Capital One Reports Third Quarter 2013 Net Income of $1.1 billion, or $1.86 per share

MCLEAN, Va., Oct. 17, 2013 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2013 of $1.1 billion, or $1.86 per diluted common share, flat to the second quarter of 2013 with net income of $1.1 billion, or $1.87 per dil uted common share, and down from the third quarter of 2012 with net income of $1.2 billion, or $2.01 per diluted common.

"Our businesses continue to deliver attractive, sustainable, and resilient returns and generate capital on a strong trajectory," said Richard D. Fairbank, Chairman and CEO.  "We remain focused on important levers that will sustain and improve our profitability and our ability to distribute capital."

All comparisons below are for the third quarter of 2013 compared with the second quarter of 2013 unless otherwise noted.  

Third Quarter 2013 Income Highlights:

  • Total net revenue increased less than 1 percent to $5.7 billion
  • Total non-interest expense increased 3 percent to $3.1 billion
  • Pre-provision earnings decreased 3 percent to $2.5 billion
  • Provision for credit losses increased 11 percent to $849 million
  • Non-interest expense includes $101 million for litigation reserves

Third Quarter 2013 Balance Sheet Highlights:

  • Tier 1 common ratio of 12.7 percent, up 60 basis points
  • Net interest margin of 6.89 percent, up 6 basis points
  • Period-end loans held for investment increased $302 million, or less than 1 percent, to $191.8 billion
    • Domestic Card period-end loans decreased $554 million, or less than 1 percent, to $69.9 billion
    • Commercial Banking period-end loans increased $1.6 billion, or 4 percent, to $42.4 billion
    • Consumer Banking:
      • Auto Finance period-end loans increased $1.4 billion, or 5 percent, to $30.8 billion
      • Home loans period-end loans decreased $2.3 billion, or 6 percent, to $36.8 billion, driven by run-off of acquired portfolios
  • Average loans held for investment in the quarter increased $573 million, or less than 1 percent, to $191.1 billion
    • Domestic Card average loans declined $19 million, or less than 1 percent, to $69.9 billion
    • Commercial Banking average loans increased $2.1 billion, or 5 percent, to $41.6 billion
    • Consumer Banking:
      • Auto Finance average loans increased $1.5 billion, or 5 percent, to $30.2 billion
      • Home loans decreased by $2.7 billion, or 7 percent, to $37.9 billion, driven by run-off of acquired portfolios
  • Period-end total deposits decreased $3.0 billion, or 1 percent, to $206.8 billion, while average deposits declined $2.3 billion, or 1 percent, to $208.3 billion
  • Deposit interest rates declined 2 basis points to 0.79 percent

Detailed segment information will be available in the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on October 17, 2013, at 5:00 PM, Eastern Daylight Time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the company's home page (www.capitalone.com). Choose "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 November 7, 2013 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, 2012. 

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N. A., had $206.9 billion in deposits and    $289.9 billion in total assets as of September 30, 2013. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has more than 900 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.

 

Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

Third Quarter 2013(1)(2)

Table of Contents



Capital One Financial Corporation Consolidated

Page

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 Under Basel I

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 September 30, 2013 once it is filed with the Securities and Exchange Commission.

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

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated(1)









2013

2013

2012

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

Q3

Q2

Q3

Earnings





Net interest income

$

4,560

$

4,553

$

4,646

Non-interest income(2)

1,091

1,085

1,136

Total net revenue(3)

5,651

5,638

5,782

Provision for credit losses

849

762

1,014

Non-interest expense:





Marketing

299

330

316

    Amortization of intangibles(4)

161

167

199

    Acquisition-related(5)

37

50

48

Operating expenses

2,650

2,512

2,482

Total non-interest expense

3,147

3,059

3,045

Income from continuing operations before income taxes

1,655

1,817

1,723

Income tax provision

525

581

535

Income from continuing operations, net of tax

1,130

1,236

1,188

Loss from discontinued operations, net of tax(2)

(13)

(119)

(10)

Net income

1,117

1,117

1,178

Dividends and undistributed earnings allocated to participating securities(6)

(5)

(4)

(5)

Preferred stock dividends

(13)

(13)

—

Net income available to common stockholders

$

1,099

$

1,100

$

1,173

Common Share Statistics





Basic EPS:(6)





Income from continuing operations, net of tax

$

1.91

$

2.09

$

2.05

Loss from discontinued operations, net of tax

(0.02)

(0.20)

(0.02)

Net income per common share

$

1.89

$

1.89

$

2.03

Diluted EPS:(6)





