08% 0.52% 0.98%
Return on Average Equity
(ROE) 7.22% 3.33% 6.16%
------------------------ ---- ---- ----
Reported Balance Sheet
Statistics (period end) (A)
Loans Held for Investment $96,783 $101,074 $97,965
Total Assets $168,472 $171,865 $154,783
Interest Bearing Deposits $101,769 $104,121 $88,248
Total Deposits $114,503 $116,724 $98,913
-------------- -------- -------- -------
Performance Statistics
(Reported) (A)
Net Interest Income
Growth (annualized) 21% 36% 18%
Non Interest Income
Growth (annualized) 104% 52% 18%
Revenue Growth
(annualized) 53% 42% 18%
Net Interest Margin 5.64% 5.14% 5.42%
Revenue Margin 9.91% 8.40% 10.51%
Risk Adjusted Margin (B) 6.81% 5.44% 7.90%
Non Interest Expense as a
% of Average Loans Held
for Investment
(annualized) 7.25% 7.30% 7.33%
Efficiency Ratio (C) 49.29% 59.10% 51.23%
-------------------- ----- ----- -----
Asset Quality Statistics
(Reported) (A)
Allowance $4,513 $4,482 $3,520
Allowance as a % of
Reported Loans Held for
Investment 4.66%(4) 4.43%(4) 3.59%
Net Charge-Offs $1,127(4) $1,119(4) $872
Net Charge-Off Rate 4.53%(4) 4.25%(4) 3.53%
30+ day performing
delinquency rate 4.11%(4) 3.71%(4) 3.85%
--------------------------- ---- ---- ----
Full-time equivalent
employees (in thousands) 26.0 26.6 23.5
------------------------- ---- ---- ----
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (*)
2009 2009 2008
(in millions) Q3 Q2 Q3
------------- -- -- --
Earnings (Managed Basis)
Net Interest Income $3,257.5 $2,959.2 $2,889.3
Non-Interest Income (2) 1,372.7 1,189.0(5) 1,325.6
------- ------- -------
Total Revenue (1) 4,630.2 4,148.2 4,214.9
Provision for Loan Losses 2,200.3 1,903.9 1,805.3
Marketing Expenses 103.7 134.0 267.4
Restructuring Expenses 26.4 43.4 15.3
Operating Expenses (3) 1,672.4 1,744.4(8) 1,527.5
------- ------- -------
Income (Loss) Before Taxes 627.4 322.5 599.4
Tax Rate 25.2% 28.6% 35.6%
Income (Loss) From Continuing
Operations, Net of Tax $469.2 $230.2 $385.8
Loss From Discontinued
Operations, Net of Tax (43.6) (6.0) (11.7)
----- ---- -----
Net Income (Loss) $425.6 $224.2 $374.1
------ ------ ------
Net Income (Loss) Available to
Common Shareholders (F) $425.6 $(275.5)(10) $374.1
------------------------------ ------ ------- ------
Managed Balance Sheet Statistics
(period average) (A)
Average Loans Held for Investment $143,671 $148,609 $147,247
Average Earning Assets $186,005 $191,804 $179,753
Average Assets $214,575 $218,325 $204,694
Return on Average Assets (ROA) 0.87% 0.42% 0.75%
------------------------------ ---- ---- ----
Managed Balance Sheet Statistics
(period end) (A)
Loans Held for Investment $141,059 $146,251 $147,346
Total Assets $209,723 $214,095 $203,452
Tangible Assets(D) $195,647 $200,110 $190,141
Tangible Common Equity (E) $12,146 $11,379 $12,301
Tangible Common Equity to
Tangible Assets Ratio (H) 6.21% 5.69%(6) 6.47%(6)
% Off-Balance Sheet
Securitizations 31% 31% 34%
-------------------- -- -- --
Performance Statistics
(Managed) (A)
Net Interest Income Growth
(annualized) 40% 31% 15%
Non Interest Income Growth
(annualized) 62% 82% 7%
Revenue Growth (annualized) 46% 45% 12%
Net Interest Margin 7.01% 6.17% 6.43%
Revenue Margin 9.96% 8.65% 9.38%
Risk Adjusted Margin (B) 5.32% 4.30% 5.86%
Non Interest Expense as a % of
Average Loans Held for
Investment (annualized) 5.02% 5.17% 4.92%
Efficiency Ratio (C) 38.36% 45.28% 42.58%
-------------------- ----- ----- -----
Asset Quality Statistics
(Managed) (A)
Net Charge-Offs $2,155(4) $2,087(4) $1,583
Net Charge-Off Rate 6.00%(4) 5.62%(4) 4.30%
30+ day performing
delinquency rate 4.55%(4) 4.09%(4) 3.99%
---------------------------- ---- ---- ----
(*) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule - "Reconciliation to GAAP Financial Measures".
