EX-99.1 2 dex991.htm EXHIBIT 99.1 EXHIBIT 99.1

Exhibit 99.1

CAPITAL ONE FINANCIAL CORPORATION (COF)

FINANCIAL & STATISTICAL SUMMARY

REPORTED BASIS

 

(in millions, except per share data and as noted)

  

2007

Q3

   

2007

Q2

   

2007

Q1

   

2006

Q4

   

2006

Q3

 
Earnings (Reported Basis)           

Net Interest Income

   $ 1,624.5     $ 1,538.6 (2)   $ 1,604.5     $ 1,393.0     $ 1,294.5  

Non-Interest Income

     2,149.7       1,971.9       1,774.4 (3)     1,671.5       1,761.4  
                                        

Total Revenue(6)

     3,774.2       3,510.5       3,378.9       3,064.5       3,055.9  

Provision for Loan Losses

     595.5       396.7       350.0       513.2       430.6  

Marketing Expenses

     332.7       326.1       330.9       395.4       368.5  

Restructuring Expenses (5)

     19.4       91.1       —         —         —    

Operating Expenses

     1,582.2 (4)     1,617.4 (4),(13)     1,643.2 (4)     1,567.3       1,358.1  
                                        

Income Before Taxes

     1,244.4       1,079.2       1,054.8       588.6       898.7  

Tax Rate(7)

     34.4 %     28.9 %     35.0 %     31.6 %     34.6 %

Income From Continuing Operations, Net of Tax

   $ 816.4     $ 767.6     $ 686.1     $ 402.6     $ 587.8  

(Loss) From Discontinued Operations, Net of Tax(1)

     (898.0 )     (17.2 )     (11.1 )     (11.9 )     —    
                                        

Net (Loss) Income

   $ (81.6 )   $ 750.4     $ 675.0     $ 390.7     $ 587.8  
Common Share Statistics           

Basic EPS:

          

Income From Continuing Operations

   $ 2.11     $ 1.96     $ 1.68     $ 1.20     $ 1.95  

(Loss) From Discontinued Operations

   $ (2.32 )   $ (0.04 )   $ (0.03 )   $ (0.04 )   $  
                                        

Net (Loss) Income

   $ (0.21 )   $ 1.92     $ 1.65     $ 1.16     $ 1.95  

Diluted EPS:

          

Income From Continuing Operations

   $ 2.09     $ 1.93     $ 1.65     $ 1.17     $ 1.89  

(Loss) From Discontinued Operations

   $ (2.30 )   $ (0.04 )   $ (0.03 )   $ (0.03 )   $  
                                        

Net (Loss) Income

   $ (0.21 )   $ 1.89     $ 1.62     $ 1.14     $ 1.89  

Dividends Per Share

   $ 0.03     $ 0.03     $ 0.03     $ 0.03     $ 0.03  

Tangible Book Value Per Share (period end)

   $ 28.88     $ 29.11     $ 29.76     $ 27.95     $ 41.12  

Stock Price Per Share (period end)

   $ 66.43     $ 78.44     $ 75.46     $ 76.82     $ 78.66  

Total Market Capitalization (period end)

   $ 25,602.1     $ 30,701.4     $ 31,112.2     $ 31,488.5     $ 23,944.1  

Shares Outstanding (period end)

     385.4       391.4       412.3       409.9       304.4  

Shares Used to Compute Basic EPS

     386.1       390.8       408.7       336.5       301.6  

Shares Used to Compute Diluted EPS

     390.8       397.5       415.5       343.8       310.4  
Reported Balance Sheet Statistics (period average) (8)           

Average Loans Held for Investment

   $ 91,745     $ 91,145     $ 93,466     $ 74,738     $ 62,429  

Average Earning Assets

   $ 117,694     $ 119,430     $ 120,766     $ 97,849     $ 81,437  

Average Assets

   $ 143,291     $ 142,690     $ 143,130     $ 111,440     $ 92,295  

Average Interest Bearing Deposits

   $ 73,555     $ 75,218     $ 74,867     $ 53,735     $ 42,984  

Total Average Deposits

   $ 84,884     $ 86,719     $ 86,237     $ 60,382     $ 47,196  

Average Equity

   $ 25,344     $ 25,128     $ 25,610     $ 18,311     $ 16,310  

Return on Average Assets (ROA)

     2.28 %     2.15 %     1.92 %     1.45 %     2.55 %

Return on Average Equity (ROE)

     12.89 %     12.22 %     10.72 %     8.79 %     14.42 %
Reported Balance Sheet Statistics (period end)(8)           

Loans Held for Investment

   $ 93,789     $ 90,930     $ 90,869     $ 96,512     $ 63,612  

Total Assets

   $ 143,884     $ 141,917     $ 143,832     $ 144,361     $ 94,907  

Interest Bearing Deposits

   $ 72,503     $ 74,444     $ 76,306     $ 74,123     $ 43,468  

Total Deposits

   $ 83,343     $ 85,680     $ 87,664     $ 85,771     $ 47,613  
Performance Statistics (Reported)(8)           

Net Interest Income Growth (annualized)

     22 %     (16 )%     61 %     30 %     33 %

Non Interest Income Growth (annualized)

     36 %     45 %     25 %     (20 )%     12 %

Revenue Growth (annualized)

     30 %     16 %     41 %     1 %     20 %

Net Interest Margin

     5.52 %     5.15 %     5.31 %     5.69 %     6.36 %

Revenue Margin

     12.83 %     11.76 %     11.19 %     12.53 %     15.01 %

Risk Adjusted Margin(11)

     11.20 %     10.41 %     9.77 %     10.72 %     13.20 %

Non Interest Expense as a % of Average Loans Held for Investment (annualized)

     8.43 %     8.93 %     8.45 %     10.50 %     11.06 %

Efficiency Ratio(12)

     50.74 %     55.36 %     58.42 %     64.05 %     56.50 %
Asset Quality Statistics (Reported)(8)           

Allowance

   $ 2,237     $ 2,113     $ 2,105     $ 2,180     $ 1,840  

Allowance as a % of Reported Loans Held for Investment

     2.39 %     2.32 %     2.32 %     2.26 %     2.89 %

Net Charge-Offs

   $ 480     $ 401     $ 430     $ 443     $ 369  

Net Charge-Off Rate

     2.09 %     1.76 %(14)     1.84 %     2.37 %     2.36 %

Full-time equivalent employees (in thousands)

     27.5       29.5       30.8       31.1       21.1  

 

1


CAPITAL ONE FINANCIAL CORPORATION (COF)

FINANCIAL & STATISTICAL SUMMARY

MANAGED BASIS (*)

 

(in millions)

  

2007

Q3

   

2007

Q2

   

2007

Q1

   

2006

Q4

   

2006

Q3

 
Earnings (Managed Basis)           

Net Interest Income

   $ 2,803.4     $ 2,613.3 (2)   $ 2,602.5     $ 2,339.1     $ 2,217.8  

Non-Interest Income

     1,518.0       1,387.5       1,294.1 (3)     1,210.3       1,275.4  
                                        

Total Revenue(6)

