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Capital One Reports First Quarter 2014 Net Income of $1.2 billion, or $1.96 per share

April 16, 2014 at 4:06 PM EDT

MCLEAN, Va., April 16, 2014 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the first quarter of 2014 of $1.2 billion, or $1.96 per diluted common share, compared to the fourth quarter of 2013 with net income of $852 million, or $1.43 per diluted common share, and the first quarter of 2013 with net income of $1.1 billion, or $1.77 per diluted common share. 

"Capital One posted solid results across our businesses in the first quarter," said Richard D. Fairbank, Chairman and CEO.  "We received no objection to our CCAR capital plan and announced a $2.5 billion share repurchase program that we expect to complete by the end of the first quarter of 2015." 

All comparisons below are for the first quarter of 2014 compared with the fourth quarter of 2013 unless otherwise noted.  

First Quarter 2014 Income Highlights:

  • Total net revenue decreased 3 percent to $5.4 billion.
  • Total non-interest expense decreased 9 percent to $2.9 billion.
  • Pre-provision earnings increased 6 percent to $2.4 billion.
  • Provision for credit losses decreased 23 percent to $735 million.

First Quarter 2014 Balance Sheet Highlights:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 13.0 percent at March 31, 2014.
  • Net interest margin of 6.62 percent, down 11 basis points.
  • Domestic Card period-end loans decreased $5.0 billion, or 7 percent, to $68.3 billion.
  • Commercial Banking period-end loans increased $1.2 billion, or 3 percent, to $46.2 billion.
  • Consumer Banking:
    • Auto period-end loans increased $1.2 billion, or 4 percent, to $33.1 billion.
    • Home loans period-end loans decreased $1.2 billion, or 4 percent, to $34.0 billion, driven by expected run-off of acquired portfolios.
  • Average loans held for investment in the quarter increased $909 million, or less than 1 percent, to $193.7 billion.
    • Domestic Card average loans decreased $558 million, or less than 1 percent, to $69.8 billion.
    • Commercial Banking average loans increased $2.1 billion, or 5 percent, to $45.4 billion.
    • Consumer Banking:
      • Auto average loans increased $963 million, or 3 percent, to $32.4 billion.
      • Home loans average loans decreased by $1.3 billion, or 4 percent, to $34.6 billion, driven by expected run-off of acquired portfolios.
  • Period-end total deposits increased $3.8 billion, or 2 percent, to $208.3 billion, while average deposits increased $136 million, or less than 1 percent, to $205.8 billion.
  • Deposit interest rates declined 3 basis points to 0.60 percent.

Detailed segment information will be available in the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.

Earnings Conference Call Webcast Information 

The company will hold an earnings conference call on April 16, 2014, at 5:00 PM, Eastern 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 "About Us", then choose "Investors" to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation of non-GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company's website through May 7, 2014 at 5:00 PM.

Forward Looking Statements

Certain statements in this release are forward-looking statements, which involve a number of risks and uncertainties. Capital One cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information due to a number of factors, including those listed from time to time in reports that Capital One 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, 2013.

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 $208.3 billion in deposits and $290.5 billion in total assets as of March 31, 2014. 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.

 

 



 

Capital One Financial Corporation

Financial Supplement

First Quarter 2014(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 Quarterly Report on Form 10-Q for the period ended March 31, 2014 once it is filed with the Securities and Exchange Commission.

(2) 

References to ING Direct refers to business and assets acquired and liabilities assumed in the February 17, 2012 acquisition. Reference 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 adopted ASU 2014-01 "Accounting for Investments in Qualified Affordable Housing Projects" as of January 1, 2014. As permitted by the guidance, we adopted the proportional amortization method of accounting for Qualified Affordable Housing Projects. The proportional amortization method amortizes the cost of the investment over the period in which we will receive tax credits and other tax benefits, and the resulting amortization is recognized as a component of income taxes attributable to continuing operations. Historically, these investments were accounted for under the equity method of accounting and the passive losses related to the investments were recognized within non-interest expense. Prior period results and related metrics have been restated to conform to this presentation.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated(1)

