Capital One Reports Second Quarter 2014 Net Income of $1.2 billion, or $2.04 per share

MCLEAN, Va., July 17, 2014 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the second quarter of 2014 of $1.2 billion, or $2.04 per diluted common share, compared to the first quarter of 2014 with net income of $1.2 billion, or $1.96 per diluted common share, and the second quarter of 2013 with net income of $1.1 billion, or $1.85 per diluted common share. 

"Capital One posted another quarter of solid growth and profitability, including the return of year-over-year growth in our Domestic Card business, and we continued to return capital to our shareholders as we began to execute our announced $2.5 billion share repurchase program," said Richard D. Fairbank, Chairman and Chief Executive Officer.  "We remain focused on sustaining high returns as we invest to drive future growth and be a leader in digital banking."

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

Second Quarter 2014 Income Highlights:

  • Total net revenue increased 2 percent to $5.5 billion.
  • Total non-interest expense increased 2 percent to $3.0 billion.
  • Pre-provision earnings increased 2 percent to $2.5 billion.
  • Provision for credit losses decreased 4 percent to $704 million.

Second Quarter 2014 Balance Sheet Highlights:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 12.7 percent at June 30, 2014.
  • Net interest margin of 6.55 percent, down 7 basis points.
  • Period-end loans held for investment in the quarter increased $5.6 billion, or 3 percent, to $198.5 billion.
    • Domestic Card period-end loans increased $2.9 billion, or 4 percent, to $71.2 billion.
    • Commercial Banking period-end loans increased $2.1 billion, or 5 percent, to $48.3 billion.
    • Consumer Banking:
      • Auto period-end loans increased $1.7 billion, or 5 percent, to $34.8 billion.
      • Home loans period-end loans decreased $1.4 billion, or 4 percent, to $32.6 billion, driven by run-off of acquired portfolios.

 

  • Average loans held for investment in the quarter increased $1.3 billion, or less than 1 percent, to $195.0 billion.
    • Domestic Card average loans decreased $434 million, or 1 percent, to $69.4 billion.
    • Commercial Banking average loans increased $1.6 billion, or 3 percent, to $47.0 billion.
    • Consumer Banking:
      • Auto average loans increased $1.6 billion, or 5 percent, to $34.0 billion.
      • Home loans average loans decreased by $1.3 billion, or 4 percent, to $33.3 billion, driven by run-off of acquired portfolios.

 

  • Period-end total deposits decreased $2.4 billion, or 1 percent, to $205.9 billion, while average deposits increased $473 million, or less than 1 percent, to $206.3 billion.
  • Interest-bearing deposit rate remained flat at 0.60 percent.

Earnings Conference Call Webcast Information 

The company will hold an earnings conference call on July 17, 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 July 31, 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 $205.9 billion in deposits and $298.3 billion in total assets as of June 30, 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 approximately 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

Second Quarter 2014(1)(2)(3)

Table of Contents





















Page

Capital One Financial Corporation Consolidated Results








     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 Segments Detail



     Table 8:

Financial Summary—Business Segments

8



     Table 9:

Financial & Statistical Summary—Credit Card Business

9



     Table 10:

Financial & Statistical Summary—Consumer Banking Business

10



     Table 11:

Financial & Statistical Summary—Commercial Banking Business

11



     Table 12:

Financial & Statistical Summary—Other and Total

12



     Table 13:

Notes to Loan and Business Segments Disclosures (Tables 7 — 12)

13

Other



     Table 14:

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

14











(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 June 30, 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. 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 adopted ASU 2014-01 "Accounting for Investments in Qualified Affordable Housing Projects" as of January 1, 2014. Prior period results and related metrics have been recast to conform to this presentation.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated(1)









































































2014 Q2 vs.


2014

2014

2013

2013

2013

2014

2013

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

Q2

Q1

Q4

Q3

Q2

Q1

Q2

Earnings



























Net interest income

$

4,315

$

4,350

$

4,423

$

4,560

$

4,553


(1)%


(5)%

Non-interest income(2)

1,153


1,020


1,121


1,091


1,085


13


6





























Total net revenue(3)

5,468


5,370


5,544


5,651


5,638


2


(3)





























Provision for credit losses

704


735


957


849


762


(4)


(8)

Non-interest expense:



























     Marketing

335


325


427


299


330


3


2

     Amortization of intangibles

136


143


166


161


167


(5)


(19)

     Acquisition-related(4)

18


23


60


37


50


(22)


(64)

     Operating expenses

2,490


2,441


2,582


2,612


2,471


2


1





























Total non-interest expense

2,979


2,932


3,235


3,109


3,018


2


(1)





























Income from continuing operations before income taxes

1,785


1,703


1,352


1,693


1,858


5


(4)

Income tax provision

581


579


477


575


631


—


(8)





























Income from continuing operations, net of tax

1,204


1,124


875


1,118


1,227


7


(2)

Income (loss) from discontinued operations, net of tax(2)

(10)


30


(23)


(13)


(119)


**


92





























Net income

1,194


1,154


852


1,105


1,108


3


8

Dividends and undistributed earnings allocated to participating securities(5)

(4)


(5)


(4)


(5)


(4)


(20)


—

Preferred stock dividends(5)

(13)


(13)


(13)


(13)


(13)


—


—





























Net income available to common stockholders

$

1,177

$

1,136

$

835

$

1,087

$

1,091


4


8





























Common Share Statistics



























Basic earnings per common share:(5)



























     Net income from continuing operations

$

2.09

$

1.94

$

1.50

$

1.89

$

2.08


8


—

     Income (loss) from discontinued operations

(0.02)


0.05


(0.04)


(0.02)


(0.20)


**


(90)





























     Net income per basic common share

$

2.07

$

1.99

$

1.46

$

1.87

$

1.88


4


10





























Diluted earnings per common share:(5)



























     Net income from continuing operations

$

2.06

$

1.91

$

1.46

$

1.86

$

2.05


8


—

     Income (loss) from discontinued operations

(0.02)


0.05


(0.03)


(0.02)


(0.20)


**


(90)





























     Net income per diluted common share

$

2.04

$

1.96

$

1.43

$

1.84

$

1.85


4


10





























Weighted average common shares outstanding (in millions) for:



























     Basic common shares

567.5


571.0


573.4


582.3


581.5


(1)


(2)

     Diluted common shares

577.6


580.3


582.6


591.1


588.8


—


(2)

Common shares outstanding (period end, in millions)

561.8


572.9


572.7


582.0


584.9


(2)