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY NOTES
(1) In accordance with the Company's finance charge and fee revenue
recognition policy, the amounts billed to customers but not recognized
as revenue were as follows: Q3 2009 - $517.0 million, Q2 2009 - $571.9
million and Q3 2008 - $445.7 million.
(2) Includes the impact from the change in fair value of retained
interests, including the interest-only strips, of an increase of $37.3
million in Q3 2009, and a decrease of $114.5 million in Q2 2009 and
$73.5 million in Q3 2008.
(3) Includes core deposit intangible amortization expense of $55.5 million
in Q3 2009, $57.4 million in Q2 2009 and $47.3 million in Q3 2008
and integration costs of $10.7 million in Q3 2009, $8.8 million in Q2
2009 and $10.3 million in Q3 2008.
(4) Allowance as a % of Reported Loans Held for Investment, Net Charge-off
Rate and 30+ Days Performing Delinquency Rate on both a Reported and
Managed basis include period end loans held for investment and average
loans held for investment acquired as part of the Chevy Chase Bank,
FSB (CCB) acquisition. The period end and average loans held for
investment and metrics excluding such loans are as follows. The net
charge-off dollars were unchanged.
Q3 2009 Q2 2009
------- -------
CCB period end acquired loan
portfolio (in millions) $8,002.3 $8,552.9
CCB average acquired loan
portfolio (in millions) $8,525.2 $8,931.9
Allowance as a % of reported
loans held for investment 5.08% 4.84%
Net charge-off rate (Reported) 4.96% 4.65%
Net charge-off rate (Managed) 6.38% 5.98%
30+ day performing delinquency
rate(Reported) 4.48% 4.05%
30+ day performing delinquency
rate(Managed) 4.82% 4.35%
(5) In Q2 2009 the Company elected to convert and sell 404,508 shares of
MasterCard class B common stock and recognized a gain of $65.5
Million in non-interest income from the transaction.
(6) The Q2 2009 TCE ratio reflects the issuance of 56,000,000 common
shares on May 14, 2009 at $27.75 per share. The Q3 2008 TCE ratio
reflects the issuance of 15,527,000 shares on September 30, 2008 at
$49 per share.
(7) Average equity includes the impact of the Company's participation in
the U.S. Treasury's Capital Purchase Program. On June 17, 2009, the
Company repurchased all 3,555,199 preferred shares issued in Q4 2008
for approximately $3.57 billion, including accrued dividends. The
warrants to purchase common shares of $491.5 million remain
outstanding and are included in paid-in capital on the balance sheet.
(8) Includes the FDIC Special Assessment of $80.5 million.
(9) Average equity includes the impact of the issuance of 56,000,000
common shares on May 14, 2009 at $27.75 per share.
(10) The calculation of net income (loss) available to common shareholders
includes the impact from dividends on preferred shares of $38.0
million and from the accretion of the discount on preferred shares of
$461.7 million. With the repayment of the preferred shares to the
U.S. Treasury, the remaining accretion was accelerated to Q2 2009 and
treated as a dividend.