     4,321.4       4,000.8       3,896.6       3,549.4       3,493.2  

Provision for Loan Losses

     1,142.7       887.1       867.7       998.1       867.9  

Marketing Expenses

     332.7       326.1       330.9       395.4       368.5  

Restructuring Expenses(5)

     19.4       91.1       —         —         —    

Operating Expenses

     1,582.2 (4)     1,617.4 (4),(13)     1,643.2 (4)     1,567.3       1,358.1  
                                        

Income Before Taxes

     1,244.4       1,079.1       1,054.8       588.6       898.7  

Tax Rate(7)

     34.4 %     28.9 %     35.0 %     31.6 %     34.6 %

Income From Continuing Operations, Net of Tax

   $ 816.4     $ 767.6     $ 686.1     $ 402.6     $ 587.8  

(Loss) From Discontinued Operations, Net of Tax(1)

     (898.0 )     (17.2 )     (11.1 )     (11.9 )     —    
                                        

Net (Loss) Income

   $ (81.6 )   $ 750.4     $ 675.0     $ 390.7     $ 587.8  
Managed Balance Sheet Statistics (period average)(8)           

Average Loans Held for Investment

   $ 143,781     $ 142,616     $ 144,113     $ 123,902     $ 110,512  

Average Earning Assets

   $ 167,578     $ 168,841     $ 169,358     $ 145,113     $ 127,742  

Average Assets

   $ 194,528     $ 193,446     $ 193,034     $ 159,947     $ 139,833  

Return on Average Assets (ROA)

     1.68 %     1.59 %     1.42 %     1.01 %     1.68 %
Managed Balance Sheet Statistics (period end)(8)           

Loans Held for Investment(8)

   $ 144,769     $ 143,498     $ 142,005     $ 146,151     $ 112,239  

Total Assets

   $ 194,019     $ 193,682     $ 194,252     $ 193,267     $ 142,977  

Tangible Assets(10)

   $ 180,363     $ 179,888     $ 180,501     $ 179,487     $ 138,817  

Tangible Common Equity(9)

   $ 11,131     $ 11,393     $ 12,270     $ 11,455     $ 12,517  

Tangible Common Equity to Tangible Assets Ratio

     6.17 %     6.33 %     6.80 %     6.38 %     9.02 %

% Off-Balance Sheet Securitizations

     35 %     37 %     36 %     34 %     43 %
Performance Statistics (Managed)(8)           

Net Interest Income Growth (annualized)

     29 %     2 %     45 %     22 %     14 %

Non Interest Income Growth (annualized)

     38 %     29 %     28 %     (20 )%     25 %

Revenue Growth (annualized)

     32 %     11 %     39 %     6 %     18 %

Net Interest Margin

     6.69 %     6.19 %     6.15 %     6.45 %     6.94 %

Revenue Margin

     10.31 %     9.48 %     9.20 %     9.78 %     10.94 %

Risk Adjusted Margin(11)

     7.86 %     7.37 %     6.97 %     7.23 %     8.41 %

Non Interest Expense as a of Average Loans Held for Investment (annualized)

     5.38 %     5.71 %     5.48 %     6.34 %     6.25 %

Efficiency Ratio(12)

     44.31 %     48.58 %     50.66 %     55.30 %     49.43 %
Asset Quality Statistics (Managed)(8)           

Net Charge-Offs

   $ 1,027     $ 891     $ 947     $ 927     $ 806  

Net Charge-Off Rate

     2.86 %     2.50 %(14)     2.63 %     2.99 %     2.92 %

(*) 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


CAPITAL ONE FINANCIAL CORPORATION (COF)

FINANCIAL & STATISTICAL SUMMARY NOTES

 

(1) On August 20, 2007, the Company announced that it would cease residential mortgage origination operations of its wholesale mortgage banking unit, GreenPoint Mortgage which was acquired in Q4 2006. The results of the residential mortgage origination operations are being reported as discontinued operations for each period presented subsequent to the acquisition. The results of GreenPoint's Mortgage Servicing Business are reported as continuing operations for each period presented subsequent to the acquisition. The Company recorded a loss from discontinued operations of $898.0 million after-tax for Q3 2007. Approximately $646.0 million after-tax of this loss resulted from the non-cash write-down of goodwill associated with the acquisition of GreenPoint Mortgage as part of the North Fork Bancorporation in December 2006. The remaining $252.0 million of after-tax loss includes approximately $177.8 million after-tax valuation adjustments related to ongoing operations, $59.0 million in after-tax restructuring charges associated with severance benefits and facilities closure, and $15.2 million in loss from operations in the third quarter.

 

(2) Includes a $17.4 million gain from the early extinguishment of Trust Preferred Securities in Q2 2007 included as a component of Interest expense.

 

(3) Includes a $46.2 million gain resulting from the sale of a 7% stake in the privately held company, DealerTrack Holding Inc., a leading provider of on-demand software and data solutions for the automotive retail industry in Q1 2007.

 

(4) Includes core deposit intangible amortization expense of $52.4 million in Q3 2007, $53.7 million in Q2 2007 and $55.0 million in Q1 2007, and integration costs of $30.3 million in Q3 2007, $24.5 million in Q2 2007 and $14.6 million in Q1 2007.

 

(5) During the second quarter of 2007, the Company announced a broad-based initiative to reduce expenses and improve its competitive cost position. As part of this initiative $19.4 million and $91.1 million of restructuring charges were recognized as part of continuing operations during Q3 2007 and Q2 2007, respectively.

 

(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 2007 - $310.5 million, Q2 2007 - $236.3 million, Q1 2007 - $213.6 million, Q4 2006 - $248.3 million, and Q3 2006 - $226.3 million.

 

(7) Includes a $69.0 million benefit in Q2 2007 resulting from changes in the Company’s international tax position and tax benefits from resolution of tax issues and miscellaneous tax adjustments in prior periods as follows: Q1 2007 - $11.7 million, Q4 2006 - $28.8 million and Q3 2006 - $18.7 million.

 

(8) Based on continuing operations. Average equity and return on equity are based on the Company's stockholder’s equity.

 

(9) Includes stockholders' equity and preferred interests less intangible assets and related deferred tax liability. Tangible Common Equity on a reported and managed basis is the same.

 

(10) Tangible assets include managed assets less intangible assets.

 

(11) Risk adjusted margin is total revenue less net charge-offs as a percentage of average earning assets.

 

(12) Efficiency ratio is Non-interest expense less restructuring expense divided by total revenue.

 

(13) Includes a charge of $39.8 million as a result of the accelerated vesting of equity awards made in connection with the transition of the management team for Capital One’s Banking business following the North Fork acquisition in Q4 2006.

 

(14) Managed and reported net charge-off rate for Q2 2007 was positively impacted 11 and 17 basis points, respectively, due to the implementation of a change in customer statement generation from 30 to 25 days grace. The change did not have a material impact on Net Provision for Q2 2007.