(4)

Dividends per common share

$

0.30

$

0.30

$

0.30

$

0.30

$

0.30


—


—

Tangible book value per common share (period end)(6)

47.90


45.88


43.64


43.01


41.41


4


16

Balance Sheet (Period End)



























Loans held for investment(7)

$

198,528

$

192,941

$

197,199

$

191,814

$

191,512


3


4

Interest-earning assets

266,720


259,422


265,170


259,152


265,693


3


—

Total assets

298,317


290,500


296,933


289,866


296,524


3


1

Interest-bearing deposits

180,970


184,214


181,880


184,553


187,768


(2)


(4)

Total deposits

205,890


208,324


204,523


206,834


209,865


(1)


(2)

Borrowings

39,114


30,118


40,654


31,845


36,231


30


8

Common equity

42,477


41,948


40,779


40,792


40,094


1


6

Total stockholders' equity

43,815


42,801


41,632


41,645


40,947


2


7

Balance Sheet (Quarterly Average Balances)



























Loans held for investment(7)

$

194,996

$

193,722

$

192,813

$

191,135

$

190,562


1


2

Interest-earning assets

263,570


262,659


262,957


264,796


266,544


—


(1)

Total assets

294,744


294,275


294,040


294,919


297,748


—


(1)

Interest-bearing deposits

182,053


184,183


184,206


186,752


189,311


(1)


(4)

Total deposits

206,315


205,842


205,706


208,340


210,650


—


(2)

Borrowings

35,658


35,978


36,463


36,355


36,915


(1)


(3)

Common equity

42,797


42,006


41,502


40,332


40,637


2


5

Total stockholders' equity

43,767


42,859


42,355


41,185


41,490


2


5
































1
























 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated(1)




































































2014 Q2 vs.


2014

2014

2013

2013

2013

2014

2013

(Dollars in millions) (unaudited)

Q2

Q1

Q4

Q3

Q2

Q1

Q2

Performance Metrics



























Net interest income growth (quarter over quarter)

(1)

%

(2)

%

(3)

%

0

%

0

%

**


**

Non-interest income growth (quarter over quarter)

13


(9)


3


1


11


**


**

Total net revenue growth (quarter over quarter)

2


(3)


(2)


0


2


**


**

Total net revenue margin(8)

8.30


8.18


8.43


8.54


8.46


12

 bps 

(16)

bps 

Net interest margin(9)

6.55


6.62


6.73


6.89


6.83


(7)


(28)

Return on average assets

1.63


1.53


1.19


1.52


1.65


10


(2)

Return on average tangible assets(10)

1.73


1.61


1.26


1.60


1.74


12


(1)

Return on average common equity(11)

11.09


10.53


8.27


10.91


11.91


56


(82)

Return on average tangible common equity(12)

17.47


16.83


13.38


17.96


19.62


64


(215)

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

6.11


6.05


6.71


6.51


6.33


6


(22)

Efficiency ratio(13)

54.48


54.60


58.35


55.02


53.53


(12)


95

Effective income tax rate for continuing operations

32.5


34.0


35.3


34.0


34.0


(150)


(150)

Employees (in thousands), period end(14)

44.6


44.9


45.4


43.5


43.3


(1)

%

3

%

Credit Quality Metrics(7)



























Allowance for loan and lease losses

$

3,998

$

4,098

$

4,315

$

4,333

$

4,407


(2)


(9)

Allowance as a % of loans held for investment

2.01

%

2.12

%

2.19

%

2.26

%

2.30

%

(11)

bps 

(29)

bps 

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

2.30


2.45


2.54


2.66


2.74


(15)


(44)

Net charge-offs

$

812

$

931

$

969

$

917

$

969


(13)

%

(16)

%

Net charge-off rate(15)

1.67

%

1.92

%

2.01

%

1.92

%

2.03

%

(25)

bps 

(36)

bps 

Net charge-off rate (excluding acquired loans)(15)

1.93


2.24


2.37


2.29


2.46


(31)


(53)

30+ day performing delinquency rate

2.24


2.22


2.63


2.54


2.35


2


(11)

30+ day performing delinquency rate (excluding acquired loans)

2.58


2.59


3.08


3.01


2.83


(1)


(25)

30+ day delinquency rate

2.53


2.51


2.96


2.88


2.71


2


(18)

30+ day delinquency rate (excluding acquired loans)

2.91


2.93


3.46


3.41


3.26


(2)


(35)

Capital Ratios(16)



























Common equity Tier 1 capital ratio

12.7

%

13.0

%

n/a   


n/a   


n/a   


(30)

bps 

n/a   

Tier 1 common ratio

n/a   


n/a   


12.2

%

12.7

%

12.0

%

n/a   


n/a   

Tier 1 risk-based capital ratio

13.3

%

13.4

%

12.6


13.1


12.4


(10)

bps 

90

bps 

Total risk-based capital ratio

15.4


15.4


14.7


15.2


14.6


—


80

Tier 1 leverage ratio

10.7


10.4


10.1


10.0


9.7


30


100

Tangible common equity ("TCE") ratio(17)

9.5


9.6


8.9


9.1


8.6


(10)


90
































2
























 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income(1)


































































Three Months Ended

Q2 2014 vs.

Six Months
Ended

2014

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

2014

2014

2013

2014

2013

2014

2013

vs.


Q2

Q1

Q2

Q1

Q2

Q2

Q2

2013

Interest income:































     Loans, including loans held for sale

$

4,279

$

4,307

$

4,596


(1)

%

(7)

%

$

8,586

$

9,245


(7)

%

     Investment securities

409


416


391


(2)


5


825


765


8

     Other

24


30


23


(20)


4


54


51


6

































Total interest income

4,712


4,753


5,010


(1)


(6)


9,465


10,061


(6)

































Interest expense:































     Deposits

272


276


318


(1)


(14)


548


644


(15)

     Securitized debt obligations

39


38


45


3


(13)


77


101


(24)

     Senior and subordinated notes

78


77


82


1


(5)


155


164


(5)

     Other borrowings

8


12


12


(33)


(33)


20


29


(31)

































Total interest expense

397


403


457


(1)


(13)


800


938


(15)

































Net interest income

4,315


4,350


4,553


(1)


(5)


8,665


9,123


(5)

     Provision for credit losses

704


735


762


(4)


(8)


1,439


1,647


(13)

































Net interest income after provision for credit losses

3,611


3,615


3,791


—


(5)


7,226


7,476


(3)

