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 and is
considered a non-GAAP measure. See accompanying schedule
Reconciliation to GAAP Financial Measures for a reconciliation of
tangible 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 and is considered a non-
GAAP measure. See accompanying schedule Reconciliation To GAAP
Financial Measures for a reconciliation of tangible common equity.
(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.
(H) Tangible Common Equity to Tangible Assets Ratio ("TCE Ratio") is
considered a non-GAAP measure. See accompanying schedule
Reconciliation To GAAP Financial Measures for a reconciliation of the
TCE Ratio.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended September 30, 2009
(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 they originated. For this reason the Company believes the
"managed" consolidated financial statements and related managed metrics
to be useful to stakeholders.
Total Reported Adjustments(1) Total Managed(2)
---------------------- -------------- -------------- ----------------
Income Statement Measures(3)
Net interest income $2,050,680 $1,206,867 $3,257,547
Non-interest income 1,552,380 (179,700) 1,372,680
--------- -------- ---------
Total revenue 3,603,060 1,027,167 4,630,227
Provision for loan
and lease losses 1,173,165 1,027,167 2,200,332
Net charge-offs $1,127,465 $1,027,167 $2,154,632
--------------- ---------- ---------- ----------
Balance Sheet Measures
Loans held for
investment $96,783,165 $44,275,350 $141,058,515
Total assets $168,503,921 $41,250,924 $209,754,845
Total liabilities $142,281,769 $41,250,924 $183,532,693
Average loans held
for investment $99,484,847 $44,185,873 $143,670,720
Average earning assets $145,425,656 $40,594,656 $186,020,312
Average total assets $173,389,149 $41,226,895 $214,616,044
Average total
liabilities $147,390,307 $41,226,895 $188,617,202
Delinquencies $3,982,504 $2,434,461 $6,416,965
------------- ---------- ---------- ----------
The table below presents a reconciliation of tangible common equity and
tangible assets, which are the components used to calculate the
tangible common equity "TCE" ratio. The Company believes the TCE ratio
is an important financial measure of capital strength to our investors
and readers even though it is considered to be a non-GAAP measure.
(dollars in 2009 2009 2008
millions)(unaudited) Q3 Q2 Q3
-- -- --
Equity $26,222 $25,326 $25,612
Less: preferred stock - 38 -
Less: intangible assets (4) (14,076) (13,985) (13,311)
------- ------- -------
Tangible common equity $12,146 $11,379 $12,301
======= ======= =======
Total assets 209,754 214,141 203,472
Less: discontinued ops assets (31) (46) (20)
--- --- ---
Total assets-continuing ops 209,723 214,095 203,452
Less: intangible assets (4) (14,076) (13,985) (13,311)
------- ------- -------
Tangible assets $195,647 $200,110 $190,141
======== ======== ========
TCE ratio 6.21 5.69 6.47
(1) Income statement adjustments reclassify the net of finance charges
of $1,317.2 million, past-due fees of $198.3 million, other interest
income of $(51.0) million and interest expense of $257.6 million; and
net charge-offs of $1,027.2 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 or mortgage
loans which have been sold in whole loan sale transactions or
securitizations where the Company has retained servicing rights.
(3) Based on continuing operations.
