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Capital One Reports First Quarter 2013 Net Income of $1.1 billion, or $1.79 per share

April 18, 2013 at 4:05 PM EDT

 

MCLEAN, Va., April 18, 2013 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the first quarter of 2013 of $1.1 billion, or $1.79 per diluted common share, compared with net income of $843 million, or $1.41 per diluted common share, for the fourth quarter of 2012 and net income of $1.4 billion, or $2.72 per diluted common share, for the first quarter of 2012. Without the impact of a bargain purchase gain related to the ING Direct acquisition, first quarter 2012 net income would have been $809 million, or $1.56 per diluted common share.

"Each of our businesses delivered solid results in the quarter and our balance sheet is strong," said Richard D. Fairbank, Chairman and Chief Executive Officer. "We continue to generate significant capital and we're focused on returning capital to our shareholders."

All comparisons in the following paragraphs are for the first quarter of 2013 compared with the fourth quarter of 2012 unless otherwise noted.   

Loans and Deposits

Period-end loans held for investment decreased $14.6 billion, or 7 percent, to $191.3 billion. The decrease was due in part to the movement of the Best Buy portfolio of approximately $7 billion of loans to held for sale from held for investment during the quarter. Domestic Card period-end loans decreased $12.8 billion, or 15 percent, to $70.4 billion, driven largely by the movement of loans to held for sale, seasonally lower balances and purchase volumes, and the anticipated run-off of certain acquired loans. Excluding loans reclassified to held for sale during the first quarter, Domestic Card period-end loans decreased $5.6 billion, or 7 percent. Commercial Banking period-end loans increased $330 million, or 0.9 percent, to $39.2 billion, and period-end loans in Auto Finance grew  $817 million, or 3 percent, to $27.9 billion. Period-end loans in Home Loans declined $2.2 billion, or 5 percent, to $41.9 billion, driven by the continued anticipated run-off of acquired portfolios. 

Average loans held for investment in the quarter decreased $6.9 billion, or 3 percent, to $196.0 billion. Average loans in Commercial Banking grew $978 million and Auto Finance average loans grew $596 million. Average Domestic Card loans declined $6.0 billion, or 7 percent.  Average Home Loans decreased by $2.2 billion, driven largely by the continued anticipated run-off of acquired portfolios. 

Period-end total deposits were essentially flat at $212.4 billion, while average deposits declined $1.9 billion. Deposit interest rates declined 4 basis points to 0.68 percent.

Revenues

Total net revenue for the first quarter of 2013 was $5.6 billion, a decline of $73 million, or 1 percent, driven principally by lower average loan balances and purchase volume partially offset by higher margins.

The reduction in interest expense and release of cash related to the redemption of high coupon trust preferred securities contributed to an increase in net interest margin of 19 basis points to 6.71 percent. Cost of funds in the first quarter declined 16 basis points to 0.83 percent.  

Non-Interest Expense

Non-interest expense was $3.0 billion, a decrease of $227 million, or 7 percent, driven largely by the lack of seasonally high year-end expenses recorded in the fourth quarter and lower amortization expense and acquisition-related costs including integration. Marketing expense decreased $76 million in the quarter to  $317 million.

Provision for Credit Losses

Provision for credit losses was $885 million in the quarter, a decrease of $266 million, largely driven by a $261 million release in allowance. The largest component of the allowance release was in Domestic Card, due to better than anticipated credit performance in the quarter, including delinquencies, and an improvement in drivers for the company's future outlook.

The net charge-off rate was 2.20 percent in the first quarter of 2013, a decline of 6 basis points from 2.26 percent in the fourth quarter.

Discontinued Operations

The company recorded a $107 million provision for mortgage representation and warranty reserve attributable to Discontinued Operations. This provision reflects the company's assessment of probable and estimable losses in light of the current environment, principally attributable to non-agency mortgage related legal developments.

Net Income

Net income increased $223 million, or 26 percent, in the first quarter driven primarily by lower non-interest expense and a reduction in credit expenses in the quarter.

Capital Ratios

The company's estimated Tier 1 common ratio was approximately 11.8 percent as of March 31, 2013, up from 11.0 percent as of December 31, 2012.

Detailed segment information will be available in the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on April 18, 2013 at 5:00 PM, Eastern Daylight Time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the company's home page (www.capitalone.com). Choose "Investors" to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation to GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company's website through May 2, 2013 at 5:00 PM.

Forward-looking Statements

The company cautions that its current expectations in this release dated April 18, 2013 and the company's plans, objectives, expectations and intentions, are forward-looking statements which speak only as of the date hereof. The company does not undertake any obligation to update or revise any of the information contained herein whether as a result of new information, future events or otherwise.