Non-interest income:(2)































     Service charges and other customer-related fees

460


474


534


(3)


(14)


934


1,084


(14)

     Interchange fees, net

535


440


486


22


10


975


931


5

     Net other-than-temporary impairment recognized in earnings

(1)


(5)


(4)


(80)


(75)


(6)


(29)


(79)

     Other

159


111


69


43


130


270


80


238

































Total non-interest income

1,153


1,020


1,085


13


6


2,173


2,066


5

































Non-interest expense:































     Salaries and associate benefits

1,125


1,161


1,118


(3)


1


2,286


2,213


3

     Occupancy and equipment

447


405


371


10


20


852


728


17

     Marketing

335


325


330


3


2


660


647


2

     Professional services

296


287


340


3


(13)


583


662


(12)

     Communications and data processing

203


196


236


4


(14)


399


452


(12)

     Amortization of intangibles

136


143


167


(5)


(19)


279


344


(19)

     Other

437


415


456


5


(4)


852


963


(12)

































Total non-interest expense

2,979


2,932


3,018


2


(1)


5,911


6,009


(2)

































Income from continuing operations before income taxes

1,785


1,703


1,858


5


(4)


3,488


3,533


(1)

Income tax provision

581


579


631


—


(8)


1,160


1,172


(1)

































Income from continuing operations, net of tax

1,204


1,124


1,227


7


(2)


2,328


2,361


(1)

Income (loss) from discontinued operations, net of tax(2)

(10)


30


(119)


**


(92)


20


(197)


**

































Net income

1,194


1,154


1,108


3


8


2,348


2,164


9

Dividends and undistributed earnings allocated to participating securities(5)

(4)


(5)


(4)


(20)


—


(9)


(9)


—

Preferred stock dividends(5)

(13)


(13)


(13)


—


—


(26)


(26)


—

































Net income available to common stockholders

$

1,177

$

1,136

$

1,091


4


8

$

2,313

$

2,129


9










































Basic earnings per common share:(5)































Net income from continuing operations

$

2.09

$

1.94

$

2.08


8


—

$

4.03

$

4.00


1

Income (loss) from discontinued operations

(0.02)


0.05


(0.20)


**


(90)


0.03


(0.34)


**

































Net income per basic common share

$

2.07

$

1.99

$

1.88


4


10

$

4.06

$

3.66


11










































Diluted earnings per common share:(5)































Net income from continuing operations

$

2.06

$

1.91

$

2.05


8


—

$

3.97

$

3.96


—

Income (loss) from discontinued operations

(0.02)


0.05


(0.20)


**


(90)


0.03


(0.34)


**

































Net income per diluted common share

$

2.04

$

1.96

$

1.85


4


10

$

4.00

$

3.62


10

































Weighted average common shares outstanding (in millions):































Basic common shares

567.5


571.0


581.5


(1)


(2)


569.2


581.0


(2)

Diluted common shares

577.6


580.3


588.8


—


(2)


578.9


587.9


(2)

Dividends paid per common share

$

0.30

$

0.30

$

0.30


—


—

$

0.60

$

0.35


71




































3




























 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets(1)















































June 30, 2014 vs.

(Dollars in millions) (unaudited)

June 30,
2014

December 31,
2013

June 30,
2013

December 31,
2013

June 30,
2013

Assets:



















Cash and cash equivalents:



















     Cash and due from banks

$

3,598

$

2,821

$

2,176


28

%

65

%

     Interest-bearing deposits with banks

2,954


3,131


2,279


(6)


30

     Federal funds sold and securities
          purchased under agreements to resell

180


339


198


(47)


(9)





















Total cash and cash equivalents

6,732


6,291


4,653


7


45

Restricted cash for securitization investors

361


874


377


(59)


(4)

Securities available for sale, at fair value

41,113


41,800


62,602


(2)


(34)

Securities held to maturity, at carrying value

20,688


19,132


—


8


**


Loans held for investment:



















     Unsecuritized loans held for investment

161,224


157,651


151,231


2


7

     Restricted loans for securitization investors

37,304


39,548


40,281


(6)


(7)





















Total loans held for investment

198,528


197,199


191,512


1


4

     Allowance for loan and lease losses

(3,998)


(4,315)


(4,407)


(7)


(9)





















Net loans held for investment

194,530


192,884


187,105


1


4

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

709


218


6,248


225


(89)

Premises and equipment, net

3,764


3,839


3,766


(2)


—

Interest receivable

1,473


1,418


1,454


4


1

Goodwill

13,977


13,978


13,900


—


1

Other assets

14,970


16,499


16,419


(9)


(9)





















Total assets

$

298,317

$

296,933

$

296,524


—


1





















Liabilities:



















Interest payable

$

309

$

307

$

324


1


(5)

Customer deposits:



















     Non-interest bearing deposits

24,920


22,643


22,097


10


13

     Interest-bearing deposits

180,970


181,880


187,768


(1)


(4)





















Total customer deposits

205,890


204,523


209,865


1


(2)

Securitized debt obligations

10,010


10,289


10,831


(3)


(8)

Other debt:



















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

2,030


915


1,766


122


15

     Senior and subordinated notes

16,628


13,134


12,406


27


34

     Other borrowings

10,446


16,316


11,228


(36)


(7)





















Total other debt

29,104


30,365


25,400


(4)


15

Other liabilities

9,189


9,817


9,157


(6)


—





















Total liabilities

254,502


255,301


255,577


—


—





















Stockholders' equity:



















Preferred stock

0


0


0


—


—

Common stock

6


6


6


—


—

Additional paid-in capital, net

27,210


26,526


26,339


3


3

Retained earnings

22,270


20,292


18,710


10


19

Accumulated other comprehensive income ("AOCI")

(371)


(872)


(792)


(57)


(53)

Treasury stock, at cost

(5,300)


(4,320)


(3,316)


23


60





















Total stockholders' equity

43,815


41,632


40,947


5


7





















Total liabilities and stockholders' equity

$

298,317

$

296,933

$

296,524


—


1
























4
















 

CAPITAL ONE FINANCIAL CORPORATION (COF)

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



**

Not meaningful.

(1)

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

(2)

We recorded the following related to the mortgage representation and warranty reserve: a benefit of $18 million in Q2 2014 (which includes a provision of $11 million before taxes in discontinued operations and a benefit of $29 million before taxes in continuing operations), 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 a provision of $183 million in Q2 2013. Historically, 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 was $1.0 billion as of June 30 2014, and $1.2 billion as of both December 31, 2013 and June 30, 2013.