(4) Includes impact from related deferred taxes.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
As of As of As of
September 30 June 30 September 30
2009 2009 2008
---- ---- ----
Assets:
Cash and due from banks $2,719,100 $3,001,944 $3,511,558
Federal funds sold and
resale agreements 544,793 603,564 1,435,521
Interest-bearing deposits
at other banks 863,310 1,166,419 673,662
------- --------- -------
Cash and cash equivalents 4,127,203 4,771,927 5,620,741
Securities available for
sale 37,693,001 37,667,165 26,969,471
Securities held to maturity 83,608 87,545 -
Mortgage loans held for
sale 141,158 319,975 98,900
Loans held for investment 96,783,165 101,073,629 97,965,351
Less: Allowance for
loan and lease losses (4,513,493) (4,481,827) (3,519,610)
---------- ---------- ----------
Net loans held for
investment(1) 92,269,672 96,591,802 94,445,741
Accounts receivable from
securitizations 6,985,200 5,219,968 4,980,823
Premises and equipment, net 2,773,173 2,824,785 2,305,286
Interest receivable 947,738 951,201 750,717
Goodwill(1) 13,524,978 13,381,056 12,815,642
Other(1) 9,958,190 10,095,883 6,815,792
--------- ---------- ---------
Total assets $168,503,921 $171,911,307 $154,803,113
============ ============ ============
Liabilities:
Non-interest-bearing
deposits $12,734,589 $12,603,548 $10,665,286
Interest-bearing deposits 101,768,522 104,120,642 88,247,688
Senior and subordinated
notes 9,208,769 10,092,619 8,278,856
Other borrowings 12,126,181 13,260,589 15,962,072
Interest payable 582,969 659,784 508,091
Other(1) 5,860,739 5,848,464 5,529,580
--------- --------- ---------
Total liabilities 142,281,769 146,585,646 129,191,573
Stockholders' Equity:
Preferred stock - - -
Common stock 5,021 5,019 4,383
Paid-in capital, net 18,928,719 18,891,333 16,752,078
Retained earnings and
cumulative other
comprehensive income 10,460,779 9,598,606 12,020,490
Less: Treasury stock,
at cost (3,172,367) (3,169,297) (3,165,411)
---------- ---------- ----------
Total stockholders'
equity 26,222,152 25,325,661 25,611,540
---------- ---------- ----------
Total liabilities and
stockholders' equity $168,503,921 $171,911,307 $154,803,113
============ ============ ============
(1) Balances at September 30, 2009 reflect adjustments made to the
allocation of purchase price of the Chevy Chase Bank acquisition.
The balances at June 30, 2009 have not been adjusted, however, if
the adjustments had been made at June 30, 2009, net loans held for
investment would have been $96,518.7 million (a decrease of $73.1
million), goodwill would have been $13,527.9 million (an increase
of $146.9 million), other assets would have been $10,045.2 million
(an decrease of $50.7 million) and other liabilities would have
been $5,822.8 million (a decrease of $25.7 million). The allocation
of purchase price is still preliminary and will be finalized upon
completion of the analysis of the fair values of Chevy Chase Bank's
assets and liabilities.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended Nine Months Ended
September June September September September
30 30 30 30 30
2009 2009 2008 2009 2008
Interest Income:
Loans held for
investment,
including past-due
fees $2,265,720 $2,233,808 $2,347,480 $6,689,859 $7,153,582
Investment
securities 398,835 412,845 317,268 1,206,460 856,093
Other 83,195 67,982 107,048 214,294 333,503
------ ------ ------- ------- -------
Total interest
income 2,747,750 2,714,635 2,771,796 8,110,613 8,343,178
Interest Expense:
Deposits 479,178 555,579 624,319 1,666,605 1,827,284
Senior and
subordinated
notes 74,032 57,113 96,568 189,189 352,335
Other borrowings 143,860 155,357 244,264 470,802 817,241
------- ------- ------- ------- -------
Total interest
expense 697,070 768,049 965,151 2,326,596 2,996,860
------- ------- ------- --------- ---------
Net interest
income 2,050,680 1,946,586 1,806,645 5,784,017 5,346,318
Provision for
loan and