Certain statements in this release are forward-looking statements, including those that discuss, among other things: strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, capital measures, accruals for claims in litigation and for other claims against the company, earnings per share or other financial measures for the company; future financial and operating results; the company's plans, objectives, expectations and intentions; the projected impact and benefits of the acquisition of ING Direct and HSBC's U.S. Card business (the "Acquisitions") and the sale of the Best Buy loan portfolio (the "Sale Transaction"); and the assumptions that underlie these matters.  To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause the company's actual results to differ materially from those described in such forward-looking statements, including, among other things: general economic and business conditions in the U.S., the U.K., Canada or the company's local markets, including conditions affecting employment levels, interest rates, consumer income and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; an increase or decrease in credit losses (including increases due to a worsening of general economic conditions in the credit environment); financial, legal, regulatory, tax or accounting changes or actions, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder and regulations governing bank capital and liquidity standards, including Basel-related initiatives and potential changes to financial accounting and reporting standards; the possibility that the company may not fully realize the projected cost savings and other projected benefits of the Acquisitions; difficulties and delays in integrating the assets and businesses acquired in the Acquisitions; business disruption following the Acquisitions; diversion of management time on issues related to the Acquisitions, including integration of the assets and businesses acquired; reputational risks and the reaction of customers and counterparties to the Acquisitions; disruptions relating to the Acquisitions negatively impacting the company's ability to maintain relationships with customers, employees and suppliers; changes in asset quality and credit risk as a result of the Acquisitions; the possibility that conditions to the Sale Transaction are not received or satisfied on a timely basis or at all; the possibility that modifications to the terms of the Sale Transaction may be required in order to obtain or satisfy such conditions; changes in the anticipated timing for closing the Sale Transaction; developments, changes or actions relating to any  litigation matter involving the company; the inability to sustain revenue and earnings growth; increases or decreases in interest rates; the company's ability to access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; the success of the company's marketing efforts in attracting and retaining customers; increases or decreases in the company's aggregate loan balances or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses the company incurs and attrition of loan balances; the level of future repurchase or indemnification requests the company may receive, the actual future performance of mortgage loans relating to such requests, the success rates of claimants against the company, any developments in litigation and the actual recoveries the company may make on any collateral relating to claims against the company; the amount and rate of deposit growth; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; any significant disruption in the company's operations or technology platform; the company's ability to maintain a compliance infrastructure suitable for the nature of our business; the company's ability to control costs; the amount of, and rate of growth in, the company's expenses as its business develops or changes or as it expands into new market areas; the company's ability to execute on its strategic and operational plans; any significant disruption of, or loss of public confidence in, the United States Mail service affecting the company's response rates and consumer payments; any significant disruption of, or loss of public confidence in, the internet affecting the ability of the company's customers to access their accounts and conduct banking transactions; the company's ability to recruit and retain experienced personnel to assist in the management and operations of new products and services; changes in the labor and employment markets; fraud or misconduct by the company's customers, employees or business partners; competition from providers of products and services that compete with the company's businesses; and other risk factors set forth from time to time in reports that the company files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2012.

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 $212.4 billion in deposits and    $300.2 billion in total assets as of March 31, 2013. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has more than 900 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.

 










Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

     First Quarter 2013 (1) (2) (3)

    Table of Contents 










Page 

Capital One Financial Corporation Consolidated



Table   1:   


Financial Summary―Consolidated

1


Table   2:


Selected Metrics―Consolidated

2


Table   3:


Consolidated Statements of Income

3


Table   4:


Consolidated Balance Sheets

4


Table   5:


Notes to Financial & Selected Metrics and Consolidated Financial Statements (Tables 1 — 4)

5


Table   6:


Average Balances, Net Interest Income and Net Interest Margin

6


Table   7:


Loan Information and Performance Statistics

7

Business Segment Detail



Table   8:


Financial & Statistical Summary―Credit Card Business

8


Table   9:


Financial & Statistical Summary―Consumer Banking Business

9


Table 10:


Financial & Statistical Summary―Commercial Banking Business

10


Table 11:


Financial & Statistical Summary―Other and Total 

11


Table 12:


Notes to Loan and Business Segment Disclosures (Tables 7 11)

12

Other





Table 13:


Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures

13











(1)

The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our March 31, 2013 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission. 


(2)

References to ING Direct refer to the business and assets acquired and liabilities assumed in the February 17, 2012 acquisition. References to the 2012 U.S. card acquisition refer to the May 1, 2012 transaction in which we acquired substantially all of HSBC's credit card and private-label credit card business in the United States.


(3)

We use the term "acquired loans" to refer to a limited portion of the credit card loans acquired in the 2012 U.S. card acquisition and the substantial majority of loans acquired in the ING Direct and Chevy Chase Bank ("CCB") acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard formerly known as "SOP 03-3"). Because SOP 03-3 takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with these loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans.

 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)






Table 1:  Financial Summary—Consolidated (1)(2)(3)
















2013


2012


2012


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


Q1


Q4


Q1


Earnings








Net interest income


$    4,570


$    4,528


$    3,414


Non-interest income(4) (5)


981


1,096


1,521


Total net revenue(6)


5,551


5,624


4,935


Provision for credit losses


885


1,151


573


Non-interest expense:








    Marketing


317


393


321


    Amortization of intangibles(7)


177


191


62


    Acquisition-related (8)


46


69


86


    Operating expenses


2,488


2,602


2,035


Total non-interest expense


3,028


3,255


2,504


Income from continuing operations before income taxes 


1,638


1,218


1,858


Income tax provision


494


370


353


Income from continuing operations, net of tax


1,144


848


1,505


Loss from discontinued operations, net of tax(4)