(3)

Total net revenue was reduced by $153 million in Q2 2014, $163 million in Q1 2014, $185 million in Q4 2013, $154 million in Q3 2013 and $192 million in Q2 2013 for the estimated uncollectible amount of billed finance charges and fees.

(4)

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

(5)

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.

(6)

Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.

(7)

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
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

Acquired loans accounted for under SOP 03-3:


















Period-end unpaid principal balance

$

27,117

$

28,549

$

29,761

$

31,377

$

33,620

Period-end loans held for investment

26,019


27,390


28,550


30,080


32,275

Average loans held for investment

26,491


27,760


29,055


30,713


33,144

 

(8)

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

(9)

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

(10)

Calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible assets for the period. See "Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.

(11)

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.

(12)

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 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.

(13)

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

(14)

Effective Q2 2014, we changed our presentation from total full-time equivalent employees to total employees. All prior periods have been recast to conform to the current presentation. During this change, we determined that we had previously understated the total number of full-time equivalent employees by approximately 7%.

(15)

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

(16)

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 Q2 2014 are preliminary and therefore subject to change. See "Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for information on the calculation of each of these ratios.

(17)

TCE ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See "Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.


5

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

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





































































2014 Q2

2014 Q1

2013 Q2

(Dollars in millions) (unaudited)

Average
Balance

Interest
Income/
Expense(1)

Yield/
Rate(1)

Average
Balance

Interest
Income/
Expense(1)

Yield/
Rate(1)

Average
Balance

Interest
Income/
Expense(1)

Yield/
Rate(1)

Interest-earning assets:



































Loans, including loans held for sale

$

195,322

$

4,279


8.76

%

$

194,020

$

4,307


8.88

%

$

196,874

$

4,596


9.34

%

Investment securities

62,518


409


2.62


62,124


416


2.68


63,907


391


2.45

Cash equivalents and other

5,730


24


1.68


6,515


30


1.84


5,763


23


1.60





































Total interest-earning assets

$

263,570

$

4,712


7.15

$

262,659

$

4,753


7.24

$

266,544

$

5,010


7.52





































Interest-bearing liabilities:



































Interest-bearing deposits

$

182,053

$

272


0.60

$

184,183

$

276


0.60

$

189,311

$

318


0.67

Securitized debt obligations

10,731


39


1.45


10,418


38


1.46


10,942


45


1.65

Senior and subordinated notes

16,004


78


1.95


14,162


77


2.17


12,692


82


2.58

Other borrowings

8,923


8


0.36


11,398


12


0.42


13,281


12


0.36





































Total interest-bearing liabilities

$

217,711

$

397


0.73

$

220,161

$

403


0.73

$

226,226

$

457


0.81





































Net interest income/spread




$

4,315


6.42





$

4,350


6.51





$

4,553


6.71





































Impact of non-interest bearing funding









0.13










0.11










0.12





































Net interest margin









6.55

%









6.62

%









6.83

%





































 

























Six Months Ended June 30,


2014

2013

(Dollars in millions) (unaudited)

Average
Balance

Interest
Income/
Expense(1)

Yield/
Rate(1)

Average
Balance

Interest
Income/
Expense(1)

Yield/
Rate(1)

Interest-earning assets:























Loans, including loans held for sale

$

194,674

$

8,586


8.82

%

$

198,648

$

9,245


9.31

%

Investment securities

62,322


825


2.65


63,930


765


2.39

Cash equivalents and other

6,123


54


1.76


6,430


51


1.59

























Total interest-earning assets

$

263,119

$

9,465


7.19

$

269,008

$

10,061


7.48

























Interest-bearing liabilities:























Interest-bearing deposits

$

182,431

$

548


0.60

$

189,958

$

644


0.68

Securitized debt obligations

10,576


77


1.46


11,348


101


1.78

Senior and subordinated notes

15,088


155


2.05


12,340


164


2.66

Other borrowings

10,153


20


0.39


15,544


29


0.37

























Total interest-bearing liabilities

$

218,248

$

800


0.73

$

229,190

$

938


0.82

























Net interest income/spread




$

8,665


6.46





$

9,123


6.66

























Impact of non-interest bearing funding









0.13










0.12

























Net interest margin









6.59

%









6.78

%

























(1) Interest income and interest expense and the calculation of average yields on interest-earning assets and average rates on interest-bearing liabilities include the impact of hedge accounting.


6

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics(1)







































































2014 Q2 vs.

(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

2014
Q1

2013
Q2

Period-end Loans Held For Investment



























Credit card:



























Domestic credit card

$

71,165

$

68,275

$

73,255

$

69,936

$

70,490


4

%

1

%

International credit card

7,853


7,575


8,050


8,031


7,820


4


—





























Total credit card

79,018


75,850


81,305


77,967


78,310


4


1





























Consumer banking:



























Auto

34,792


33,080


31,857


30,803


29,369


5


18

Home loan

32,644


34,035


35,282


36,817


39,163


(4)


(17)

Retail banking

3,626


3,612


3,623


3,665


3,686


—


(2)





























Total consumer banking

71,062


70,727


70,762


71,285


72,218


—


(2)





























Commercial banking:



























Commercial and multifamily real estate

22,040


21,256


20,750


19,523


18,570


4


19

Commercial and industrial

25,402


24,064


23,309


21,848


21,170


6


20





























Total commercial lending

47,442


45,320


44,059


41,371


39,740


5


19

Small-ticket commercial real estate

879


910


952


1,028


1,065


(3)


(17)





























Total commercial banking

48,321


46,230


45,011


42,399


40,805


5


18





























Other loans

127


134


121


163


179


(5)


(29)





























Total loans held for investment

$

198,528

$

192,941

$

197,199

$

191,814

$

191,512


3


4





























Average Loans Held For Investment



























Credit card:



























Domestic credit card

$

69,376

$

69,810

$

70,368

$

69,947

$

69,966


(1)


(1)

International credit card

7,621


7,692


7,899


7,782


7,980


(1)


(4)





























Total credit card

76,997


77,502


78,267


77,729


77,946


(1)


(1)





























Consumer banking:



























Auto

33,972


32,387


31,424


30,157


28,677


5


18

Home loan

33,299


34,646


35,974


37,852


40,532


(4)


(18)

Retail banking

3,613


3,630


3,635


3,655


3,721


—


(3)





























Total consumer banking

70,884


70,663


71,033


71,664


72,930


—


(3)





