lease losses 1,173,165 934,038 1,093,917 3,386,340 3,002,119
--------- ------- --------- --------- ---------
Net interest income
after provision for
loan and lease
losses 877,515 1,012,548 712,728 2,397,677 2,344,199
Non-Interest Income:
Servicing and
securitizations 720,698 362,416 875,718 1,536,751 2,793,520
Service charges and
other customer-
related fees 496,404 491,763 576,762 1,494,292 1,675,032
Mortgage servicing
and other 8,656 13,163 39,183 45,199 90,990
Interchange 122,585 126,702 148,076 389,378 432,708
Net impairment
losses recognized in
earnings(1) (11,173) (10,031) - (21,567) -
Other 215,210 247,674 57,152 430,348 383,435
------- ------- ------ ------- -------
Total non-interest
income 1,552,380 1,231,687 1,696,891 3,874,401 5,375,685
Non-Interest Expense:
Salaries and
associate
benefits 648,180 633,819 571,686 1,836,430 1,761,538
Marketing 103,698 133,970 267,372 400,380 853,265
Communications and
data processing 175,575 194,578 176,720 569,257 559,065
Supplies and
equipment 122,777 128,483 126,781 370,160 389,649
Occupancy 113,913 114,885 96,483 329,049 264,700
Restructuring
expense 26,357 43,374 15,306 87,358 81,625
Other 611,978 672,647 555,858 1,876,692 1,542,242
------- ------- ------- --------- ---------
Total non-interest
expense 1,802,478 1,921,756 1,810,206 5,469,326 5,452,084
--------- --------- --------- --------- ---------
Income from
continuing
operations before
income taxes 627,417 322,479 599,413 802,752 2,267,800
Income taxes 158,191 92,278 213,624 190,246 786,958
------- ------ ------- ------- -------
Income from
continuing
operations, net
of tax 469,226 230,201 385,789 612,506 1,480,842
Loss from
discontinued
operations, net
of tax (43,587) (5,998) (11,650) (74,543) (105,294)
------- ------ ------- ------- --------
Net income $425,639 $224,203 $374,139 $537,963 $1,375,548
======== ======== ======== ======== ==========
Net income (loss)
available to common
shareholders $425,639 $(275,515) $374,139 $(25,945) $1,375,548
======== ========= ======== ======== ==========
Basic earnings per common share
Income (loss) from
continuing
operations $1.04 $(0.64) $1.03 $0.12 $3.98
Loss from
discontinued
operations (0.09) (0.01) (0.03) (0.18) (0.28)
----- ----- ----- ----- -----
Net Income (loss)
per common share $0.95 $(0.65) $1.00 $(0.06) $3.70
===== ====== ===== ====== =====
Diluted earnings per
common share
Income (loss) from
continuing
operations $1.03 $(0.64) $1.03 $0.12 $3.96
Loss from
discontinued
operations (0.09) (0.01) (0.03) (0.18) (0.28)
----- ----- ----- ----- -----
Net Income (loss)
per common share $0.94 $(0.65) $1.00 $(0.06) $3.68
===== ====== ===== ====== =====
Dividends paid per
common share $0.05 $0.05 $0.375 $0.475 $1.125
===== ===== ====== ====== =====
(1) Total other-than-temporary impairment losses for the three and nine
months ended September 30, 2009 are $131.0 million and $290.6 million,
respectively. The portion of loss recognized in other comprehensive income
(before taxes) for the three and nine months ended September 30, 2009 are
$119.9 million and $269.0 million, respectively. Total other-than-
temporary impairment losses for the three months ended June 30, 2009 is
$159.2 million. The portion of loss recognized in other comprehensive
income (before taxes) for the three months ended June 30, 2009 is $149.2
million.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates (1)
(dollars in thousands)(unaudited)
Reported Quarter Ended 09/30/09
----------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- --------
Earning assets:
Loans held for investment $99,484,847 $2,265,720 9.11%
Investment Securities (2) 37,376,895 398,835 4.27%
Other 8,548,610 83,195 3.89%
--------- ------ ----
Total earning assets $145,410,352 $2,747,750 7.56%
============ ==========
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts 10,418,557 12,745 0.49%
Money market deposit accounts 36,036,826 96,477 1.07%