 

























2014



2013



2013



2013



2013


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


Q1



Q4



Q3



Q2



Q1


Earnings





















Net interest income


$

4,350



$

4,423



$

4,560



$

4,553



$

4,570


Non-interest income(2)



1,020




1,121




1,091




1,085




981























Total net revenue(3)



5,370




5,544




5,651




5,638




5,551























Provision for credit losses



735




957




849




762




885


Non-interest expense:





















Marketing



325




427




299




330




317


Amortization of intangibles(4)



143




166




161




167




177


Acquisition-related(5)



23




60




37




50




46


Operating expenses



2,441




2,582




2,612




2,471




2,451























Total non-interest expense



2,932




3,235




3,109




3,018




2,991























Income from continuing operations before income taxes



1,703




1,352




1,693




1,858




1,675


Income tax provision



579




477




575




631




541























Income from continuing operations, net of tax



1,124




875




1,118




1,227




1,134


Income/(Loss) from discontinued operations, net of tax(2)



30




(23)




(13)




(119)




(78)























Net income



1,154




852




1,105




1,108




1,056


Dividends and undistributed earnings allocated to participating securities(6)



(5)




(4)




(5)




(4)




(5)


Preferred stock dividends(6)



(13)




(13)




(13)




(13)




(13)























Net income available to common stockholders


$

1,136



$

835



$

1,087



$

1,091



$

1,038























Common Share Statistics





















Basic EPS:(6)





















Net income from continuing operations


$

1.94



$

1.50



$

1.89



$

2.08



$

1.92


Income/(Loss) from discontinued operations



0.05




(0.04)




(0.02)




(0.20)




(0.13)























Net income per basic common share


$

1.99



$

1.46



$

1.87



$

1.88



$

1.79























Diluted EPS:(6)





















Net income from continuing operations


$

1.91



$

1.46



$

1.86



$

2.05



$

1.90


Income/(Loss) from discontinued operations



0.05




(0.03)




(0.02)




(0.20)




(0.13)























Net income per diluted common share


$

1.96



$

1.43



$

1.84



$

1.85



$

1.77























Weighted average common shares outstanding (in millions) for:





















Basic EPS



571.0




573.4




582.3




581.5




580.5


Diluted EPS



580.3




582.6




591.1




588.8




586.3


Common shares outstanding (period end, in millions)



572.9




572.7




582.0




584.9




584.0


Dividends per common share


$

0.30



$

0.30



$

0.30



$

0.30



$

0.05


Tangible book value per common share (period end)(7)



45.88




43.64




43.01




41.41




41.72


Balance Sheet (Period End)





















Loans held for investment(8)


$

192,941



$

197,199



$

191,814



$

191,512



$

191,333


Interest-earning assets



259,422




265,170




259,152




265,693




268,479


Total assets



290,500




296,933




289,866




296,524




300,145


Interest-bearing deposits



184,214




181,880




184,553




187,768




191,093


Total deposits



208,324




204,523




206,834




209,865




212,410


Borrowings



30,118




40,654




31,845




36,231




37,492


Common equity



41,948




40,779




40,792




40,094




40,358


Total stockholders' equity



42,801




41,632




41,645




40,947




41,211


Balance Sheet (Quarterly Average Balances)





















Loans held for investment(8)


$

193,722



$

192,813



$

191,135



$

190,562



$

195,997


Interest-earning assets



262,659




262,957




264,796




266,544




272,345


Total assets



294,275




294,040




294,919




297,748




303,226


Interest-bearing deposits



184,183




184,206




186,752




189,311




190,612


Total deposits



205,842




205,706




208,340




210,650




211,555


Borrowings



35,978




36,463




36,355




36,915




41,574


Common equity



42,006




41,502




40,332




40,637




40,027


Total stockholders' equity



42,859




42,355




41,185




41,490




40,880


 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated(1)

 

