Commercial banking:



























Commercial and multifamily real estate

21,484


20,962


19,928


19,047


18,084


2


19

Commercial and industrial

24,611


23,541


22,445


21,491


20,332


5


21





























Total commercial lending

46,095


44,503


42,373


40,538


38,416


4


20

Small-ticket commercial real estate

896


932


986


1,038


1,096


(4)


(18)





























Total commercial banking

46,991


45,435


43,359


41,576


39,512


3


19





























Other loans

124


122


154


166


174


2


(29)





























Total average loans held for investment

$

194,996

$

193,722

$

192,813

$

191,135

$

190,562


1


2





























Net Charge-off Rates



























Credit card:



























Domestic credit card

3.52

%

4.01

%

3.89

%

3.67

%

4.28

%

(49)

bps 

(76)

bps 

International credit card

3.93


4.17


4.74


4.71


5.08


(24)


(115)

Total credit card

3.56


4.02


3.98


3.78


4.36


(46)


(80)

Consumer banking:



























Auto

1.31


1.66


2.30


2.01


1.28


(35)


3

Home loan

0.05


0.06


0.03


0.06


0.03


(1)


2

Retail banking

0.70


0.95


1.09


1.38


1.50


(25)


(80)

Total consumer banking

0.69


0.84


1.09


0.95


0.60


(15)


9

Commercial banking:



























Commercial and multifamily real estate

0.00


0.01


(0.11)


(0.11)


0.04


(1)


(4)

Commercial and industrial

0.04


0.03


0.04


0.18


0.03


1


1

Total commercial lending

0.02


0.02


(0.03)


0.04


0.03


—


(1)

Small-ticket commercial real estate

0.61


0.67


(0.81)


1.26


0.45


(6)


16

Total commercial banking

0.03


0.04


(0.05)


0.07


0.04


(1)


(1)

Other loans

2.18


(0.68)


4.68


12.17


13.10


**


**

Total charge-off

1.67


1.92


2.01


1.92


2.03


(25)


(36)
































7
























 












































2014 Q2 vs.

(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

2014
Q1

2013
Q2

30+ Day Performing Delinquency Rates



























Credit card:



























Domestic credit card

2.83

%

3.02

%

3.43

%

3.46

%

3.05

%

(19)

bps 

(22)

bps 

International credit card

3.40


3.59


3.71


3.86


3.84


(19)


(44)

Total credit card

2.89


3.08


3.46


3.51


3.13


(19)


(24)

Consumer banking:



























Auto

5.77


5.29


6.85


6.29


6.03


48


(26)

Home loan

0.13


0.12


0.16


0.14


0.12


1


1

Retail banking

0.48


0.74


0.69


0.68


0.68


(26)


(20)

Total consumer banking

2.91


2.57


3.20


2.82


2.55


34


36

Nonperforming Assets Rates(2)



























Credit card:



























International credit card

1.03


1.07


1.10


1.16


1.20


(4)


(17)

Total credit card

0.10


0.11


0.11


0.12


0.12


(1)


(2)

Consumer banking:



























Auto(3)

0.88


0.81


1.11


0.92


0.81


7


7

Home loan

1.16


1.17


1.14


1.08


1.08


(1)


8

Retail banking

0.79


1.15


1.13


1.10


1.11


(36)


(32)

Total consumer banking

1.01


1.00


1.12


1.01


0.97


1


4

Commercial banking:



























Commercial and multifamily real estate

0.32


0.31


0.29


0.40


0.56


1


(24)

Commercial and industrial

0.45


0.40


0.44


0.65


0.65


5


(20)

Total commercial lending

0.39


0.35


0.37


0.53


0.61


4


(22)

Small-ticket commercial real estate

1.40


0.73


0.43


1.49


1.11


67


29

Total commercial banking

0.41


0.36


0.37


0.56


0.62


5


(21)

Total nonperforming assets

0.55


0.54


0.58


0.60


0.58


1


(3)






























8


























 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial Summary—Business Segments(1)








Three Months Ended June 30, 2014

(Dollars in millions) (unaudited)

Total

Credit Card

Consumer
Banking

Commercial
Banking

Other

Earnings:



















Net interest income (expense)

$

4,315

$

2,461

$

1,431

$

436

$

(13)

Non-interest income

1,153


839


170


109


35





















Total net revenue(4)

5,468


3,300


1,601


545


22

Provision for credit losses

704


549


143


12


—

Non-interest expense

2,979


1,719


938


267


55





















Income (loss) from continuing operations before taxes

1,785


1,032


520


266


(33)

Income tax provision (benefit)

581


364


186


95


(64)





















Income from continuing operations, net of tax

$

1,204

$

668

$

334

$

171

$

31

























Three Months Ended March 31, 2014

(Dollars in millions) (unaudited)

Total

Credit
Card

Consumer
Banking

Commercial
Banking

Other

Earnings:



















Net interest income (expense)

$

4,350

$

2,525

$

1,433

$

421

$

(29)

Non-interest income (expense)

1,020


785


150


87


(2)





















Total net revenue (loss)(4)

5,370


3,310


1,583


508


(31)

Provision (benefit) for credit losses

735


558


140


40


(3)

Non-interest expense

2,932


1,726


930


255


21





















Income (loss) from continuing operations before taxes

1,703


1,026


513


213


(49)

Income tax provision (benefit)

579


358


183


76


(38)





















Income (loss) from continuing operations, net of tax

$

1,124

$

668

$

330

$

137

$

(11)

























Three Months Ended June 30, 2013

(Dollars in millions) (unaudited)

Total

Credit
Card

Consumer
Banking

Commercial
Banking

Other

Earnings:



















Net interest income (expense)

$

4,553

$

2,804

$

1,478

$

402

$

(131)

Non-interest income (expense)

1,085


832


189


93


(29)





















Total net revenue (loss)(4)

5,638


3,636


1,667


495


(160)

Provision (benefit) for credit losses

762


713


67


(14)


(4)

Non-interest expense

3,018


1,819


910


228


61





















Income (loss) from continuing operations before taxes

1,858


1,104


690


281


(217)

Income tax provision (benefit)

631


385


246


100


(100)





















Income (loss) from continuing operations, net of tax

$

1,227

$

719

$

444

$

181

$

(117)























9

















 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary—Credit Card Business(1)


































































2014 Q2 vs.

(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

2014
Q1

2013
Q2

Credit Card



























Earnings:



