(78)


(5)


(102)


Net income


1,066


843


1,403


Dividends and undistributed earnings allocated to participating securities(9)


(5)


(3)


(7)


Preferred stock dividends


(13)


(15)



Net income available to common stockholders


$    1,048


$      825


$    1,396










Common Share Statistics








Basic EPS:(9) 








   Income from continuing operations, net of tax


$     1.94


$     1.43


$     2.94


   Loss from discontinued operations, net of tax


(0.13)


(0.01)


(0.20)


   Net income per common share 


$     1.81


$     1.42


$     2.74


Diluted EPS:(9) 








   Income from continuing operations, net of tax


$     1.92


$     1.42


$     2.92


   Loss from discontinued operations, net of tax


(0.13)


(0.01)


(0.20)


   Net income per common share


$     1.79


$     1.41


$     2.72


Weighted average common shares outstanding (in millions) for:








   Basic EPS


580.5


579.2


508.7


   Diluted EPS


586.3


585.6


513.1


Common shares outstanding (period end, in millions)


584.0


582.2


580.2


Dividends per common share


$     0.05


$     0.05


$     0.05


Tangible book value per common share (period end)(10)


41.87


40.23


39.37










Balance Sheet (Period End)








Loans held for investment(11)


$191,333


$205,889


$173,822


Interest-earning assets


268,479


280,096


265,398


Total assets


300,163


312,918


294,481


Interest-bearing deposits


191,093


190,018


197,254


Total deposits


212,410


212,485


216,528


Borrowings


37,492


49,910


32,885


Stockholders' equity


41,296


40,499


36,950










Balance Sheet (Quarterly Average Balances)








Average loans held for investment(10)


$195,997


$202,944


$152,900


Average interest-earning assets


272,345


277,886


220,246


Average total assets


303,223


308,096


246,384


Average interest-bearing deposits


190,612


192,122


151,625


Average total deposits


211,555


213,494


170,259


Average borrowings


41,574


44,189


35,994


Average stockholders' equity


40,960


40,212


32,982










 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)






Table 2:  Selected Metrics—Consolidated (1)(2)(3)
















2013


2012


2012


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


Q1


Q4


Q1


Performance Metrics








Net interest income growth (quarter over quarter) 


1

%

(3)

%

7

%

Non-interest income growth(quarter over quarter)


(10)


(4)


75


Total net revenue growth(quarter over quarter)


(1)


(3)


22


Total net revenue margin(12)


8.15


8.10


8.96


Net interest margin(13)


6.71


6.52


6.20


Return on average assets(14)


1.51


1.10


2.44


Return on average total stockholders' equity(15)


11.17


8.44


18.25


Return on average tangible common equity(16) 


19.09


14.74


31.60


Non-interest expense as a % of average loans held for investment(17)


6.18


6.42


6.55


Efficiency ratio(18)


54.55


57.88


50.74


Effective income tax rate


30.2


30.4


19.0


Full-time equivalent employees (in thousands), period end


39.3


39.6


34.2










Credit Quality Metrics(11)(19)








Allowance for loan and lease losses 


$    4,606


$    5,156


$    4,060


Allowance as a % of loans held for investment 


2.41

%

2.50

%

2.34

%

Allowance as a % of loans held for investment (excluding acquired loans) 

2.91


3.02


3.08


Net charge-offs 


$    1,079


$    1,150


$      780


Net charge-off rate(20)


2.20

%

2.26

%

2.04

%

Net charge-off rate (excluding acquired loans)(20)


2.69


2.78


2.40


30+ day performing delinquency rate


2.37


2.70


2.23


30+ day performing delinquency rate (excluding acquired loans)


2.90


3.29


2.96


30+ day delinquency rate(21) 


**


3.09


2.69


30+ day delinquency rate (excluding acquired loans)(21) 


**


3.77


3.57










Capital Ratios (22)








Tier 1 common ratio


11.8

%

11.0

%

11.9

%

Tier 1 risk-based capital ratio


12.2


11.3


13.9


Total risk-based capital ratio


14.4


13.6


16.5


Tangible common equity ("TCE") ratio


8.6


7.9


8.2


 

 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)






Table 3:  Consolidated Statements of Income(1)(2)(3)
























Three Months Ended




March 31,


December 31,


March 31,


(Dollars in millions, except per share data) (unaudited)


2013


2012


2012










Interest income:








Loans, including loans held for sale


$              4,649


$              4,727


$              3,657


Investment securities


374


361


298


Other


28


27


24


    Total interest income


5,051


5,115


3,979










Interest expense:








Deposits


326


348


311


Securitized debt obligations


56


58


80


Senior and subordinated notes


82


85


88


Other borrowings


17


96


86


    Total interest expense


481


587


565










Net interest income


4,570


4,528


3,414


Provision for credit losses


885


1,151


573


    Net interest income after provision for credit losses


3,685


3,377


2,841










Non-interest income:








Service charges and other customer-related fees


550


595


415


Interchange fees, net


445


459


328


Net other-than-temporary impairment losses recognized in earnings


(25)


(12)


(14)


Bargain purchase gain(5)