 

3


CAPITAL ONE FINANCIAL CORPORATION (COF)

SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS

MANAGED BASIS (1)

 

(in thousands)

  

2007

Q3

   

2007

Q2

   

2007

Q1

   

2006

Q4

   

2006

Q3

 

Local Banking: (3)

          

Interest Income

   $ 1,746,683     $ 1,724,239     $ 1,740,132     $ 721,102     $ 719,207  

Interest Expense

     1,161,758       1,139,774       1,166,563       476,523       461,009  
                                        

Net interest income

   $ 584,925     $ 584,465     $ 573,569     $ 244,579     $ 258,198  

Non-interest income

     195,204       210,581       200,141       112,021       115,526  

Provision for loan losses

     (58,285 )     23,929       23,776       (21,549 )     5,495  

Other non-interest expenses

     543,390       548,462       554,598       307,810       297,080  

Income tax provision

     102,693       77,821       68,339       24,619       24,902  
                                        

Net income

   $ 192,331     $ 144,834     $ 126,997     $ 45,720     $ 46,247  
                                        

Loans Held for Investment

   $ 42,233,665     $ 41,919,645     $ 41,642,594     $ 12,145,533     $ 13,326,088  

Average Loans Held for Investment

   $ 41,992,618     $ 42,110,537     $ 41,846,678     $ 13,330,876     $ 13,171,414  

Core Deposits(2)

   $ 63,118,580     $ 63,828,306     $ 62,962,395     $ 27,071,324     $ 26,997,345  

Total Deposits

   $ 73,419,558     $ 74,482,705     $ 74,509,054     $ 35,334,610     $ 35,163,849  

Loans Held for Investment Yield

     7.13 %     7.03 %     6.99 %     7.98 %     8.02 %

Net Interest Margin - Loans (4)

     1.79 %     1.88 %     1.91 %     3.21 %     3.30 %

Net Interest Margin - Deposits (5)

     2.09 %     2.01 %     1.98 %     1.50 %     1.62 %

Efficiency Ratio (7)

     69.65 %     68.98 %     71.68 %     86.32 %     79.49 %

Net charge-off rate

     0.19 %     0.19 %     0.15 %     0.40 %     0.48 %

Non Performing Loans

   $ 112,794     $ 80,781     $ 80,162     $ 57,824     $ 79,042  

Non Performing Loans as a % of Loans Held for Investment

     0.27 %     0.19 %     0.19 %     0.48 %     0.59 %

Non-Interest Expenses as a % of Average Loans Held for Investment

     5.18 %     5.21 %     5.30 %     9.24 %     9.02 %

Number of Active ATMs

     1,282       1,253       1,236       661       623  

Number of locations

     732       724       723       358       342  

National Lending:

          

Interest Income

   $ 3,511,878     $ 3,261,042     $ 3,254,596     $ 3,182,013     $ 3,078,097  

Interest Expense

     1,232,115       1,197,106       1,184,284       1,163,106       1,089,279  
                                        

Net interest income

   $ 2,279,763     $ 2,063,936     $ 2,070,312     $ 2,018,907     $ 1,988,818  

Non-interest income

     1,312,146       1,177,139       1,138,499       1,105,240       1,213,924  

Provision for loan losses

     1,196,087       869,149       849,216       1,010,837       862,375  

Other non-interest expenses

     1,367,607       1,366,282       1,422,169       1,534,523       1,411,882  

Income tax provision

     352,847       346,547       322,877       205,768       324,366  
                                        

Net income

   $ 675,368     $ 659,097     $ 614,549     $ 373,019     $ 604,119  
                                        

Loans Held for Investment

   $ 102,556,271     $ 101,590,039     $ 100,371,532     $ 102,359,180     $ 98,909,970  

Average Loans Held for Investment

   $ 101,805,584     $ 100,520,138     $ 102,276,581     $ 99,881,480     $ 97,309,087  

Core Deposits(2)

   $ 470     $ 1,124     $ 3,212     $ 6,061     $ 137,602  

Total Deposits

   $ 2,295,131     $ 2,411,435     $ 2,409,291     $ 2,383,902     $ 2,461,941  

Loans Held for Investment Yield

     13.77 %     12.95 %     12.70 %     12.72 %     12.63 %

Net Interest Margin

     8.96 %     8.21 %     8.10 %     8.09 %     8.18 %

Revenue Margin

     14.11 %     12.90 %     12.55 %     12.51 %     13.17 %

Risk Adjusted Margin

     10.15 %     9.43 %     8.90 %     8.88 %     9.92 %

Non-Interest Expenses as a % of Average Loans Held for Investment

     5.37 %     5.44 %     5.56 %     6.15 %     5.80 %

Efficiency Ratio (7)

     38.07 %     42.16 %     44.32 %     49.12 %     44.08 %

Net charge-off rate

     3.96 %     3.47 %(6)     3.65 %     3.63 %     3.25 %

Delinquency Rate (30+ days)

     4.70 %     3.89 %     3.63 %     4.09 %     3.70 %

Number of Loan Accounts (000s)

     48,473       48,536       48,668       49,374       49,176  

Other: (3)

          

Net interest income

   $ (61,250 )   $ (35,056 )   $ (41,427 )   $ 75,586     $ (29,194 )

Non-interest income

     10,639       (249 )     (44,564 )     (6,915 )     (54,041 )

Provision for loan losses

     5,023       (5,981 )     (5,330 )     8,840       27  

Restructuring expenses

     19,354       91,074       —         —         —    

Other non-interest expenses

     3,870       28,717       (2,720 )     120,353       17,667  

Income tax benefit

     (27,530 )     (112,796 )     (22,519 )     (44,395 )     (38,402 )
                                        

Net loss

   $ (51,328 )   $ (36,319 )   $ (55,422 )   $ (16,127 )   $ (62,527 )
                                        

Loans Held for Investment

   $ (21,375 )   $ (11,928 )   $ (9,084 )   $ 31,646,555     $ 2,488  

Core Deposits(2)

   $ 5,967,308     $ 6,937,760     $ 7,532,854     $ 42,819,710     $ 7,301,435  

Total Deposits

   $ 7,628,125     $ 8,786,315     $ 10,745,405     $ 48,052,380     $ 9,987,360  

Total:

          

Interest Income

   $ 4,646,430     $ 4,380,376     $ 4,359,663     $ 3,901,560     $ 3,595,874  

Interest Expense

     1,842,992       1,767,031       1,757,209       1,562,488       1,378,052  
                                        

Net interest income

   $ 2,803,438     $ 2,613,345     $ 2,602,454     $ 2,339,072     $ 2,217,822  

Non-interest income

     1,517,989       1,387,471       1,294,076       1,210,346       1,275,409  

Provision for loan losses

     1,142,825       887,097       867,662       998,128       867,897  

Restructuring expenses

     19,354       91,074       —         —         —    

Other non-interest expenses

     1,914,867       1,943,461       1,974,047       1,962,686       1,726,629  

Income tax provision

     428,010       311,572       368,697       185,992       310,866  
                                        

Income From Continuing Operations, Net of Tax

   $ 816,371     $ 767,612     $ 686,124     $ 402,612     $ 587,839  
                                        

Loans Held for Investment

   $ 144,768,561     $ 143,497,756     $ 142,005,042     $ 146,151,268     $ 112,238,546  

Core Deposits(2)

   $ 69,086,358     $ 70,767,190     $ 70,498,461     $ 69,897,095     $ 34,436,382  

Total Deposits

   $ 83,342,814     $ 85,680,455     $ 87,663,750     $ 85,770,892     $ 47,613,150  

(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.”