Net interest income

$

2,461

$

2,525

$

2,576

$

2,757

$

2,804


(3)%


(12)%

Non-interest income

839


785


833


834


832


7


1





























Total net revenue

3,300


3,310


3,409


3,591


3,636


—


(9)

Provision for credit losses

549


558


751


617


713


(2)


(23)

Non-interest expense

1,719


1,726


1,868


1,904


1,819


—


(5)





























Income from continuing operations before taxes

1,032


1,026


790


1,070


1,104


1


(7)

Income tax provision

364


358


274


376


385


2


(5)





























Income from continuing operations, net of tax

$

668

$

668

$

516

$

694

$

719


—


(7)





























Selected performance metrics:



























Period-end loans held for investment

$

79,018

$

75,850

$

81,305

$

77,967

$

78,310


4


1

Average loans held for investment

76,997


77,502


78,267


77,729


77,946


(1)


(1)

Average yield on loans held for investment(5)

14.22

%

14.43

%

14.64

%

15.72

%

15.94

%

(21)

bps 

(172)

bps 

Total net revenue margin(6)

17.14


17.08


17.43


18.48


18.66


6


(152)

Net charge-off rate

3.56


4.02


3.98


3.78


4.36


(46)


(80)

30+ day performing delinquency rate

2.89


3.08


3.46


3.51


3.13


(19)


(24)

30+ day delinquency rate

2.97


3.16


3.54


3.60


3.22


(19)


(25)

Nonperforming loan rate

0.10


0.11


0.11


0.12


0.12


(1)


(2)

Card loan premium amortization and other intangible accretion(7)

$

31

$

37

$

39

$

45

$

57


(16)

%

(46)

%

PCCR intangible amortization

94


98


102


106


110


(4)


(15)

Purchase volume(8)

56,358


47,434


54,245


50,943


50,788


19


11

Domestic Card



























Earnings:



























Net interest income

$

2,193

$

2,255

$

2,303

$

2,492

$

2,536


(3)


(14)

Non-interest income

768


702


747


749


737


9


4





























Total net revenue

2,961


2,957


3,050


3,241


3,273


—


(10)

Provision for credit losses

504


486


679


529


647


4


(22)

Non-interest expense

1,513


1,545


1,664


1,713


1,635


(2)


(7)





























Income from continuing operations before taxes

944


926


707


999


991


2


(5)

Income tax provision

337


331


252


355


353


2


(5)





























Income from continuing operations, net of tax

$

607

$

595

$

455

$

644

$

638


2


(5)





























Selected performance metrics:



























Period-end loans held for investment

$

71,165

$

68,275

$

73,255

$

69,936

$

70,490


4


1

Average loans held for investment

69,376


69,810


70,368


69,947


69,966


(1)


(1)

Average yield on loans held for investment(5)

13.95

%

14.19

%

14.44

%

15.65

%

15.91

%

(24)

bps 

(196)

bps 

Total net revenue margin(6)

17.07


16.94


17.34


18.53


18.71


13


(164)

Net charge-off rate

3.52


4.01


3.89


3.67


4.28


(49)


(76)

30+ day performing delinquency rate

2.83


3.02


3.43


3.46


3.05


(19)


(22)

30+ day delinquency rate

2.83


3.02


3.43


3.46


3.05


(19)


(22)

Purchase volume(8)

$

52,653

$

44,139

$

50,377

$

47,420

$

47,273


19

%

11

%

International Card



























Earnings:



























Net interest income

$

268

$

270

$

273

$

265

$

268


(1)


—

Non-interest income

71


83


86


85


95


(14)


(25)





























Total net revenue

339


353


359


350


363


(4)


(7)

Provision for credit losses

45


72


72


88


66


(38)


(32)

Non-interest expense

206


181


204


191


184


14


12





























Income from continuing operations before taxes

88


100


83


71


113


(12)


(22)

Income tax provision

27


27


22


21


32


—


(16)





























Income from continuing operations, net of tax

$

61

$

73

$

61

$

50

$

81


(16)


(25)


































10






















 












































2014 Q2 vs.

(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

2014
Q1

2013
Q2

Selected performance metrics:



























Period-end loans held for investment

$

7,853

$

7,575

$

8,050

$

8,031

$

7,820


4

%

—

%

Average loans held for investment

7,621


7,692


7,899


7,782


7,980


(1)


(4)

Average yield on loans held for investment

16.74

%

16.64

%

16.48

%

16.35

%

16.19

%

10

bps 

55

bps 

Total net revenue margin

17.76


18.38


18.20


17.99


18.20


(62)


(44)

Net charge-off rate

3.93


4.17


4.74


4.71


5.08


(24)


(115)

30+ day performing delinquency rate

3.40


3.59


3.71


3.86


3.84


(19)


(44)

30+ day delinquency rate

4.20


4.41


4.56


4.78


4.79


(21)


(59)

Nonperforming loan rate

1.03


1.07


1.10


1.16


1.20


(4)


(17)

Purchase volume(8)

$

3,705

$

3,295

$

3,868

$

3,523

$

3,515


12

%

5

%
































11
























  

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary—Consumer Banking Business(1)



































































2014 Q2 vs.

(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

2014
Q1

2013
Q2

Consumer Banking



























Earnings:



























Net interest income

$

1,431

$

1,433

$

1,468

$

1,481

$

1,478


—

%

(3)

%

Non-interest income

170


150


195


184


189


13


(10)





























Total net revenue

1,601


1,583


1,663


1,665


1,667


1


(4)

Provision for credit losses

143


140


212


202


67


2


113

Non-interest expense

938


930


1,018


927


910


1


3





























Income from continuing operations before taxes

520


513


433


536


690


1


(25)

Income tax provision

186


183


154


191


246


2


(24)





























Income from continuing operations, net of tax

$

334

$

330

$

279

$

345

$

444


1


(25)





























Selected performance metrics:



























Period-end loans held for investment

$

71,062

$

70,727

$

70,762

$

71,285

$

72,218


—


(2)

Average loans held for investment

70,884


70,663


71,033


71,664


72,930


—


(3)

Average yield on loans held for investment

6.22

%

6.18

%

6.30

%

6.21

%

5.99

%

4

bps 

23

bps 

Auto loan originations

$

5,376

$

4,727

$

4,322

$

4,752

$

4,525


14

%

19

%

Period-end deposits

169,153


171,529


167,652


168,437


169,789


(1)


—

Average deposits

169,694


168,676


167,870


169,082


170,733


1


(1)