594


Other


11


54


198


    Total non-interest income


981


1,096


1,521










Non-interest expense:








Salaries and associate benefits


1,080


1,039


864


Occupancy and equipment


350


380


270


Marketing


317


393


321


Professional services


307


354


293


Communications and data processing


210


205


172


Amortization of intangibles(7)


177


191


62


Acquisition-related(8)


46


69


86


Other


541


624


436


    Total non-interest expense


3,028


3,255


2,504


Income from continuing operations before income taxes


1,638


1,218


1,858


Income tax provision


494


370


353


Income from continuing operations, net of tax


1,144


848


1,505


Loss from discontinued operations, net of tax(4)


(78)


(5)


(102)


    Net income


1,066


843


1,403


Dividends and undistributed earnings allocated to participating securities(9)


(5)


(3)


(7)


Preferred stock dividends


(13)


(15)


-


    Net income available to common stockholders


$              1,048


$                 825


$              1,396










Basic earnings per common share:(9)








    Income from continuing operations


$                1.94


$                1.43


$                2.94


    Loss from discontinued operations


(0.13)


(0.01)


(0.20)


    Net income per basic common share


$                1.81


$                1.42


$                2.74










Diluted earnings per common share:(9)








    Income from continuing operations


$                1.92


$                1.42


$                2.92


    Loss from discontinued operations


(0.13)


(0.01)


(0.20)


    Net income per diluted common share


$                1.79


$                1.41


$                2.72










Weighted average common shares outstanding (in millions) for:








    Basic EPS


580.5


579.2


508.7


    Diluted EPS


586.3


585.6


513.1










Dividends paid per common share


$                0.05


$                0.05


$                0.05










 

CAPITAL ONE FINANCIAL CORPORATION (COF)




Table 4:  Consolidated Balance Sheets

























March 31,


December 31,


March 31,


(Dollars in millions)(unaudited)


2013


2012


2012











Assets:








Cash and cash equivalents:









Cash and due from banks


$             1,947


$             3,440


$             2,183



Interest-bearing deposits with banks


4,563


7,617


28,165



Federal funds sold and securities purchased under agreements to resell


236


1


308


Total cash and cash equivalents


6,746


11,058


30,656


Restricted cash for securitization investors


1,018


428


1,090


Securities available for sale, at fair value


63,968


63,979


60,810


Loans held for investment:









Unsecuritized loans held for investment


150,721


162,059


128,927



Restricted loans for securitization investors


40,612


43,830


44,895


Total loans held for investment


191,333


205,889


173,822



    Less: Allowance for loan and lease losses


(4,606)


(5,156)


(4,060)


Net loans held for investment


186,727


200,733


169,762


Loans held for sale, at lower of cost or fair value


6,410


201


627


Premises and equipment, net


3,736


3,587


3,062


Interest receivable


1,378


1,694


1,157


Goodwill


13,900


13,904


13,595


Other


16,280


17,334


13,722


Total assets


$         300,163


$         312,918


$         294,481




















Liabilities:








Interest payable


$                310


$                450


$                384


Customer deposits:









Non-interest bearing deposits


21,317


22,467


19,274



Interest-bearing deposits


191,093


190,018


197,254


Total customer deposits


212,410


212,485


216,528


Securitized debt obligations


11,046


11,398


15,474


Other debt:









Federal funds purchased and securities loaned or sold under agreements to repurchase


855


1,248


770



Senior and subordinated notes


13,255


12,686


11,948



Other borrowings


12,336


24,578


4,693


Total other debt


26,446


38,512


17,411


Other liabilities


8,655


9,574


7,734


Total liabilities


258,867


272,419


257,531











Stockholders' equity:








Preferred stock





Common stock


6


6


6


Additional paid-in capital, net


26,256


26,188


25,136


Retained earnings


17,876


16,853


14,841


Accumulated other comprehensive income


473


739


253


Treasury stock, at cost


(3,315)


(3,287)


(3,286)


Total stockholders' equity


41,296


40,499


36,950


Total liabilities and stockholders' equity


$         300,163


$         312,918


$         294,481











 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 5: Notes to Financial & Selected Metrics and Consolidated Financial Statements (Tables 1 — 4)
















(1)

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
















(2)

Results for Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the 2012 U.S. card acquisition, which resulted in the addition of $28.2 billion in credit card receivables at closing.
















(3)

Results for Q1 2012 and thereafter include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans of $40.4 billion, other assets of $53.9 billion and deposits of $84.4 billion at acquisition.
















(4)

We recorded a provision for mortgage representation and warranty losses of $97 million in Q1 2013.  We did not record a provision for mortgage representation and warranty losses in Q4 2012. We recorded a provision for mortgage representation and warranty losses of $169 million in Q1 2012. The majority of the provision for representation and warranty losses is generally included net of tax in discontinued operations, with the remaining amount included pre-tax in non-interest income. The mortgage representation and warranty reserve increased to $994 million as of March 31, 2013, from $899 million as of December 31, 2012.
















(5)

Includes a bargain purchase gain of $594 million recognized in earnings in Q1 2012 attributable to the February 17, 2012 acquisition of ING Direct. Represents the excess of the fair value of the net assets acquired in the ING Direct acquisition as of the acquisition date of February 17, 2012 over the consideration transferred.
