On August 20, 2007, the Company announced that it would cease residential mortgage origination operations of its wholesale mortgage banking unit, GreenPoint Mortgage. The results of the residential mortgage origination operations are reported as discontinued operations and excluded from the segment results presented. The results of GreenPoint's Mortgage Servicing Business are reported as continuing operations for each period presented and included in Local Banking results for 2007 and in Other for Q4 2006.

(2) Includes domestic non-interest bearing deposits, NOW accounts, money market deposit accounts, savings accounts, certificates of deposit of less than $100,000 and other consumer time deposits.
(3) Results of the North Fork acquisition were included in the Other category for Q4 2006.
(4) Interest Income - funds transfer pricing charges divided by average managed loans
(5) Interest Expense - funds transfer pricing credits divided by average retail deposits
(6) Net charge-off rate for Q2 2007 was positively impacted by 16 basis points due to the implementation of a change in customer statement generation from 30 to 25 days grace. This change did not have a material impact on the provision for the quarter.
(7) Efficiency ratio is Non-Interest Expenses divided by total Managed Revenue

 

4


CAPITAL ONE FINANCIAL CORPORATION (COF)

NATIONAL LENDING SUBSEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS

MANAGED BASIS (1)

 

(in thousands)

  

2007

Q3

   

2007

Q2

   

2007

Q1

   

2006

Q4

   

2006

Q3

 

US Card:

          

Interest Income

   $ 1,953,967     $ 1,779,670     $ 1,813,846     $ 1,795,345     $ 1,734,459  

Interest Expense

     596,767       590,236       602,505       600,821       554,708  
                                        

Net interest income

   $ 1,357,200     $ 1,189,434     $ 1,211,341     $ 1,194,524     $ 1,179,751  

Non-interest income

     975,502       842,428       778,606       795,881       881,304  

Provision for loan losses

     662,428       402,589       373,836       554,698       451,782  

Non-interest expenses

     815,470       808,769       861,020       916,963       899,062  

Income tax provision

     294,053       282,253       259,751       181,561       248,574  
                                        

Net income

   $ 560,751     $ 538,251     $ 495,340     $ 337,183     $ 461,637  
                                        

Loans Held for Investment

   $ 49,573,279     $ 50,032,530     $ 49,681,559     $ 53,623,680     $ 51,127,654  

Average Loans Held for Investment

   $ 49,682,666     $ 49,573,957     $ 51,878,104     $ 51,686,135     $ 50,131,562  

Loans Held for Investment Yield

     15.73 %     14.36 %     13.99 %     13.89 %     13.84 %

Net Interest Margin

     10.93 %     9.60 %     9.34 %     9.24 %     9.41 %

Revenue Margin

     18.78 %     16.39 %     15.34 %     15.40 %     16.45 %

Risk Adjusted Margin

     14.65 %     12.66 %     11.35 %     11.58 %     13.05 %

Non-Interest Expenses as a % of Average Loans Held for Investment

     6.57 %     6.53 %     6.64 %     7.10 %     7.17 %

Efficiency Ratio (2)

     34.96 %     39.80 %     43.27 %     46.07 %     43.62 %

Net charge-off rate

     4.13 %     3.73 %(5)     3.99 %     3.82 %     3.39 %

Delinquency Rate (30+ days)

     4.46 %     3.41 %     3.48 %     3.74 %     3.53 %

Purchase Volume (3)

   $ 21,522,104     $ 21,781,462     $ 19,346,812     $ 22,782,451     $ 21,450,024  

Number of Loan Accounts (000s)

     36,504       36,608       36,758       37,630       37,483  

Auto Finance:

          

Interest Income

   $ 661,471     $ 651,821     $ 637,609     $ 593,268     $ 575,376  

Interest Expense

     283,949       277,783       265,556       242,311       227,053  
                                        

Net interest income

   $ 377,522     $ 374,038     $ 372,053     $ 350,957     $ 348,323  

Non-interest income

     13,514       23,273       60,586       14,143       21,181  

Provision for loan losses

     244,537       182,278       200,058       151,171       161,145  

Non-interest expenses

     152,275       157,044       164,948       162,022       154,014  

Income tax provision

     (1,987 )     19,948       23,266       18,167       19,021  
                                        

Net (loss) income

   $ (3,789 )   $ 38,041     $ 44,367     $ 33,740     $ 35,324  
                                        

Loans Held for Investment

   $ 24,335,242     $ 24,067,760     $ 23,930,547     $ 21,751,827     $ 21,158,797  

Average Loans Held for Investment

   $ 24,170,047     $ 23,898,070     $ 23,597,675     $ 21,498,205     $ 20,812,533  

Loans Held for Investment Yield

     10.95 %     10.91 %     10.81 %     11.04 %     11.06 %

Net Interest Margin

     6.25 %     6.26 %     6.31 %     6.53 %     6.69 %

Revenue Margin

     6.47 %     6.65 %     7.33 %     6.79 %     7.10 %

Risk Adjusted Margin

     2.91 %     4.30 %     5.04 %     3.94 %     4.76 %

Non-Interest Expenses as a % of Average Loans Held for Investment

     2.52 %     2.63 %     2.80 %     3.01 %     2.96 %

Efficiency Ratio (2)

     38.94 %     39.53 %     38.13 %     44.38 %     41.68 %

Net charge-off rate

     3.56 %     2.35 %     2.29 %     2.85 %     2.34 %

Delinquency Rate (30+ days)

     7.15 %     6.00 %     4.64 %     6.35 %     5.18 %

Auto Loan Originations

   $ 3,248,747     $ 2,992,427     $ 3,311,868     $ 3,078,877     $ 3,158,481  

Number of Loan Accounts (000s)

     1,731       1,771       1,762       1,589       1,558  

Global Financial Services:

          

Interest Income

   $ 896,440     $ 829,551     $ 803,141     $ 793,400     $ 768,262  

Interest Expense

     351,399       329,087       316,223       319,974       307,518  
                                        

Net interest income

   $ 545,041     $ 500,464     $ 486,918     $ 473,426     $ 460,744  

Non-interest income

     323,130       311,438       299,307       295,216       311,439  

Provision for loan losses

     289,122       284,282       275,322       304,968       249,448  

Non-interest expenses

     399,862       400,469       396,201       455,538       358,806  

Income tax provision

     60,781       44,346       39,860       6,040       56,771  
                                        

Net income

   $ 118,406     $ 82,805     $ 74,842     $ 2,096     $ 107,158  
                                        

Loans Held for Investment

   $ 28,647,750     $ 27,489,749     $ 26,759,426     $ 26,983,673     $ 26,623,519  

Average Loans Held for Investment

   $ 27,952,871     $ 27,048,111     $ 26,800,802     $ 26,697,140     $ 26,364,992  

Loans Held for Investment Yield (4)