Average deposit interest rate

0.57

%

0.57

%

0.60

%

0.63

%

0.64

%

—

bps 

(7)

bps 

Core deposit intangible amortization

$

28

$

30

$

32

$

34

$

35


(7)

%

(20)

%

Net charge-off rate

0.69

%

0.84

%

1.09

%

0.95

%

0.60

%

(15)

bps 

9

bps 

30+ day performing delinquency rate

2.91


2.57


3.20


2.82


2.55


34


36

30+ day delinquency rate

3.49


3.14


3.89


3.46


3.15


35


34

Nonperforming loan rate

0.75


0.74


0.86


0.79


0.78


1


(3)

Nonperforming asset rate(2)

1.01


1.00


1.12


1.01


0.97


1


4

Period-end loans serviced for others

$

6,944

$

6,868

$

7,665

$

14,043

$

14,313


1

%

(51)

%

































12























  

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Financial & Statistical Summary—Commercial Banking Business(1)



































































2014 Q2 vs.

(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

2014
Q1

2013
Q2

Commercial Banking



























Earnings:



























Net interest income

$

436

$

421

$

447

$

424

$

402


4

%

8

%

Non-interest income

109


87


131


87


93


25


17





























Total net revenue(4)(9)

545


508


578


511


495


7


10

Provision (benefit) for credit losses

12


40


(6)


31


(14)


(70)


**

Non-interest expense

267


255


281


228


228


5


17





























Income from continuing operations before taxes

266


213


303


252


281


25


(5)

Income tax provision

95


76


108


90


100


25


(5)





























Income from continuing operations, net of tax

$

171

$

137

$

195

$

162

$

181


25


(6)





























Selected performance metrics:



























Period-end loans held for investment

$

48,321

$

46,230

$

45,011

$

42,399

$

40,805


5


18

Average loans held for investment

46,991


45,435


43,359


41,576


39,512


3


19

Average yield on loans held for investment(9)

3.50

%

3.47

%

3.92

%

3.87

%

3.84

%

3

bps 

(34)

bps 

Period-end deposits

$

31,440

$

31,485

$

30,567

$

30,592

$

30,869


—

%

2

%

Average deposits

31,238


31,627


31,033


30,685


30,746


(1)


2

Average deposit interest rate

0.24

%

0.25

%

0.25

%

0.27

%

0.26

%

(1)

bps 

(2)

bps 

Core deposit intangible amortization

$

5

$

6

$

6

$

6

$

8


(17)

%

(38)

%

Net charge-off rate

0.03

%

0.04

%

(0.05)

%

0.07

%

0.04

%

(1)

bps 

(1)

bps 

Nonperforming loan rate

0.38


0.33


0.33


0.47


0.60


5


(22)

Nonperforming asset rate(2)

0.41


0.36


0.37


0.56


0.62


5


(21)

Risk category:(10)



























Noncriticized

$

46,689

$

44,904

$

43,593

$

40,940

$

39,168


4

%

19

%

Criticized performing

1,234


952


1,007


968


1,087


30


14

Criticized nonperforming

181


150


149


201


244


21


(26)





























Total risk-rated loans

48,104


46,006


44,749


42,109


40,499


5


19

Acquired commercial loans

217


224


262


290


306


(3)


(29)





























Total commercial loans

$

48,321

$

46,230

$

45,011

$

42,399

$

40,805


5


18





























% of period-end commercial loans held for investment:



























Noncriticized

96.6

%

97.1

%

96.9

%

96.5

%

96.0

%

(50)

bps 

60

bps 

Criticized performing

2.6


2.1


2.2


2.3


2.7


50


(10)

Criticized nonperforming

0.4


0.3


0.3


0.5


0.6


10


(20)





























Total risk-rated loans

99.6


99.5


99.4


99.3


99.3


10


30

Acquired commercial loans

0.4


0.5


0.6


0.7


0.7


(10)


(30)





























Total commercial loans

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

—


—
































13
























  

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 12: Financial & Statistical Summary—Other and Total(1)




































































2014 Q2 vs.

(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

2014
Q1

2013
Q2

Other



























Earnings:



























Net interest expense

$

(13)

$

(29)

$

(68)

$

(102)

$

(131)


(55)

%

(90)

%

Non-interest income

35


(2)


(38)


(14)


(29)


**


**





























Total net revenue (loss)(4)

22


(31)


(106)


(116)


(160)


**


**

Provision (benefit) for credit losses

—


(3)


—


(1)


(4)


**


**

Non-interest expense

55


21


68


50


61


162


(10)





























Loss from continuing operations before taxes

(33)


(49)


(174)


(165)


(217)


(33)


(85)

Income tax benefit

(64)


(38)


(59)


(82)


(100)


68


(36)





























Income (loss) from continuing operations, net of tax

$

31

$

(11)

$

(115)

$

(83)

$

(117)


**


**





























Selected performance metrics:



























Period-end loans held for investment

$

127

$

134

$

121

$

163

$

179


(5)


(29)

Average loans held for investment

124


122


154


166


174


2


(29)

Period-end deposits

5,297


5,310


6,304


7,805


9,207


—


(42)

Average deposits

5,383


5,539


6,803


8,573


9,171


(3)


(41)

Total



























Earnings:



























Net interest income

$

4,315

$

4,350

$

4,423

$

4,560

$

4,553


(1)


(5)

Non-interest income

1,153


1,020


1,121


1,091


1,085


13


6





























Total net revenue

5,468


5,370


5,544


5,651


5,638


2


(3)

Provision for credit losses

704


735


957


849


762


(4)


(8)

Non-interest expense

2,979


2,932


3,235


3,109


3,018


2


(1)





























Income from continuing operations before taxes

1,785


1,703


1,352


1,693


1,858


5


(4)

Income tax provision

581


579


477


575


631


—


(8)





























Income from continuing operations, net of tax

$

1,204

$

1,124

$

875

$

1,118

$

1,227


7


(2)





























Selected performance metrics:



























Period-end loans held for investment

$

198,528

$

192,941

$

197,199

$

191,814

$

191,512


3


4

Average loans held for investment

194,996


193,722


192,813


191,135


190,562


1


2

Period-end deposits

205,890


208,324


204,523


206,834


209,865


(1)


(2)

Average deposits

206,315


205,842


205,706


208,340


210,650


—


(2)































14

























CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 13: Notes to Loan and Business Segments Disclosures (Tables 7 — 12)



**

Not meaningful.

(1)

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

(2)

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. Nonperforming assets related to acquired loans are excluded from the calculation for our home loans and auto businesses.