2014



2013



2013



2013



2013


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


Q1



Q4



Q3



Q2



Q1


Performance Metrics





















Net interest income growth (quarter over quarter)



(2)

%



(3)

%



%



%



1

%

Non-interest income growth (quarter over quarter)



(9)




3




1




11




(10)


Total net revenue growth (quarter over quarter)



(3)




(2)







2




(1)


Total net revenue margin(9)



8.18




8.43




8.54




8.46




8.15


Net interest margin(10)



6.62




6.73




6.89




6.83




6.71


Return on average assets(11)



1.53




1.19




1.52




1.65




1.50


Return on average tangible assets(12)



1.61




1.26




1.60




1.74




1.58


Return on average common equity(13)



10.53




8.27




10.91




11.91




11.15


Return on average tangible common equity(14)



16.83




13.38




17.96




19.62




18.69


Non-interest expense as a % of average loans held for investment(15)



6.05




6.71




6.51




6.33




6.10


Efficiency ratio(16)



54.60




58.35




55.02




53.53




53.88


Effective income tax rate for continuing operations



34.0




35.3




34.0




34.0




32.3


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



41.1




42.0




39.6




39.6




39.3


Credit Quality Metrics(8)





















Allowance for loan and lease losses


$

4,098



$

4,315



$

4,333



$

4,407



$

4,606


Allowance as a % of loans held for investment



2.12

%



2.19

%



2.26

%



2.30

%



2.41

%

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



2.45




2.54




2.66




2.74




2.91


Net charge-offs


$

931



$

969



$

917



$

969



$

1,079


Net charge-off rate(17)



1.92

%



2.01

%



1.92

%



2.03

%



2.20

%

Net charge-off rate (excluding acquired loans)(17)



2.24




2.37




2.29




2.46




2.69


30+ day performing delinquency rate



2.22




2.63




2.54




2.35




2.37


30+ day performing delinquency rate (excluding acquired loans)



2.59




3.08




3.01




2.83




2.90


30+ day delinquency rate



2.51




2.96




2.88




2.71




2.74


30+ day delinquency rate (excluding acquired loans)



2.93




3.46




3.41




3.26




3.35


Capital Ratios(18)





















Common equity Tier 1 capital ratio



13.0

%



N/A




N/A




N/A




N/A


Tier 1 common ratio



N/A




12.2

%



12.7

%



12.0

%



11.7

%

Tier 1 risk-based capital ratio



13.4




12.6




13.1




12.4




12.1


Total risk-based capital ratio



15.4




14.7




15.2




14.6




14.4


Tier 1 leverage ratio



10.4




10.1




10.0




9.7




9.1


Tangible common equity ("TCE") ratio



9.6




8.9




9.1




8.6




8.6


 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income(1)

 

















Three Months Ended


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


March 31,
2014



December 31,
2013



March 31,
2013


Interest income:













Loans, including loans held for sale


$

4,307



$

4,398



$

4,649


Investment securities



416




414




374


Other



30




27




28















Total interest income



4,753




4,839




5,051















Interest expense:













Deposits



276




288




326


Securitized debt obligations



38




40




56


Senior and subordinated notes



77




75




82


Other borrowings



12




13




17















Total interest expense



403




416




481















Net interest income



4,350




4,423




4,570


Provision for credit losses



735




957




885















Net interest income after provision for credit losses



3,615




3,466




3,685















Non-interest income:(2)













Service charges and other customer-related fees



474




504




550


Interchange fees, net



440




489




445


Net other-than-temporary impairment losses recognized

    in earnings



(5)




(1)




(25)


Other



111




129




11















Total non-interest income



1,020




1,121




981















Non-interest expense:













Salaries and associate benefits



1,161




1,115




1,095


Occupancy and equipment



405




437




357


Marketing



325




427




317


Professional services



287




357




322


Communications and data processing



196




220




216


Amortization of intangibles(4)