     12.72 %     12.16 %     11.88 %     11.80 %     11.58 %

Net Interest Margin

     7.80 %     7.40 %     7.27 %     7.09 %     6.99 %

Revenue Margin

     12.42 %     12.01 %     11.73 %     11.52 %     11.72 %

Risk Adjusted Margin

     8.42 %     8.03 %     7.55 %     7.63 %     8.02 %

Non-Interest Expenses as a % of Average Loans Held for Investment

     5.72 %     5.92 %     5.91 %     6.83 %     5.44 %

Efficiency Ratio (2)

     46.06 %     49.32 %     50.39 %     59.27 %     46.47 %

Net charge-off rate

     4.00 %     3.98 %     4.18 %     3.89 %     3.70 %

Delinquency Rate (30+ days)

     3.02 %     2.93 %     2.99 %     2.97 %     2.86 %

Number of Loan Accounts (000s)

     10,238       10,157       10,148       10,155       10,135  

(1) The information in this statistical summary reflects the adjustment to add back the effect of securitization transactions qualifying as sales under generally accepted accounting principles. See accompanying schedule - “Reconciliation to GAAP Financial Measures.”
(2) Efficiency ration is non-Interest Expenses divided by total Managed Revenue
(3) Includes all purchase transactions net of returns and excludes cash advance transactions.
(4) Excludes “GFS - Home Loans Originations” and “GFS - Settlement Services” from Other Interest Income.
(5) Net charge-off rate for Q2 2007 was positively impacted by 31 basis points due to the implementation of a change in customer statement generation from 30 to 25 days grace. This change did not have a material impact on the provision for the quarter.

 

5


CAPITAL ONE FINANCIAL CORPORATION

Reconciliation to GAAP Financial Measures

For the Three Months Ended September 30, 2007

(dollars in thousands)(unaudited)

The Company’s consolidated financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) are referred to as its “reported” financial statements. Loans included in securitization transactions which qualified as sales under GAAP have been removed from the Company’s “reported” balance sheet. However, servicing fees, finance charges, and other fees, net of charge-offs, and interest paid to investors of securitizations are recognized as servicing and securitizations income on the “reported” income statement.

The Company’s “managed” consolidated financial statements reflect adjustments made related to effects of securitization transactions qualifying as sales under GAAP. The Company generates earnings from its “managed” loan portfolio which includes both the on-balance sheet loans and off-balance sheet loans. The Company’s “managed” income statement takes the components of the servicing and securitizations income generated from the securitized portfolio and distributes the revenue and expense to appropriate income statement line items from which it originated. For this reason the Company believes the “managed” consolidated financial statements and related managed metrics to be useful to stakeholders.

 

     Total Reported    Adjustments(1)     Total Managed(2)

Income Statement Measures(3)

       

Net interest income

   $ 1,624,474    $ 1,178,964     $ 2,803,438

Non-interest income

     2,149,662    $ (631,673 )     1,517,989
                     

Total revenue

     3,774,136    $ 547,291       4,321,427

Provision for loan losses

     595,534    $ 547,291       1,142,825

Net charge-offs

   $ 480,065    $ 547,291     $ 1,027,356

Balance Sheet Measures

       

Loans Held for Investment

   $ 95,405,217    $ 50,980,053     $ 146,385,270

Total assets

   $ 147,154,835    $ 50,135,190     $ 197,290,025

Average loans Held for Investment

   $ 92,450,865    $ 52,036,422     $ 144,487,287

Average earning assets

   $ 121,169,771    $ 49,884,042     $ 171,053,813

Average total assets

   $ 147,884,578    $ 51,237,294     $ 199,121,872

Delinquencies

   $ 3,077,211    $ 2,020,368     $ 5,097,579

(1) Income statement adjustments reclassify the net of finance charges of $1,659.5 million, past-due fees of $262.7 million, other interest income of $(42.7) million and interest expense of $700.5 million; and net charge-offs of $547.3 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.
(3) Based on continuing operations.

 

6


CAPITAL ONE FINANCIAL CORPORATION

Consolidated Balance Sheets

(in thousands)(unaudited)

 

     As of     As of     As of  
     September 30     June 30     September 30  
     2007     2007(1)     2006(1)  

Assets:

      

Cash and due from banks

   $ 1,819,121     $ 2,354,393     $ 1,461,132  

Federal funds sold and resale agreements

     1,922,735       3,940,269       3,340,809  

Interest-bearing deposits at other banks

     703,805       753,160       797,708  
                        

Cash and cash equivalents

     4,445,661       7,047,822       5,599,649  

Securities available for sale

     19,959,247       20,203,381       13,631,409  

Mortgage loans held for sale

     1,454,457       2,732,044       311,169  

Loans held for investment

     95,405,217       91,617,353       63,612,169  

Less: Allowance for loan and lease losses

     (2,320,000 )     (2,120,000 )     (1,840,000 )
                        

Net loans held for investment

     93,085,217       89,497,353       61,772,169  

Accounts receivable from securitizations

     6,905,859       5,481,686       5,617,113  

Premises and equipment, net

     2,268,034       2,260,928       1,532,006  

Interest receivable

     793,693       768,617       529,104  

Goodwill

     12,952,838       13,612,005       3,964,177  

Other

     5,289,829       4,334,121       1,949,950  
                        

Total assets

   $ 147,154,835     $ 145,937,957     $ 94,906,746  
                        

Liabilities:

      

Non-interest-bearing deposits

   $ 10,840,189     $ 11,236,110     $ 4,145,173  

Interest-bearing deposits

     72,502,625       74,444,345       43,467,977  

Senior and subordinated notes

     10,784,182       9,222,506       8,701,794  

Other borrowings

     22,722,519       20,681,289       17,619,817  

Interest payable

     552,674       543,805       387,000  

Other

     4,965,794       4,623,241       3,908,008  
                        

Total liabilities

     122,367,983       120,751,296       78,229,769  

Stockholders' Equity:

      

Common stock

     4,183       4,174       3,065  

Paid-in capital, net

     15,768,525       15,682,009       7,237,785  

Retained earnings and cumulative other comprehensive income

     11,395,226       11,386,625       9,551,504  

Less: Treasury stock, at cost

     (2,381,082 )     (1,886,147 )     (115,377 )
                        

Total stockholders' equity

     24,786,852       25,186,661       16,676,977  
                        

Total liabilities and stockholders' equity

   $ 147,154,835     $ 145,937,957     $ 94,906,746  
                        

(1) Certain prior period amounts have been reclassified to conform to the current period presentation.