(6)

Total net revenue was reduced by $265 million in Q1 2013, $318 million in Q4 2012, and $123 million in Q1 2012 for the estimated uncollectible amount of billed finance charges and fees.  Premium amortization related to the 2012 U.S. card and ING Direct acquisitions reduced revenue by $111 million in Q1 2013, $124 million in Q4 2012, and $30 million in Q1 2012. 
















(7)

Includes purchased credit card relationship ("PCCR") intangible amortization of $116 million in Q1 2013, $127 million in Q4 2012, and $4 million in Q1 2012, the substantial majority of which is attributable to the 2012 U.S. card acquisition. Includes core deposit intangible amortization of $44 million in Q1 2013, $47 million in Q4 2012, and $46 million in Q1 2012. 



(8)

Acquisition-related costs include transaction costs, legal and other professional or consulting fees, restructuring costs and integration expense.
















(9)

Dividends and undistributed earnings allocated to participating securities and EPS are computed independently for each period. Accordingly, the sum of each quarter may not agree to the year-to-date total.
















(10)

Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
















(11)

Loans held for investment includes acquired loans accounted for based on cash flows expected to be collected.  See Table "Table 12: Notes to Loan and Business Segment Disclosures (Tables 7 — 11)" for information on the amount of acquired loans for each of the periods presented.
















(12)

Calculated based on annualized total net revenue for the period divided by average interest-earning assets for the period.
















(13)

Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.
















(14)

Calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period. 
















(15)

Calculated based on annualized income from continuing operations, net of tax, for the period divided by average stockholders' equity for the period. 
















(16)

Calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible common equity for the period.  See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
















(17)

Calculated based on annualized non-interest expense for the period divided by average loans held for investment for the period.
















(18)

Calculated based on non-interest expense, excluding goodwill impairment charges, for the period divided by total net revenue for the period. 
















(19)

Loans acquired as part of the 2012 U.S. card, ING Direct and CCB acquisitions classified as held for investment are included in the denominator used in calculating our reported credit quality metrics.  We supplement certain reported credit quality metrics with metrics adjusted to exclude from the denominator acquired loans accounted for based on estimated expected cash flows to be collected (formerly SOP 03-3).
















(20)

Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period. 
















(21)

The 30+ day delinquency rate as of the end of Q1 2013 will be provided in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.
















(22)

Capital ratios as of the end of Q1 2013 are preliminary and therefore subject to change. TCE ratio is a non-GAAP capital ratio. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for information on the calculation of each of these ratios.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)











Table 6:  Average Balances, Net Interest Income and Net Interest Margin






















































2013 Q1



2012 Q4



2012 Q1





Average


Interest Income/


 Yield/ 



Average


Interest Income/


 Yield/ 



Average


Interest Income/


 Yield/ 



(Dollars in millions)(unaudited)


Balance


Expense


Rate



Balance


Expense


Rate



Balance


Expense


Rate



Interest-earning assets:























    Loans, including loans held for sale


$200,441


$  4,649


9.28

%


$203,132


$  4,727


9.31

%


$153,332


$  3,657


9.54

%

    Investment securities


64,798


374


2.31



64,174


361


2.25



50,543


298


2.36



    Cash equivalents and other


7,106


28


1.58



10,580


27


1.02



16,371


24


0.59



Total interest-earning assets 


$272,345


$  5,051


7.42

%


$277,886


$  5,115


7.36

%


$220,246


$  3,979


7.23

%
























Interest-bearing liabilities:























    Interest-bearing deposits


$190,612


$     326


0.68

%


$192,122


$     348


0.72

%


$151,625


$     311


0.82

%

    Securitized debt obligations


11,758


56


1.91



12,119


58


1.91



16,185


80


1.98



    Senior and subordinated notes


11,984


82


2.74



11,528


85


2.95



10,268


88


3.43



    Other borrowings


17,832


17


0.38



20,542


96


1.87



9,541


86


3.61



Total interest-bearing liabilities


$232,186


$     481


0.83

%


$236,311


$     587


0.99

%


$187,619


$     565


1.20

%

Net interest income/spread




$  4,570


6.59

%




$  4,528


6.37

%




$  3,414


6.03

%

Impact of non-interest bearing funding






0.12







0.15







0.17



Net interest margin






6.71

%






6.52

%






6.20

%
























 

CAPITAL ONE FINANCIAL CORPORATION (COF)






Table 7: Loan Information and Performance Statistics(1)(2)(3)(4)














2013


2012


2012


(Dollars in millions)(unaudited)


Q1


Q4


Q1 


Period-end Loans Held For Investment








Credit card:








   Domestic credit card 


$           70,361


$           83,141


$           53,173


   International credit card


8,036


8,614


8,303


      Total credit card


78,397


91,755


61,476


Consumer banking:








   Automobile


27,940


27,123


23,568


   Home loan


41,931


44,100


49,550


   Retail banking


3,742


3,904


4,182


      Total consumer banking


73,613


75,127


77,300


Commercial banking:








   Commercial and multifamily real estate


17,878


17,732


15,702


   Commercial and industrial


20,127


19,892


17,761


      Total commercial lending


38,005


37,624


33,463


   Small-ticket commercial real estate


1,145


1,196


1,443


      Total commercial banking


39,150


38,820


34,906


Other loans


173


187


140


     Total 


$         191,333


$         205,889


$         173,822










Average Loans Held For Investment








Credit card:








   Domestic credit card 


$           74,714


$           80,718


$           54,131


   International credit card


8,238


8,372


8,301


      Total credit card


82,952


89,090


62,432


Consumer banking:








   Automobile


27,477


26,881


22,582


   Home loan 


43,023


45,250


29,502


   Retail banking


3,786


3,967


4,179


      Total consumer banking


74,286


76,098


56,263


Commercial banking:








   Commercial and multifamily real estate


17,454


17,005


15,514


   Commercial and industrial


19,949


19,344


17,038


      Total commercial lending


37,403


36,349


32,552


   Small-ticket commercial real estate


1,173


1,249


1,480


      Total commercial banking


38,576


37,598


34,032


Other loans


183


158


173


      Total


$         195,997


$         202,944


$         152,900










Net Charge-off Rates








Credit card:








   Domestic credit card


4.43

%

4.35

%

3.92

%

   International credit card


4.59


3.99


5.52


      Total credit card


4.45


4.32


4.14


Consumer banking:








   Automobile


1.78


2.24


1.41


   Home loan


0.04


(0.06)


0.20


   Retail banking


1.85


2.45


1.39


      Total consumer banking


0.78


0.88


0.77


Commercial banking:








   Commercial and multifamily real estate


0.01


(0.08)


0.09


   Commercial and industrial


0.04


0.13


(0.08)


      Total commercial lending


0.03


0.03


-


   Small-ticket commercial real estate


1.41


2.02


4.24


      Total commercial banking


0.07


0.10


0.19


Other loans


14.53


24.23


23.30


      Total


2.20

%

2.26

%

2.04

%









30+ Day Performing Delinquency Rates








Credit card:








   Domestic credit card


3.37

%

3.61

%

3.25

%

   International credit card


4.04


3.58


5.14


      Total credit card


3.44

%

3.61

%

3.51

%

Consumer banking:








   Automobile


5.58

%

7.00

%

4.87

%

   Home loan


0.14


0.13


0.15


   Retail banking


0.83


0.76


0.80


      Total consumer banking


2.24

%

2.65

%

1.63

%









Nonperforming Asset Rates(5)








Credit card:








   International credit card


1.13

%

1.16

%

%

      Total credit card


0.12

%

0.11

%

%

Consumer banking:








   Automobile


0.40

%

0.63

%

0.32

%

   Home loan


1.02


1.00


0.94


   Retail banking


1.24


1.85


2.25


      Total consumer banking


0.80

%

0.91

%

0.82

%

Commercial banking:








   Commercial and multifamily real estate


0.76

%

0.82

%

1.55

%

   Commercial and industrial


0.64


0.72


0.69


      Total commercial lending


0.69

%

0.77

%

1.09

%

   Small-ticket commercial real estate


2.42


0.97


4.35


      Total commercial banking


0.74

%

0.77

%

1.23

%

















 

CAPITAL ONE FINANCIAL CORPORATION (COF)



Table 8:  Financial & Statistical Summary—Credit Card Business(2)(4)













2013


2012


2012


(Dollars in millions) (unaudited)


Q1


Q4


Q1


Credit Card








Earnings:








  Net interest income


$            2,830


$            2,849


$            1,992


  Non-interest income


821


883


598


  Total net revenue


3,651


3,732


2,590


  Provision for credit losses


743


1,000


458


  Non-interest expense


1,848


1,933


1,268


  Income (loss) from continuing operations before taxes


1,060


799


864


  Income tax provision (benefit)


374


279


298


  Income (loss) from continuing operations, net of tax


$               686


$               520


$               566










Selected performance metrics:








  Period-end loans held for investment


$           78,397


$           91,755


$           61,476


  Average loans held for investment


82,952


89,090


62,432


  Average yield on loans held for investment(10)


15.16

%

14.33

%

14.41

%

  Total net revenue margin(11)


17.61


16.76


16.59


  Net charge-off rate


4.45


4.32


4.14


  30+ day performing delinquency rate


3.44


3.61


3.51


  30+ day delinquency rate(7)


**


3.69


3.51


  Nonperforming loan rate(5)


0.12


0.11



  PCCR intangible amortization


$               116


$               127


$                   4


  Purchase volume(6)


45,098


52,853


34,498










Domestic Card








Earnings:








  Net interest income


$            2,556


$            2,583


$            1,713


  Non-interest income


724


798


497


  Total net revenue


3,280


3,381


2,210


  Provision for credit losses


647


911


361


  Non-interest expense


1,633


1,727


1,052


  Income (loss) from continuing operations before taxes


1,000


743


797


  Income tax provision (benefit)


356


263


282


  Income (loss) from continuing operations, net of tax


$               644


$               480


$               515










Selected performance metrics:








  Period-end loans held for investment


$           70,361


$           83,141


$           53,173


  Average loans held for investment


74,714


80,718


54,131


  Average yield on loans held for investment(10)