Income from continuing operations, net of tax

$

1.88

$

2.07

$

2.03

Loss from discontinued operations, net of tax

(0.02)

(0.20)

(0.02)

Net income per common share

$

1.86

$

1.87

$

2.01

Weighted average common shares outstanding (in millions) for:





Basic EPS

582.3

581.5

578.3

Diluted EPS

591.1

588.8

584.1

Common shares outstanding (period end, in millions)

582.0

584.9

581.3

Dividends per common share

$

0.30

$

0.30

$

0.05

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

43.19

41.57

38.70

Balance Sheet (Period End)





Loans held for investment(8)

$

191,814

$

191,512

$

203,132

Interest-earning assets

259,152

265,693

270,661

Total assets

289,888

296,542

301,989

Interest-bearing deposits

184,553

187,768

192,488

Total deposits

206,834

209,865

213,255

Borrowings

31,845

36,231

38,377

Common equity

40,897

40,188

38,819

Total stockholders' equity

41,750

41,041

39,672

Balance Sheet (Quarterly Average Balances)





Loans held for investment(8)

$

191,135

$

190,562

$

202,856

Interest-earning assets

264,796

266,544

266,803

Total assets

294,939

297,766

297,154

Interest-bearing deposits

186,752

189,311

193,700

Total deposits

208,340

210,650

213,323

Borrowings

36,355

36,915

36,451

Common equity

40,431

40,726

38,079

Total stockholders' equity

41,284

41,579

38,535

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated(1)










2013

2013

2012

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

Q3

Q2

Q3

Performance Metrics






Net interest income growth (quarter over quarter)

—

%

—

%

16

%

Non-interest income growth (quarter over quarter)

1

11

8

Total net revenue growth (quarter over quarter)

—

2

14

Total net revenue margin(9)

8.54

8.46

8.67

Net interest margin(10)

6.89

6.83

6.97

Return on average assets(11)

1.53

1.66

1.60

Return on average tangible assets(12)

1.62

1.75

1.69

Return on average common equity(13)

11.00

11.97

12.43

Return on average tangible common equity(14)

18.08

19.70

21.84

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

6.59

6.42

6.00

Efficiency ratio(16)

55.69

54.26

52.66

Effective income tax rate for continuing operations

31.7

32.0

31.1

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

39.6

39.6

37.6

Credit Quality Metrics(8)






Allowance for loan and lease losses

$

4,333

$

4,407

$

5,154

Allowance as a % of loans held for investment

2.26

%

2.30

%

2.54

%

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

2.66

2.74

3.11

Net charge-offs

$

917

$

969

$

887

Net charge-off rate(17)

1.92

%

2.03

%

1.75

%

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

2.29

2.46

2.18

30+ day performing delinquency rate

2.54

2.35

2.54

30+ day performing delinquency rate (excluding acquired loans)

3.01

2.83

3.15

30+ day delinquency rate(18)

**

2.71

2.92

30+ day delinquency rate (excluding acquired loans)(18)

**

3.26

3.62

Capital Ratios (19)






Tier 1 common ratio

12.7

%

12.1

%

10.7

%

Tier 1 risk-based capital ratio

13.1

12.4

12.7

Total risk-based capital ratio

15.3

14.7

15.0

Tangible common equity ("TCE") ratio

9.2

8.7

7.9

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income(1)



Three Months Ended

Nine Months Ended


September 30,

June 30,

September 30,

September 30,

September 30,

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

2013

2013

2012

2013

2012

Interest income:









Loans, including loans held for sale

$

4,579

$

4,596

$

4,903

$

13,824

$

12,817

Investment securities

396

391

335

1,161

968

Other

23

23

16

74

64

Total interest income

4,998

5,010

5,254

15,059

13,849

Interest expense:









Deposits

309

318

371

953

1,055

Securitized debt obligations

42

45

64

143

213

Senior and subordinated notes

76

82

85

240

260

Other borrowings

11

12

88

40

260

Total interest expense

438

457

608

1,376

1,788

Net interest income

4,560

4,553

4,646

13,683

12,061

Provision for credit losses

849

762

1,014

2,496

3,264

Net interest income after provision for credit losses

3,711

3,791

3,632

11,187

8,797

Non-interest income(2):









Service charges and other customer-related fees

530

534

557

1,614

1,511

Interchange fees, net

476

486

452

1,407

1,188

Net other-than-temporary impairment losses recognized in earnings

(11)

(4)

(13)

(40)

(40)

Bargain purchase gain(20)

—

—

—

—

594

Other

96

69

140

176

458

Total non-interest income

1,091

1,085

1,136

3,157

3,711

Non-interest expense:









Salaries and associate benefits

1,145

1,104

1,002

3,329

2,837

Occupancy and equipment

369

356

354

1,075

947

Marketing

299

330

316

946

971

Professional services

320

329

310

956

916

Communications and data processing

224

233

198

667

573

Amortization of intangibles(4)

161

167

199

505

418

Acquisition-related(5)

37

50

48

133

267

Other

592

490

618

1,623

1,762

Total non-interest expense

3,147

3,059

3,045

9,234

8,691

Income from continuing operations before income taxes

1,655

1,817

1,723

5,110

3,817

Income tax provision

525

581

535

1,600

931

Income from continuing operations, net of tax

1,130

1,236

1,188

3,510

2,886

Loss from discontinued operations, net of tax(2)

(13)

(119)

(10)

(210)

(212)

Net income

1,117

1,117

1,178

3,300

2,674

Dividends and undistributed earnings allocated to participating securities(6)

(5)

(4)

(5)

(14)

(12)

Preferred stock dividends

(13)

(13)

—

(39)

—

Net income available to common stockholders

$

1,099

$

1,100

$

1,173

$

3,247

$

2,662











Basic earnings per common share:(6)









Income from continuing operations

$

1.91

$

2.09

$

2.05

$

5.94

$

5.18

Loss from discontinued operations

(0.02)

(0.20)

(0.02)

(0.36)

(0.38)

Net income per basic common share

$

1.89

$

1.89

$

2.03

$

5.58

$

4.80











Diluted earnings per common share:(6)









Income from continuing operations

$

1.88

$

2.07

$

2.03

$

5.87

$

5.13

Loss from discontinued operations

(0.02)

(0.20)

(0.02)

(0.36)

(0.38)

Net income per diluted common share

$

1.86

$

1.87

$

2.01

$

5.51

$

4.75











Weighted average common shares outstanding (in millions) for:









Basic EPS

582.3

581.5

578.3

581.4

555.0

Diluted EPS

591.1

588.8

584.1

589.0

560.1

Dividends paid per common share

$

0.30

$

0.30

$

0.05

$

0.65

$

0.15

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets(1)



September 30,

December 31,

September 30,

(Dollars in millions)(unaudited)

2013

2012

2012

Assets:






Cash and cash equivalents:






Cash and due from banks

$

2,855

$

3,440

$

1,855

Interest-bearing deposits with banks

2,481

7,617

3,860

Federal funds sold and securities purchased under agreements to resell

382

1

254

Total cash and cash equivalents

5,718

11,058

5,969

Restricted cash for securitization investors

390

428

760

Securities available for sale, at fair value

43,132

63,979

61,464

Securities held to maturity, at amortized cost

18,276

9

—

Loans held for investment:






Unsecuritized loans held for investment

152,332

162,059

159,219

Restricted loans for securitization investors

39,482

43,830

43,913

Total loans held for investment

191,814

205,889

203,132

Less: Allowance for loan and lease losses

(4,333)

(5,156)

(5,154)

Net loans held for investment

187,481

200,733

197,978

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

180

201

187

Premises and equipment, net

3,792

3,587

3,519

Interest receivable

1,304

1,694

1,614

Goodwill

13,906

13,904

13,901

Other

15,709

17,325

16,597

Total assets

$

289,888

$

312,918

$

301,989








Liabilities:






Interest payable

$

276

$

450

$

368

Customer deposits:






Non-interest bearing deposits

22,281

22,467

20,767

Interest-bearing deposits

184,553

190,018

192,488

Total customer deposits

206,834

212,485

213,255

Securitized debt obligations

9,544

11,398

12,686

Other debt:






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

1,686

1,248

967

Senior and subordinated notes

12,395

12,686

11,756

Other borrowings

8,220

24,578

12,968

Total other debt

22,301

38,512

25,691

Other liabilities

9,183

9,574

10,317

Total liabilities

248,138

272,419

262,317








Stockholders' equity:






Preferred stock

—

—

853

Common stock

6

6

6

Additional paid-in capital, net

26,426

26,188

25,265

Retained earnings

19,731

16,853

16,054

Accumulated other comprehensive income ("AOCI")

(839)

739

781

Treasury stock, at cost

(3,574)

(3,287)

(3,287)

Total stockholders' equity

41,750

40,499

39,672

Total liabilities and stockholders' equity

$

289,888

$

312,918

$

301,989














 

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 a benefit for mortgage representation and warranty losses of $4 million in Q3 2013, and a provision for mortgage representation and warranty losses of $183 million in Q2 2013. We did not record a provision for mortgage representation and warranty losses in Q3 2012. The majority of the provision for representation and warranty losses is generally included net of tax in discontinued operations, with the remaining amount included pre-tax in non-interest income. The mortgage representation and warranty reserve was $1.2 billion as of September 30, 2013, $899 million as of December 31, 2012, and $919 million as of September 30, 2012.