 

7


CAPITAL ONE FINANCIAL CORPORATION

Consolidated Statements of Income

(in thousands, except per share data)(unaudited)

 

     Three Months Ended    Nine Months Ended
     September 30     June 30 (1)     September 30 (1)    September 30     September 30 (1)
     2007     2007     2006    2007     2006

Interest Income:

           

Loans held for investment, including past-due fees

   $ 2,381,096     $ 2,255,573     $ 1,814,803    $ 6,963,349     $ 5,044,362

Securities available for sale

     252,550       237,978       151,616      694,608       483,078

Other

     133,321       145,135       98,652      460,005       313,370
                                     

Total interest income

     2,766,967       2,638,686       2,065,071      8,117,962       5,840,810

Interest Expense:

           

Deposits

     740,091       749,603       442,571      2,220,177       1,262,412

Senior and subordinated notes

     144,643       134,061       96,300      417,250       275,361

Other borrowings

     257,759       216,441       231,685      712,937       604,563
                                     

Total interest expense

     1,142,493       1,100,105       770,556      3,350,364       2,142,336
                                     

Net interest income

     1,624,474       1,538,581       1,294,515      4,767,598       3,698,474

Provision for loan and lease losses

     595,534       396,713       430,566      1,342,292       963,281
                                     

Net interest income after provision for loan and lease losses

     1,028,940       1,141,868       863,949      3,425,306       2,735,193

Non-Interest Income:

           

Servicing and securitizations

     1,354,303       1,226,896       1,071,091      3,569,281       3,250,201

Service charges and other customer-related fees

     522,374       482,979       459,125      1,484,820       1,308,254

Mortgage banking operations

     52,661       68,365       44,520      172,476       118,378

Interchange

     103,799       125,979       150,474      347,889       401,503

Other

     116,525       67,632       36,175      321,417       251,213
                                     

Total non-interest income

     2,149,662       1,971,851       1,761,385      5,895,883       5,329,549

Non-Interest Expense:

           

Salaries and associate benefits

     627,358       667,904       554,504      1,970,433       1,607,113

Marketing

     332,693       326,067       368,498      989,654       1,048,964

Communications and data processing

     194,551       192,620       183,020      569,405       524,958

Supplies and equipment

     134,639       116,434       111,625      384,971       322,837

Occupancy

     77,597       75,843       49,710      230,835       151,840

Restructuring expense

     19,354       91,074       —        110,428       —  

Other

     548,029       564,593       459,272      1,687,077       1,325,293
                                     

Total non-interest expense

     1,934,221       2,034,535       1,726,629      5,942,803       4,981,005
                                     

Income from continuing operations before income taxes

     1,244,381       1,079,184       898,705      3,378,386       3,083,737

Income taxes

     428,010       311,572       310,866      1,108,279       1,059,972
                                     

Income from continuing operations, net of tax(2)

     816,371       767,612       587,839      2,270,107       2,023,765
                                     

(Loss) from discontinued operations, net of tax

     (898,029 )     (17,240 )     —        (926,343 )     —  
                                     

Net (loss) income

   $ (81,658 )   $ 750,372     $ 587,839    $ 1,343,764     $ 2,023,765
                                     

Basic earnings per share

           

Net income from continuing operations

   $ 2.11     $ 1.96     $ 1.95    $ 5.74     $ 6.73

Net (loss) from discontinued operations

     (2.32 )     (0.04 )     —        (2.34 )     —  
                                     

Net (loss) income

   $ (0.21 )   $ 1.92     $ 1.95    $ 3.40     $ 6.73
                                     

Diluted earnings per share

           

Net income from continuing operations

   $ 2.09     $ 1.93     $ 1.89    $ 5.66     $ 6.53

Net (loss) from discontinued operations

     (2.30 )     (0.04 )     —        (2.31 )     —  
                                     

Net (loss) income

   $ (0.21 )   $ 1.89     $ 1.89    $ 3.35     $ 6.53
                                     

Dividends paid per share

   $ 0.03     $ 0.03     $ 0.03    $ 0.08     $ 0.08
                                     

(1) Certain prior period amounts have been reclassified to conform to the current period presentation.

 

(2) On August 20, 2007, the Company announced that it would cease residential mortgage origination operations of its wholesale mortgage banking unit, GreenPoint Mortgage, which was acquired in Q4 2006. The results of the residential mortgage origination operations are being reported as discontinued operations for each period presented subsequent to the acquisition.

 

8


CAPITAL ONE FINANCIAL CORPORATION

Statements of Average Balances, Income and Expense, Yields and Rates

(dollars in thousands)(unaudited)

 

Reported    Quarter Ended 9/30/07     Quarter Ended 6/30/07 (1)     Quarter Ended 9/30/06 (1)  
     Average    Income/    Yield/     Average    Income/    Yield/     Average    Income/    Yield/  
     Balance    Expense    Rate     Balance    Expense    Rate     Balance    Expense    Rate  

Earning assets:

                        

Loans held for investment

     91,744,846      2,381,096    10.38 %     91,144,738      2,255,573    9.90 %     62,428,789      1,814,803    11.63 %

Securities available for sale

     20,041,177      252,550    5.04 %     19,144,926      237,978    4.97 %     14,259,073      151,616    4.25 %

Other

     5,908,249      133,321    9.03 %     9,140,405      145,135    6.35 %     4,749,636      98,652    8.31 %
                                                            

Total earning assets (2)

   $ 117,694,272    $ 2,766,967    9.40 %   $ 119,430,069    $ 2,638,686    8.84 %   $ 81,437,498    $ 2,065,071    10.14 %
                                                

Interest-bearing liabilities:

                        

Interest-bearing deposits

                        

NOW accounts

   $ 4,759,665    $ 34,030    2.86 %   $ 5,115,994    $ 36,764    2.87 %   $ 619,460    $ 4,816    3.11 %

Money market deposit accounts

     28,696,735      294,873    4.11 %     27,612,189      276,038    4.00 %     11,237,206      103,073    3.67 %

Savings accounts

     8,345,638      37,474    1.80 %     8,409,684      36,294    1.73 %     3,911,765      28,604    2.92 %

Other Consumer Time Deposits

     17,203,453      194,256    4.52 %     18,494,150      217,700    4.71 %     14,325,784      153,881    4.30 %

Public Fund CD’s of $100,000 or more

     1,884,767      23,092    4.90 %     1,981,883      24,290    4.90 %     1,022,465      13,046    5.10 %

CD’s of $100,000 or more

     8,673,860      103,296    4.76 %     9,609,949      107,491    4.47 %     8,302,487      95,229    4.59 %

Foreign time deposits

     3,991,056      53,070    5.32 %     3,994,639      51,026    5.11 %     3,564,708      43,922    4.93 %
                                                            

Total Interest-bearing deposits

   $ 73,555,174    $ 740,091    4.02 %   $ 75,218,488    $ 749,603    3.99 %   $ 42,983,875    $ 442,571    4.12 %

Senior and subordinated notes

     9,811,821      144,643    5.90 %     9,336,130      134,061    5.74 %     6,544,768      96,300    5.89 %

Other borrowings

     18,892,876      257,759    5.46 %     17,124,784      216,441    5.06 %     18,010,737      231,685    5.15 %
                                                            

Total interest-bearing liabilities

   $ 102,259,871    $ 1,142,493    4.47 %   $ 101,679,402    $ 1,100,105    4.33 %   $ 67,539,380    $ 770,556    4.56 %
                                                
                                    

Net interest spread

         4.93 %         4.51 %         5.58 %
                                    

Interest income to average earning assets

         9.40 %         8.84 %         10.14 %

Interest expense to average earning assets

         3.88 %         3.69 %         3.78 %
                                    

Net interest margin

         5.52 %         5.15 %         6.36 %
                                    

(1) Prior period amounts have been reclassified to conform with current period presentation.
(2) Average balances, income and expenses, yields and rates are based on continuing operations.