143




166




177


Other



415




513




507















Total non-interest expense



2,932




3,235




2,991















Income from continuing operations before income taxes



1,703




1,352




1,675


Income tax provision



579




477




541















Income from continuing operations, net of tax



1,124




875




1,134


Income/(Loss) from discontinued operations, net of tax(2)



30




(23)




(78)















Net income



1,154




852




1,056


Dividends and undistributed earnings allocated to participating securities(6)



(5)




(4)




(5)


Preferred stock dividends(6)



(13)




(13)




(13)















Net income available to common stockholders


$

1,136



$

835



$

1,038



















Basic earnings per common share:(6)













Net income from continuing operations


$

1.94



$

1.50



$

1.92


Income/(Loss) from discontinued operations



0.05




(0.04)




(0.13)















Net income per basic common share


$

1.99



$

1.46



$

1.79



















Diluted earnings per common share:(6)













Net income from continuing operations


$

1.91



$

1.46



$

1.90


Income/(Loss) from discontinued operations



0.05




(0.03)




(0.13)















Net income per diluted common share


$

1.96



$

1.43



$

1.77



















Weighted average common shares outstanding (in millions) for:













Basic EPS



571.0




573.4




580.5


Diluted EPS



580.3




582.6




586.3


Dividends paid per common share


$

0.30



$

0.30



$

0.05


 

 

 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets(1)

 















(Dollars in millions)(unaudited)


March 31,
2014



December 31,
2013



March 31,
2013


Assets:













Cash and cash equivalents:













Cash and due from banks


$

3,373



$

2,821



$

1,947


Interest-bearing deposits with banks



2,641




3,131




4,563


Federal funds sold and securities purchased under agreements

    to resell



168




339




236















Total cash and cash equivalents



6,182




6,291




6,746


Restricted cash for securitization investors



550




874




1,018


Securities available for sale, at fair value



40,721




41,800




63,968


Securities held to maturity, at carrying value



20,150




19,132





Loans held for investment:













Unsecuritized loans held for investment



156,072




157,651




150,721


Restricted loans for securitization investors



36,869




39,548




40,612















Total loans held for investment



192,941




197,199




191,333


Less: Allowance for loan and lease losses



(4,098)




(4,315)




(4,606)















Net loans held for investment



188,843




192,884




186,727


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



259




218




6,410


Premises and equipment, net



3,807




3,839




3,736


Interest receivable



1,325




1,418




1,378


Goodwill



13,974




13,978




13,900


Other



14,689




16,499




16,262















Total assets


$

290,500



$

296,933



$

300,145



















Liabilities:













Interest payable


$

259



$

307



$

310


Customer deposits:













Non-interest bearing deposits



24,110




22,643




21,317


Interest-bearing deposits



184,214




181,880




191,093















Total customer deposits



208,324




204,523




212,410


Securitized debt obligations



9,783




10,289




11,046


Other debt:













Federal funds purchased and securities loaned or sold under

    agreements to repurchase



1,544




915




855


Senior and subordinated notes



14,891




13,134




13,255


Other borrowings



3,900




16,316




12,336















Total other debt



20,335




30,365




26,446


Other liabilities



8,998




9,817




8,722















Total liabilities



247,699




255,301




258,934



















Stockholders' equity:













Preferred stock










Common stock



6




6




6


Additional paid-in capital, net



26,605




26,526




26,256


Retained earnings



21,259




20,292




17,791


Accumulated other comprehensive income ("AOCI")



(710)




(872)




473


Treasury stock, at cost



(4,359)




(4,320)




(3,315)















Total stockholders' equity



42,801




41,632




41,211















Total liabilities and stockholders' equity


$

290,500



$

296,933



$

300,145















 

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) 

We recorded the following related to mortgage representation and warranty losses: a benefit of $33 million in Q1 2014 (which includes a benefit of $47 million before taxes in discontinued operations and a provision of $14 million before taxes in continuing operations), a provision of $33 million in Q4 2013, a benefit of $4 million in Q3 2013, and provisions of $183 million and $97 million in Q2 2013 and Q1 2013 respectively. Historically, the majority of the provision for representation and warranty losses is included net of tax in discontinued operations, with the remaining amount included pre-tax in non-interest income. The mortgage representation and warranty reserve was $1.1 billion as of March 31, 2014, $1.2 billion as of December 31, 2013 and $994 million as of March 31, 2013.