15.07

%

14.20

%

14.11

%

  Total net revenue margin(11)


17.56


16.75


16.33


  Net charge-off rate


4.43


4.35


3.92


  30+ day performing delinquency rate


3.37


3.61


3.25


  30+ day delinquency rate(7)


**


3.61


3.25


  Purchase volume(6)


$           41,831


$           48,918


$           31,417










International Card








Earnings:








  Net interest income


$               274


$               266


$               279


  Non-interest income


97


85


101


  Total net revenue


371


351


380


  Provision for credit losses


96


89


97


  Non-interest expense


215


206


216


  Income (loss) from continuing operations before taxes


60


56


67


  Income tax provision (benefit)


18


16


16


  Income (loss) from continuing operations, net of tax


$                 42


$                 40


$                 51










Selected performance metrics:








  Period-end loans held for investment


$            8,036


$            8,614


$            8,303


  Average loans held for investment


8,238


8,372


8,301


  Average yield on loans held for investment


15.97

%

15.59

%

16.38

%

  Total net revenue margin


18.01


16.77


18.31


  Net charge-off rate


4.59


3.99


5.52


  30+ day performing delinquency rate


4.04


3.58


5.14


  30+ day delinquency rate(7)


**


4.49


5.14


  Nonperforming loan rate(5)


1.13


1.16



  Purchase volume(6)


$            3,267


$            3,935


$            3,081


















 

CAPITAL ONE FINANCIAL CORPORATION (COF)



Table 9:  Financial & Statistical Summary—Consumer Banking Business(3)(4)














2013


2012


2012


(Dollars in millions) (unaudited)


Q1


Q4


Q1 


Consumer Banking








Earnings:









Net interest income


$            1,478


$            1,503


$            1,288



Non-interest income


181


161


176



Total net revenue


1,659


1,664


1,464



Provision for credit losses


175


169


174



Non-interest expense


890


992


943



Income from continuing operations before taxes


594


503


347



Income tax provision


211


178


123



Income from continuing operations, net of tax


$               383


$               325


$               224











Selected performance metrics:









Period-end loans held for investment 


$           73,613


$           75,127


$           77,300



Average loans held for investment 


74,286


76,098


56,263



Average yield on loans held for investment


5.93

%

5.94

%

7.20

%


Auto loan originations


$            3,789


$            3,479


$            4,270



Period-end deposits


172,605


172,396


176,007



Average deposits 


171,089


172,654


129,915



Deposit interest expense rate


0.64

%

0.68

%

0.73

%


Core deposit intangible amortization


$                 37


$                 39


$                 37



Net charge-off rate


0.78

%

0.88

%

0.77

%


30+ day performing delinquency rate


2.24


2.65


1.63



30+ day delinquency rate(7)


**


3.34


2.25



Nonperforming loan rate


0.74


0.85


0.77



Nonperforming asset rate(5)


0.80


0.91


0.82



Period-end loans serviced for others


$           14,869


$           15,333


$           17,586




















 

CAPITAL ONE FINANCIAL CORPORATION (COF)




Table 10:  Financial & Statistical Summary—Commercial Banking Business(3)(4)














2013


2012


2012


(Dollars in millions) (unaudited)


Q1


Q4


Q1 


Commercial Banking








Earnings:









Net interest income


$               454


$               450


$               431



Non-interest income


84


86


85



Total net revenue(8)


538


536


516



Provision for credit losses


(35)


(20)


(69)



Non-interest expense


258


294


261



Income from continuing operations before taxes


315


262


324



Income tax provision 


112


93


114



Income from continuing operations, net of tax


$               203


$               169


$               210











Selected performance metrics:









Period-end loans held for investment 


$           39,150


$           38,820


$           34,906



Average loans held for investment 


38,576


37,598


34,032



Average yield on loans held for investment


3.91

%

4.15

%

4.47

%


Period-end deposits 


$           30,275


$           29,866


$           28,046



Average deposits 


30,335


29,476


27,569



Deposit interest expense rate


0.28

%

0.28

%

0.37

%


Core deposit intangible amortization


$                   7


$                   8


$                   9



Net charge-off rate


0.07

%

0.10

%

0.19

%


Nonperforming loan rate


0.71


0.73


1.15



Nonperforming asset rate(5)


0.74


0.77


1.23











Risk category:(9)









Noncriticized


$           37,359


$           36,839


$           32,339



Criticized performing


1,191


1,340


1,695



Criticized nonperforming


277


282


402



    Total risk-rated loans


38,827


38,461


34,436



Acquired commercial loans


323


359


470



    Total commercial loans


$           39,150


$           38,820


$           34,906












% of period-end commercial loans held for investment:









Noncriticized


95.4

%

94.9

%

92.6

%


Criticized performing


3.1


3.5


4.9



Criticized nonperforming


0.7


0.7


1.2



    Total risk-rated loans


99.2


99.1


98.7



Acquired commercial loans


0.8


0.9


1.3



    Total commercial loans


100.0

%

100.0

%

100.0

%



















 

CAPITAL ONE FINANCIAL CORPORATION (COF)




Table 11:  Financial & Statistical Summary—Other and Total(2)(3)
