 

9


CAPITAL ONE FINANCIAL CORPORATION

Statements of Average Balances, Income and Expense, Yields and Rates

(dollars in thousands)(unaudited)

 

Managed (1)    Quarter Ended 9/30/07     Quarter Ended 6/30/07 (2)     Quarter Ended 9/30/06 (2)  
     Average    Income/    Yield/     Average    Income/    Yield/     Average    Income/    Yield/  
     Balance    Expense    Rate     Balance    Expense    Rate     Balance    Expense    Rate  

Earning assets:

                        

Loans held for investment

     143,781,268      4,324,272    12.03 %     142,616,011      4,055,689    11.38 %     110,512,266      3,401,130    12.31 %

Securities available for sale

     20,041,177      252,550    5.04 %     19,144,926      237,978    4.97 %     14,259,073      151,616    4.25 %

Other

     3,755,869      69,610    7.41 %     7,080,441      86,709    4.90 %     2,970,236      43,128    5.81 %
                                                            

Total earning assets (3)

   $ 167,578,314    $ 4,646,432    11.09 %   $ 168,841,378    $ 4,380,376    10.38 %   $ 127,741,575    $ 3,595,874    11.26 %
                                                

Interest-bearing liabilities:

                        

Interest-bearing deposits

                        

NOW accounts

   $ 4,759,665    $ 34,030    2.86 %   $ 5,115,994    $ 36,764    2.87 %   $ 619,460    $ 4,816    3.11 %

Money market deposit accounts

     28,696,735      294,873    4.11 %     27,612,189      276,038    4.00 %     11,237,206      103,073    3.67 %

Savings accounts

     8,345,638      37,474    1.80 %     8,409,684      36,294    1.73 %     3,911,765      28,604    2.92 %

Other Consumer Time Deposits

     17,203,453      194,256    4.52 %     18,494,150      217,700    4.71 %     14,325,784      153,881    4.30 %

Public Fund CD’s of $100,000 or more

     1,884,767      23,092    4.90 %     1,981,883      24,290    4.90 %     1,022,465      13,046    5.10 %

CD’s of $100,000 or more

     8,673,860      103,296    4.76 %     9,609,949      107,491    4.47 %     8,302,487      95,229    4.59 %

Foreign time deposits

     3,991,056      53,070    5.32 %     3,994,639      51,026    5.11 %     3,564,708      43,922    4.93 %
                                                            

Total Interest-bearing deposits

   $ 73,555,174    $ 740,091    4.02 %   $ 75,218,488    $ 749,603    3.99 %   $ 42,983,875    $ 442,571    4.12 %

Senior and subordinated notes

     9,811,821      144,643    5.90 %     9,336,130      134,061    5.74 %     6,544,768      96,300    5.89 %

Other borrowings

     18,892,876      257,759    5.46 %     17,124,784      216,441    5.06 %     18,010,737      231,672    5.15 %

Securitization liability

     51,320,446      700,501    5.46 %     50,841,894      666,926    5.25 %     47,648,021      607,510    5.10 %
                                                            

Total interest-bearing liabilities

   $ 153,580,317    $ 1,842,994    4.80 %   $ 152,521,296    $ 1,767,031    4.63 %   $ 115,187,401    $ 1,378,053    4.79 %
                                                
                                    

Net interest spread

         6.29 %         5.75 %         6.47 %
                                    

Interest income to average earning assets

         11.09 %         10.38 %         11.26 %

Interest expense to average earning assets

         4.40 %         4.19 %         4.32 %
                                    

Net interest margin

         6.69 %         6.19 %         6.94 %
                                    

(1) The information in this table reflects the adjustment to add back the effect of securitized loans.
(2) Prior period amounts have been reclassified to conform with current period presentation.
(3) Average balances, income and expenses, yields and rates are based on continuing operations.

 

10


LOGO

News Release

FOR IMMEDIATE RELEASE: October 18, 2007

 

Contacts:    Investor Relations            Media Relations
   Jeff Norris    Tatiana Stead    Julie Rakes
   703-720-2455    703-720-2352    804-284-5800

Capital One Reports Third Quarter Earnings

Affirms earnings guidance of approximately $5.00 per share in 2007

McLean, Va. (Oct. 18, 2007) – Capital One Financial Corporation (NYSE: COF) today announced a net loss for the third quarter of 2007 of $81.6 million, or $0.21 per share (diluted). Earnings were $2.09 per share (diluted) excluding the loss from discontinued operations of $898.0 million related to the shutdown of GreenPoint Mortgage announced in August 2007. This compares to net income of $587.8 million, or $1.89 per share (diluted), for the third quarter of 2006, and income from continuing operations of $767.6 million, or $1.93 per share (diluted), for the second quarter of 2007. Additionally, the Company continues to expect earnings for 2007 of approximately $5.00 per share (diluted).

“Capital One remains focused on driving revenue growth, reducing costs, and effectively deploying capital to generate strong returns for our investors,” said Richard D. Fairbank, Capital One’s Chairman and Chief Executive Officer. “Our businesses are generating robust revenue margins, even as we continue to take a cautious approach to underwriting and managing credit risk in the current environment.”

Highlights of the quarter:

 

   

Announced the shutdown of GreenPoint Mortgage, which is largely complete. When the Company announced the shutdown, it estimated total after-tax charges to be $860 million, whereas the total impact in the third quarter of 2007 was approximately $883 million due primarily to increased valuation adjustments. The Company expects to incur approximately $23 million of additional after-tax charges associated with GreenPoint Mortgage in the fourth quarter of 2007 and into early 2008.

 

   

Executed $477.5 million of open market share repurchases in the quarter, and completed the $1.5 billion Accelerated Share Repurchase program that was launched in April. The Company expects to complete the $3.0 billion share repurchase program in the fourth quarter with additional repurchases of $772.5 million.

 

   

Successfully executed $3.8 billion in funding transactions despite difficult capital market conditions.

 

   

Company-wide cost initiative and bank integration programs remain on track.

 

- more -


Capital One Reports Third Quarter Earnings

Page 2

 

“Earnings from continuing operations in the third quarter grew 6.4 percent over the second quarter of 2007 driven by increased revenues which more than offset increased credit costs in the quarter,” said Gary L. Perlin, Capital One’s Chief Financial Officer. “We also realized significant operating leverage. Continued cost discipline and capital management will be two key drivers of future shareholder returns.”

Total Company Results

 

   

Total deposits at the end of the third quarter of $83.3 billion were down $2.3 billion from the second quarter of 2007 primarily as a result of the intended run-off of high cost brokered and public deposits.