(3)

Includes the net realizable value of auto loans that have been charged down as a result of a bankruptcy filing and repossessed assets obtained in satisfaction of auto loans.

(4)

Commercial Banking revenue related to qualified housing credits is presented on a taxable-equivalent basis. As a result of the adoption of ASU 2014-01 "Accounting for Investments in Qualified Affordable Housing Projects" as of January 1, 2014, losses related to these investments are now recognized, along with the associated tax benefits, as a component of income taxes attributable to continuing operations instead of non-interest expense. As such, losses related to these investments decrease the overall tax benefits recognized as a component of income taxes attributable to continuing operations and taxable-equivalent revenue in the Commercial Banking segment. This decrease in revenue is offset by an increase in revenue in the Other segment. Prior period amounts have been recast to conform to this presentation.

(5)

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 Credit Card of 121 basis points and 110 basis points, respectively, in Q3 2013, 168 basis points and 152 basis points, respectively, in Q2 2013 and 107 basis points and 97 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.

(6)

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 Credit Card of 136 basis points and 123 basis points, respectively, in Q3 2013, 188 basis points and 169 basis points, respectively, in Q2 2013 and 123 basis points and 112 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.

(7)

Represents the net reduction in interest income attributable to non-SOP 03-3 card loan premium amortization and other intangible accretion associated with the 2012 U.S. card acquisition.

(8)

Includes credit card purchase transactions, net of returns for both loans classified as held for investment and held for sale. Excludes cash advance and balance transfer transactions.

(9)

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

(10)

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




15

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures


Beginning on January 1, 2014, we calculate our regulatory capital under Basel III Standardized Approach subject to transition provisions. Prior to January 1, 2014, we calculated regulatory capital under Basel I as shown below:




Basel III Standardized



Basel I

(Dollars in millions) (unaudited)

    2014    

Q2

    2014    

Q1



2013
Q4

2013
Q3

2013
Q2

Regulatory Capital Metrics(3)





















Common equity Tier 1 capital

$

28,774

$

28,434




n/a


n/a


n/a

Tier 1 common capital

n/a


n/a



$

27,375

$

27,383

$

26,458

Tier 1 capital

$

30,111

$

29,257




28,230


28,238


27,313

Total risk-based capital(1)

34,737


33,784




32,987


32,881


32,210

Risk-weighted assets(2)

226,221


219,047




224,556


215,809


220,150

Average assets for the leverage ratio

281,345


280,907




280,574


281,978


282,962

Capital Ratios(3)





















Common equity Tier 1 capital ratio(4)

12.7

%

13.0

%



n/a


n/a


n/a

Tier 1 common ratio

n/a


n/a




12.2

%

12.7

%

12.0

%

Tier 1 risk-based capital ratio(5)

13.3

%

13.4

%



12.6


13.1


12.4

Total risk-based capital ratio(6)

15.4


15.4




14.7


15.2


14.6

Tier 1 leverage ratio(7)

10.7


10.4




10.1


10.0


9.7

Tangible common equity ("TCE") ratio(8)

9.5


9.6




8.9


9.1


8.6

Reconciliation of Non-GAAP Measures

We report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include tangible common equity ("TCE") and tangible assets. The tables below provide the details of the calculation of our non-GAAP capital measures and regulatory capital. 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. 



















(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

2013
Q4

2013
Q3

2013
Q2

Tangible Common Equity (Average)



















Average stockholders' equity

$

43,767

$

42,859

$

42,355

$

41,185

$

41,490

Average goodwill and other intangible assets(9)

(15,615)


(15,727)


(15,847)


(15,829)


(15,974)

Noncumulative perpetual preferred stock(10)

(970)


(853)


(853)


(853)


(853)





















Average tangible common equity

$

27,182

$

26,279

$

25,655

$

24,503

$

24,663





















Tangible Common Equity (Period End)



















Stockholders' equity

$

43,815

$

42,801

$

41,632

$

41,645

$

40,947

Goodwill and other intangible assets(9)

(15,564)


(15,666)


(15,784)


(15,760)


(15,872)

Noncumulative perpetual preferred stock(10)

(1,338)


(853)


(853)


(853)


(853)





















Tangible common equity

$

26,913

$

26,282

$

24,995

$

25,032

$

24,222





















Tangible Assets (Average)



















Average total assets

$

294,744

$

294,275

$

294,040

$

294,919

$

297,748

Average goodwill and other intangible assets(9)

(15,615)


(15,727)


(15,847)


(15,829)


(15,974)





















Average tangible assets

$

279,129

$

278,548

$

278,193

$

279,090

$

281,774





















Tangible Assets (Period End)



















Total assets

$

298,317

$

290,500

$

296,933

$

289,866

$

296,524

Goodwill and other intangible assets(9)

(15,564)


(15,666)


(15,784)


(15,760)


(15,872)





















Tangible assets

$

282,753

$

274,834

$

281,149

$

274,106

$

280,652
























16
















  



Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach(3)











(Dollars in millions) (unaudited)

2014
Q2

2014
Q1

Common equity excluding AOCI

$

42,848

$

42,658

Adjustments:







AOCI(11)(12)

6


(182)

Goodwill(9)

(13,811)


(13,811)

Intangible assets(9)(12)

(289)


(314)

Other

20


83









Common equity Tier 1 capital

$

28,774

$

28,434









Risk-weighted assets

$

226,221

$

219,047

Common equity Tier 1 capital ratio(4)

12.7

%

13.0

%









(1) Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.
(2) Risk-weighted assets continue to be calculated based on Basel I in 2014. 
(3) Regulatory capital metrics as of the end of Q2 2014 are preliminary and therefore subject to change. 
(4) Common equity Tier 1 capital ratio is a regulatory measure calculated based on Common equity Tier 1 capital divided by risk-weighted assets. 
(5) Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets. 
(6) Total risk-based capital ratio is a regulatory capital measure calculated based on Total risk-based capital divided by risk-weighted assets. 
(7) Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments. 
(8) TCE ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. 
(9) Includes impact of related deferred taxes. 
(10) Includes related surplus. 
(11) Amounts presented are net of tax. 
(12) Amounts based on transition provisions for regulatory capital deductions and adjustments of 20% for 2014.

17

 

SOURCE Capital One Financial Corporation

Investors: Jeff Norris, 703.720.2455 or Danielle Dietz, 703.720.2455, or Media: Julie Rakes, 804.284.5800 or Tatiana Stead, 703.720.2352