(3)

Total net revenue was reduced by $154 million in Q3 2013, $192 million in Q2 2013, and $185 million in Q3 2012 for the estimated uncollectible amount of billed finance charges and fees.

(4)

Includes purchased credit card relationship ("PCCR") intangible amortization of $106 million in Q32013, $110 million in Q2 2013, and $131 million in Q3 2012, the substantial majority which is attributable to the 2012 U.S. card acquisition. See "Table 8: Financial & Statistical Summary Credit Card Business". Includes core deposit intangible amortization of $40 million in Q3 2013, $43 million in Q2 2013, and $49 million in Q3 2012.

(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 and EPS 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 Under Basel I" 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 ("CCB") acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard formerly known as "SOP 03-3"). See "Table 12: Notes to Loan and Business Segment Disclosures (Tables 7 - 11)" for information on the amount of acquired loans for each of the periods presented.

(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 Under Basel I" 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. Our calculation of return on average common equity may not be comparable to similarly titled measures reported by other companies.

(14)

Calculated as 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. 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 Under Basel I" 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, excluding goodwill impairment charges, 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)

The 30+ day delinquency rate as of the end of Q3 2013 will be provided in the Quarterly Report on Form 10-Q for the period ended September 30, 2013.

(19)

Capital ratios are calculated under Basel I. Ratios as of the end of Q3 2013 are preliminary and therefore subject to change. TCE ratio is a non-GAAP capital ratio. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures Under Basel I" for information on the calculation of each of these ratios.

(20)

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

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 6: Average Balances, Net Interest Income and Net Interest Margin(1)



2013 Q3

2013 Q2


2012 Q3



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)

(Dollars in millions)(unaudited)











Interest-earning assets:




















Loans, including loans held for sale

$

195,839

$

4,579

9.35

%

$

196,874

$

4,596

9.34

%

$

203,463

$

4,903

9.64

%

Investment securities(3)

63,317

396

2.50

63,907

391

2.45


57,928

335

2.31

Cash equivalents and other

5,640

23

1.63

5,763

23

1.60


5,412

16

1.18

Total interest-earning assets

$

264,796

$

4,998

7.55

%

$

266,544

$

5,010

7.52

%

$

266,803

$

5,254

7.88

%






















Interest-bearing liabilities:




















Interest-bearing deposits

$

186,752

$

309

0.66

%

$

189,311

$

318

0.67

%

$

193,700

$

371

0.77

%

Securitized debt obligations

10,243

42

1.64

10,942

45

1.65


13,331

64

1.92

Senior and subordinated notes

12,314

76

2.47

12,692

82

2.58


11,035

85

3.08

Other borrowings

13,798

11

0.32

13,281

12

0.36


12,085

88

2.91

Total interest-bearing liabilities

$

223,107

$

438

0.79

%

$

226,226

$

457

0.81

%

$

230,151

$

608

1.06

%

Net interest income/spread


$

4,560

6.76

%


$

4,553

6.71

%


$

4,646

6.82

%

Impact of non-interest bearing funding




0.13





0.12






0.15

Net interest margin




6.89

%




6.83

%




6.97

%































Nine Months Ended September 30,










2013


2012










Average Balance

Interest Income/Expense(2)

 Yield/Rate(2)

Average Balance

Interest Income/Expense(2)

 Yield/Rate(2)

(Dollars in millions)(unaudited)














Interest-earning assets:




















Loans, including loans held for sale







$

197,701

$

13,824

9.32

%

$

183,542

$

12,817

9.31

%

Investment securities(3)







63,725

1,161

2.43

55,158

968

2.34

Cash equivalents and other







6,164

74

1.60

8,762

64

0.97

Total interest-earning assets







$

267,590

$

15,059

7.50

%

$

247,462

$

13,849

7.46

%






















Interest-bearing liabilities:




















Interest-bearing deposits







$

188,877

$

953

0.67

%

$

180,372

$

1,055

0.78

%

Securitized debt obligations







10,975

143

1.74

14,816

213

1.92

Senior and subordinated notes







12,331

240

2.60

10,839

260

3.20

Other borrowings







14,955

40

0.36

10,301

260

3.37

Total interest-bearing liabilities







$

227,138

$

1,376

0.81

%

$

216,328

$

1,788

1.10

%

Net interest income/spread









$

13,683

6.69

%


$

12,061

6.36

%

Impact of non-interest bearing funding











0.13





0.14

Net interest margin











6.82

%




6.50

%

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

(2) 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.