 

   

Managed loans held for investment from continuing operations increased from the previous quarter by $1.3 billion driven largely by the growth in Global Financial Services.

 

   

Total managed revenue is up 8.0 percent relative to the second quarter of 2007 driven largely by revenue margin expansion in our U.S. Card sub-segment. The company expects 2008 revenue growth to be in-line or slightly higher than asset growth.

 

   

Provision expense was up quarter over quarter and year over year, in anticipation of higher charge-offs over the next twelve months, primarily in U.S. Card and Auto Finance. The provision increase related to continuing operations of $124.2 million is net of a $91.4 million release in allowance associated with the integration of bank allowance methodologies. Without this methodology change, the allowance would have increased $215.6 million due primarily to a build in the National Lending segment.

 

   

Operating expenses declined $35.2 million relative to the second quarter of 2007 driven by continued efficiency gains across the businesses. Looking forward, the company expects its operating efficiency ratio to be in the mid-forty percent range for the full year 2008.

Segment Results

Local Banking Segment highlights relative to Q2 2007

 

   

Net income of $192.3 million was up $47.5 million over the second quarter due primarily to a third quarter release in reserves that resulted from aligning the Banking segment’s allowance methodologies with the company’s methodology.

 

   

Loans held for investment were essentially flat relative to the second quarter of 2007 at $42.2 billion. Total Bank deposits declined $1.1 billion to $73.4 billion.


Capital One Reports Third Quarter Earnings

Page 3

 

   

Credit at the Bank remained strong and stable, with the net charge-off rate at 19 basis points and non-performing loans at 27 basis points.

 

   

Integration efforts continue to be on track.

National Lending Segment

Following are highlights from the National Lending Segment, followed by highlights from each of the sub-segments of National Lending: U.S. Card, Global Financial Services (GFS), and Auto Finance. Mortgage Finance information is now included in Discontinued Operations.

 

   

Profits for the National Lending segment were up 11.8 percent as compared to the third quarter of 2006, driven by increased profits in U.S. Card and GFS.

 

   

The managed charge-off rate for the National Lending segment increased 71 basis points to 3.96 percent in the third quarter of 2007 from 3.25 percent in the third quarter of 2006 due to normalization of credit year over year and as a result of a mix shift in U.S. Card and credit worsening in Auto Finance. The delinquency rate of 4.70 percent for National Lending increased from 3.70 percent as of September 30, 2006.

U.S. Card highlights relative to Q3 2006

 

   

U.S. Card reported net income of $560.8 million, a 21.5 percent increase, year over year, driven by growth in revenue and reductions in non-interest expenses.

 

   

Revenue increased 13.2 percent from the third quarter of 2006 largely as a result of pricing changes implemented in some of the company’s products after completion of the card holder system conversion. This increase was partially offset by an increase in provision expense resulting from increased credit costs in the quarter and an allowance build for expected future credit losses.

 

   

Non-interest expenses declined 9.3 percent as the business began to leverage its new infrastructure to streamline processes and reduce costs as a part of the broader corporate cost initiative.

 

   

Managed loans declined from the third quarter of 2006 by 3.0 percent, or $1.6 billion to $49.6 billion at September 30, 2007, resulting from the continued low levels of marketing of teaser rate offers in the prime market and a $600.0 million portfolio sale in the first quarter of 2007.

 

   

Charge-offs rose in the third quarter of 2007 to 4.13 percent from 3.39 percent in the third quarter of 2006, and delinquencies rose to 4.46 percent from 3.53 percent. The increases


Capital One Reports Third Quarter Earnings

Page 4

 

 

resulted primarily from continued normalization of consumer credit and the mix effects of the company’s decline in prime revolver loans. Given current loan growth and delinquency trends, the company expects the U.S. Card charge-off rate to be around 5.25 percent in the fourth quarter.

 

   

Delinquencies increased 105 basis points from the sequential quarter primarily due to normal seasonality, the company’s change to a 25 day grace period, changes in the company’s pricing and fee policies, and mix effects of the decline in prime revolver loan balances. These delinquency trends are consistent with the expected rise in card charge-offs in the fourth quarter.

Global Financial Services (GFS) highlights relative to Q3 2006

 

   

Net income rose 10.5 percent from the third quarter of 2006, to $118.4 million. Net income growth resulted from strong growth in revenues partially offset by higher provision expense.

 

   

Managed loans as of September 30, 2007 grew 7.6 percent, to $28.6 billion relative to September 30, 2006, with growth from North American businesses more than offsetting a modest decline in loans in the UK. About half of the dollar growth resulted from stronger Canadian and UK currencies versus the third quarter of 2006.

 

   

Risk metrics were up modestly from the third quarter of 2006 as expected normalization continues in the U.S. Credit in the UK remains stable.

Auto Finance highlights relative to Q3 2006

 

   

Auto Finance posted a net loss of $3.8 million in the quarter. A 5.8 percent increase in revenues was more than offset by a 51.7 percent increase in provision.

 

   

Charge-off and delinquencies increases were a result of continued consumer credit normalization from historically low levels in the third quarter of 2006, continued elevated losses, and delinquencies in recent Dealer Prime vintages, and industry-wide increases in loan-to-value ratios and extended loan terms in subprime.

 

   

Originations in the third quarter of $3.2 billion were up 2.9 percent compared to the year ago third quarter.

 

   

Managed loans of $24.3 billion as of September 30, 2007 were up 15.0 percent relative to the third quarter of 2006 from ongoing originations as well as the addition of loans from the North Fork portfolio.


Capital One Reports Third Quarter Earnings

Page 5

 

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 18, 2007 for 2007 earnings, loan and deposit growth, revenue growth, return on equity, projected charge-offs for the fourth quarter of 2007 and for 2008, credit trends, dividends, operating efficiencies and ongoing cost reductions, 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 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 risk that the benefits of the company’s restructuring initiative, including cost savings and other benefits, may not be fully realized; the success of the company’s marketing efforts; general economic conditions affecting interest rates and consumer income, spending, and savings which may affect consumer bankruptcies, defaults, charge-offs and deposit activity; changes in the labor market; general secondary market conditions in the mortgage industry; changes in the credit environment in the U.S. and or the UK; 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, 2006, and reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007.

About Capital One

Headquartered in McLean, Virginia, Capital One Financial Corporation (www.capitalone.com) is a financial holding company, with 732 locations in New York, New Jersey, Connecticut, Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One Auto Finance, Inc., and Capital


Capital One Reports Third Quarter Earnings

Page 6

 

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 $83.3 billion in deposits and $146.4 billion in managed loans outstanding as of September 30, 2007. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol “COF” and is included in the S&P 100 index.

###

NOTE: Third quarter 2007 financial results, SEC Filings, and first quarter earnings conference call slides are accessible on Capital One’s home page (www.capitalone.com). Choose “Investors” on the bottom of the home page to view and download the earnings press release, slides, and other financial information. Additionally, a webcast of today’s 5:00 pm (ET) earnings conference call is accessible through the same link.