Savings accounts 12,266,254 22,772 0.74%
Other consumer time deposits 32,075,905 248,272 3.10%
Public fund CD's of $100,000 or
more 1,061,134 2,789 1.05%
CD's of $100,000 or more 9,764,172 92,681 3.80%
Foreign time deposits 1,482,519 3,442 0.93%
--------- ----- ----
Total interest-bearing deposits $103,105,367 $479,178 1.86%
Senior and subordinated notes 9,553,950 74,032 3.10%
Other borrowings 13,480,527 143,860 4.27%
---------- ------- ----
Total interest-bearing liabilities $126,139,844 $697,070 2.21%
============ ========
----
Net interest spread 5.35%
====
Interest income to average earning assets 7.56%
Interest expense to average earning assets 1.92%
----
Net interest margin 5.64%
====
Reported Quarter Ended 06/30/09
----------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- --------
Earning assets:
Loans held for investment $105,278,045 $2,233,808 8.49%
Investment Securities (2) 37,499,187 412,845 4.40%
Other 8,623,100 67,982 3.15%
--------- ------ ----
Total earning assets $151,400,332 $2,714,635 7.17%
============ ==========
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $10,914,679 $14,602 0.54%
Money market deposit accounts 35,751,007 103,855 1.16%
Savings accounts 9,931,058 13,399 0.54%
Other consumer time deposits 35,841,099 300,572 3.35%
Public fund CD's of $100,000 or
more 1,117,460 3,450 1.23%
CD's of $100,000 or more 11,097,722 108,228 3.90%
Foreign time deposits 2,387,093 11,473 1.92%
--------- ------ ----
Total interest-bearing deposits $107,040,118 $555,579 2.08%
Senior and subordinated notes 8,322,746 57,113 2.74%
Other borrowings 16,274,845 155,357 3.82%
---------- ------- ----
Total interest-bearing liabilities $131,637,709 $768,049 2.33%
============ ========
----
Net interest spread 4.84%
====
Interest income to average earning assets 7.17%
Interest expense to average earning assets 2.03%
----
Net interest margin 5.14%
====
Reported Quarter Ended 09/30/08
----------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- --------
Earning assets:
Loans held for investment $98,778,393 $2,347,480 9.51%
Investment Securities (2) 25,780,198 317,268 4.92%
Other 8,718,392 107,048 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%
====
(1) Average balances, income and expenses, yields and rates are based
on continuing operations.
(2) Includes securities available for sale and securities held to
maturity.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates (2)
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 09/30/09
----------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- --------
Earning assets:
Loans held for investment $143,670,720 $3,795,387 10.57%
Investment Securities (3) 37,376,895 398,835 4.27%
Other 4,957,393 18,038 1.46%
--------- ------ ----
Total earning assets $186,005,008 $4,212,260 9.06%
============ ==========
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $10,418,557 $12,745 0.49%
Money market deposit accounts 36,036,826 96,477 1.07%
Savings accounts 12,266,254 22,772 0.74%
Other consumer time deposits 32,075,905 248,272 3.10%
Public fund CD's of $100,000 or
more 1,061,134 2,789 1.05%
CD's of $100,000 or more 9,764,172 92,681 3.80%
Foreign time deposits 1,482,519 3,442 0.93%
--------- ----- ----
Total interest-bearing deposits $103,105,367 $479,178 1.86%
Senior and subordinated notes 9,553,950 74,032 3.10%
Other borrowings 13,480,527 143,860 4.27%
Securitization liability 41,251,788 257,643 2.50%
---------- ------- ----
Total interest-bearing liabilities $167,391,632 $954,713 2.28%
============ ========
----
Net interest spread 6.78%
====
Interest income to average earning assets 9.06%
Interest expense to average earning assets 2.05%
----
Net interest margin 7.01%
====
Managed (1) Quarter Ended 06/30/09
----------------------
Average Income/ Yield/
Balance Expense Rate
------- ------- --------
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