10-Q/APeriod: Q3 FY2007

CAPITAL ONE FINANCIAL CORP Quarterly Report (Amendment) for Q3 Ended Sep 30, 2007

Filed November 9, 2007For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation (COF) reported a net loss of $81.6 million for the third quarter of 2007, primarily driven by an $898 million after-tax loss from the discontinued operations related to the shutdown of its GreenPoint mortgage origination unit. Income from continuing operations was strong at $816.4 million, demonstrating resilience in its core lending and banking businesses. Despite the significant impact of the GreenPoint shutdown and ongoing market turbulence, the company's balance sheet remains robust with total assets of $147.15 billion and total stockholders' equity of $24.79 billion. The acquisition of North Fork Bancorporation in late 2006 continues to significantly boost deposit and loan balances, with total deposits reaching $83.3 billion and managed loans held for investment at $144.8 billion. Investors should note the substantial goodwill ($12.95 billion) and the impact of recent acquisitions and cost-saving initiatives on expenses.

Key Highlights

  • 1Reported a net loss of $81.6 million for Q3 2007, largely due to an $898 million after-tax loss from discontinued mortgage origination operations.
  • 2Income from continuing operations was $816.4 million, showing strength in core business segments.
  • 3Total assets stood at $147.15 billion, with total stockholders' equity at $24.79 billion as of September 30, 2007.
  • 4Deposits grew significantly to $83.3 billion, driven by the North Fork acquisition.
  • 5Managed loans held for investment increased to $144.8 billion, reflecting growth from acquisitions.
  • 6Significant goodwill of $12.95 billion is present on the balance sheet, with $650 million impaired due to the GreenPoint shutdown.
  • 7The company implemented a cost reduction initiative, resulting in $19.4 million in restructuring charges for the quarter.

Frequently Asked Questions

The net loss of $81.6 million was primarily due to an $898 million after-tax loss recognized from discontinued operations. This loss stemmed from the shutdown of Capital One's GreenPoint mortgage origination unit, which included a significant goodwill write-down and other restructuring charges.

The acquisition of North Fork Bancorporation, completed in December 2006, significantly boosted Capital One's balance sheet. It led to a substantial increase in total deposits ($83.3 billion) and managed loans held for investment ($144.8 billion), and contributed to higher net interest income due to expanded margins and loan volume.

Capital One has $12.95 billion in goodwill as of September 30, 2007. A significant portion of this goodwill, $650 million, was impaired in the third quarter of 2007 as a direct result of shutting down the GreenPoint mortgage origination business.

Capital One anticipates prudent and profitable growth in its operating segments, despite the challenging credit environment. They expect full-year 2007 earnings per share of approximately $5.00 and project low to mid-single digit growth in loans and deposits for 2008. However, they acknowledge uncertainties in the credit markets and economy that could impact their outlook, particularly for charge-off rates.