(3) 

Total net revenue was reduced by $163 million in Q1 2014, $185 million in Q4 2013, $154 million in Q3 2013, $192 million in Q2 2013 and $265 million in Q1 2013 for the estimated uncollectible amount of billed finance charges and fees.

(4) 

Includes purchased credit card relationship ("PCCR") intangible amortization of $98 million in Q1 2014, $102 million in Q4 2013, $106 million in Q3 2013, $110 million in Q2 2013 and $116 million in Q1 2013, the substantial majority of which is attributable to the 2012 U.S. card acquisition. Includes core deposit intangible amortization of $36 million in Q1 2014, $38 million in Q4 2013, $40 million in Q3 2013, $43 million in Q2 2013 and $44 million in Q1 2013.

(5) 

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

(6) 

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

(7) 

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.

(8) 

Loans held for investment includes acquired loans accounted for based on cash flows expected to be collected. 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 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"). The table below presents amounts related to acquired loans accounted for under SOP 03-3:






















(Dollars in millions) (unaudited)


2014
Q1



2013
Q4



2013
Q3



2013
Q2



2013
Q1


Acquired loans accounted for under SOP 03-3:





















Period-end unpaid principal balance


$

28,549



$

29,761



$

31,377



$

33,620



$

36,216


Period-end loans held for investment



27,390




28,550




30,080




32,275




34,943


Average loans held for investment



27,760




29,055




30,713




33,144




35,706




(9)   

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

(10) 

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

(11) 

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

(12) 

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

(13) 

Calculated based on the annualized sum of (i) income from continuing operations, net of tax; (ii) less dividends and undistributed earnings allocated to participating securities; (iii) less preferred stock dividends, for the period, divided by average common equity for the period. Our calculation of return on average common equity may not be comparable to similarly titled measures reported by other companies.

(14) 

Calculated based on the annualized sum of (i) income from continuing operations, net of tax; (ii) less dividends and undistributed earnings allocated to participating securities; (iii) less preferred stock dividends, for the period, divided by average tangible common equity for the period. Our calculation of return on average tangible common equity may not be comparable to similarly titled measures reported by other companies. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.

(15) 

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

(16) 

Calculated based on non-interest expense for the period divided by total net revenue for the period.

(17) 

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

(18) 

Beginning on January 1, 2014, we calculate our regulatory capital under Basel III Standardized Approach subject to transition provisions. We calculated regulatory capital measures for periods prior to the first quarter of 2014 under Basel I. Ratios as of the end of Q1 2014 are preliminary and therefore subject to change. TCE ratio is a non-GAAP measure. 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(1)

 






























































2014 Q1



2013 Q4



2013 Q1


(Dollars in millions)(unaudited)


Average
Balance



Interest
Income/
Expense(2)



Yield/
Rate(2)
 



Average
Balance



Interest
Income/
Expense(2)



Yield/
Rate(2)
 



Average
Balance



Interest
Income/
Expense(2)



Yield/
Rate(2)
 


Interest-earning assets:





































Loans, including loans held for sale


$

194,020



$

4,307




8.88

%


$

193,368



$

4,398




9.10

%


$

200,441



$

4,649




9.28

%

Investment securities(3)



62,124




416




2.68




62,919




414




2.63




64,798




374




2.31


Cash equivalents and other



6,515




30




1.84




6,670




27




1.62




7,106




28




1.58







































Total interest-earning assets


$

262,659



$

4,753




7.24

%


$

262,957



$

4,839




7.36

%


$

272,345



$

5,051




7.42

%
















































Interest-bearing liabilities:





































Interest-bearing deposits


$

184,183



$

276