2013


2012


2012


(Dollars in millions) (unaudited)


Q1


Q4


Q1


Other 








Earnings:









Net interest expense


$                  (192)


$                  (274)


$                 (297)



Non-interest income


(105)


(34)


662



Total net revenue


(297)


(308)


365



Provision for credit losses


2


2


10



Non-interest expense


32


36


32



Income (loss) from continuing operations before taxes


(331)


(346)


323



Income tax benefit


(203)


(180)


(182)



Income (loss) from continuing operations, net of tax


$                  (128)


$                  (166)


$                  505











Selected performance metrics:









Period-end loans held for investment


$                   173


$                   187


$                  140



Average loans held for investment


183


158


173



Period-end deposits


9,530


10,223


12,475



Average deposits


10,131


11,364


12,775











Total








Earnings:









Net interest income


$                4,570


$                4,528


$               3,414



Non-interest income


981


1,096


1,521



Total net revenue


5,551


5,624


4,935



Provision for credit losses


885


1,151


573



Non-interest expense


3,028


3,255


2,504



Income from continuing operations before taxes


1,638


1,218


1,858



Income tax provision


494


370


353



Income from continuing operations, net of tax


$                1,144


$                   848


$               1,505











Selected performance metrics:









Period-end loans held for investment 


$            191,333


$            205,889


$           173,822



Average loans held for investment


195,997


202,944


152,900



Period-end deposits


212,410


212,485


216,528



Average deposits


211,555


213,494


170,259











 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)









Table 12:  Notes to Loan and Business Segment Disclosures (Tables 7 — 11)



















(1)

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















(2)

Results for Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the 2012 U.S. card acquisition, which resulted in the addition of approximately $28.2 billion in credit card receivables at closing.















(3)

Results for Q1 2012 and thereafter include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans of $40.4 billion, other assets of $53.9 billion and deposits of $84.4 billion at acquisition.















(4)

Loans acquired as part of the 2012 U.S. card, ING Direct and CCB acquisitions are included in the denominator used in calculating our reported credit quality metrics. We therefore present certain reported credit quality metrics, adjusted to exclude from the denominator acquired loans accounted for based on estimated cash flows expected to be collected over the life of the loans (formerly SOP 03-3). The table below presents amounts related to acquired loans accounted for under SOP 03-3.





2013


2012


2012







(Dollars in millions) (unaudited)


Q1


Q4


Q1 







Acquired loans accounted for under SOP 03-3:














Period-end unpaid principal balance


$       36,216


$       38,477


$    44,798








Period-end loans held for investment


34,943


37,134


43,131








Average loans held for investment


35,706


37,899


23,067




















(5)

Nonperforming assets consist of nonperforming loans, real estate owned ("REO") and other foreclosed assets. The nonperforming asset ratios are calculated based on nonperforming assets for each category divided by the combined period-end total of loans held for investment, REO and other foreclosed assets for each respective category.















(6)

Includes credit card purchase transactions, net of returns. Excludes cash advance transactions.















(7)

The 30+ day delinquency rate as of the end of Q1 2013 will be provided in our Quarterly Report on Form 10-Q for the period ended March 31, 2013.















(8)

Because some of our tax-related commercial investments generate tax-exempt income or tax credits, we make certain reclassifications within our Commercial Banking business results to present revenues on a taxable-equivalent basis, calculated assuming an effective tax rate approximately equal to our federal statutory tax rate of 35%.















(9)

Criticized exposures correspond to the "Special Mention," "Substandard" and "Doubtful" asset categories defined by bank regulatory authorities.















(10)

The transfer of the Best Buy Stores, L.P. ("Best Buy") portfolio to held for sale resulted in an increase in the average yield for Domestic Card and Total Card of 107 basis points and 97 basis points, respectively, in Q1 2013.















(11)

The transfer of the Best Buy portfolio to held for sale resulted in an increase in the net revenue margin for Domestic Card and Total Card of 123 basis points and 112 basis points, respectively, in Q1 2013.





























 

 


CAPITAL ONE FINANCIAL CORPORATION (COF)





Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures












In addition to disclosing required regulatory capital measures, we also report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include average tangible common equity, tangible common equity ("TCE") and TCE ratio. The table below provides the details of the calculation of our regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies. 















2013


2012


2012




(Dollars in millions)(unaudited)


Q1


Q4


Q1




Average Equity to Non-GAAP Average Tangible Common Equity










Average total stockholders' equity


$     40,960


$     40,212


$      32,982




Less:  Average intangible assets(1)


(16,141)


(16,340)


(13,931)




           Noncumulative perpetual preferred stock(2)


(853)


(853)





Average tangible common equity(3)


$     23,966


$     23,019


$      19,051















Stockholders' Equity to Non-GAAP Tangible Common Equity










Total stockholders' equity


$     41,296


$     40,499


$      36,950




Less:  Goodwill and other intangible assets(1)


(15,992)


(16,224)


(14,110)




           Noncumulative perpetual preferred stock(2)


(853)


(853)





Tangible common equity(3)


$     24,451


$     23,422


$      22,840















Total Assets to Tangible Assets










Total assets


$    300,163


$    312,918