(3) Prior to Q2 2013, average balances for investment securities were calculated based on fair value amounts. Effective Q2 2013, average balances are calculated based on the amortized cost of investment securities. The impact of this change on prior period yields is not material.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

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




2013

2013

2012

(Dollars in millions)(unaudited)

Q3

Q2

Q3

Period-end Loans Held For Investment






Credit card:






Domestic credit card

$

69,936

$

70,490

$

80,621

International credit card

8,031

7,820

8,412

Total credit card

77,967

78,310

89,033

Consumer banking:






Automobile

30,803

29,369

26,434

Home loan

36,817

39,163

46,275

Retail banking

3,665

3,686

4,029

Total consumer banking

71,285

72,218

76,738

Commercial banking:






Commercial and multifamily real estate

19,523

18,570

16,963

Commercial and industrial

21,848

21,170

18,965

Total commercial lending

41,371

39,740

35,928

Small-ticket commercial real estate

1,028

1,065

1,281

Total commercial banking

42,399

40,805

37,209

Other loans

163

179

152

Total

$

191,814

$

191,512

$

203,132

Average Loans Held For Investment






Credit card:






Domestic credit card

$

69,947

$

69,966

$

80,502

International credit card

7,782

7,980

8,154

Total credit card

77,729

77,946

88,656

Consumer banking:






Automobile

30,157

28,677

25,923

Home loan

37,852

40,532

47,262

Retail banking

3,655

3,721

4,086

Total consumer banking

71,664

72,930

77,271

Commercial banking:






Commercial and multifamily real estate

19,047

18,084

16,654

Commercial and industrial

21,491

20,332

18,817

Total commercial lending

40,538

38,416

35,471

Small-ticket commercial real estate

1,038

1,096

1,296

Total commercial banking

41,576

39,512

36,767

Other loans

166

174

162

Total

$

191,135

$

190,562

$

202,856

Net Charge-off Rates






Credit card:






Domestic credit card

3.67

%

4.28

%

3.04

%

International credit card

4.71

5.08

4.95

Total credit card

3.78

4.36

3.22

Consumer banking:






Automobile

2.01

1.28

1.79

Home loan

0.06

0.03

0.28

Retail banking

1.38

1.50

1.20

Total consumer banking

0.95

0.60

0.83

Commercial banking:






Commercial and multifamily real estate

(0.11)

0.04

(0.05)

Commercial and industrial

0.18

0.03

—

Total commercial lending

0.04

0.03

(0.03)

Small-ticket commercial real estate

1.26

0.45

0.79

Total commercial banking

0.07

0.04

—

Other loans

12.17

13.10

30.11

Total

1.92

%

2.03

%

1.75

%

30+ Day Performing Delinquency Rates






Credit card:






Domestic credit card

3.46

%

3.05

%

3.52

%

International credit card

3.86

3.84

4.92

Total credit card

3.51

%

3.13

%

3.65

%

Consumer banking:






Automobile

6.29

%

6.03

%

6.12

%

Home loan

0.14

0.12

0.15

Retail banking

0.68

0.68

0.73

Total consumer banking

2.82

%

2.55

%

2.23

%

Nonperforming Asset Rates(3)






Credit card:






International credit card

1.16

%

1.20

%

—

%

Total credit card

0.12

%

0.12

%

—

%

Consumer banking:






Automobile

0.58

%

0.50

%

0.52

%

Home loan

1.08

1.08

0.98

Retail banking

1.10

1.11

2.25

Total consumer banking

0.87

%

0.84

%

0.89

%

Commercial banking:






Commercial and multifamily real estate

0.40

%

0.56

%

1.04

%

Commercial and industrial

0.65

0.65

0.68

Total commercial lending

0.53

%

0.61

%

0.85

%

Small-ticket commercial real estate

1.49

1.11

1.49

Total commercial banking

0.56

%

0.62

%

0.87

%

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial & Statistical Summary—Credit Card Business(1)(2)




2013

2013

2012

(Dollars in millions) (unaudited)

Q3

Q2

Q3

Credit Card






Earnings:






Net interest income

$

2,757

$

2,804

$

2,991

Non-interest income

834

832

826

Total net revenue

3,591

3,636

3,817

Provision for credit losses

617

713

892

Non-interest expense

1,904

1,819

1,790

Income (loss) from continuing operations before taxes

1,070

1,104

1,135

Income tax provision (benefit)

376

385

394

Income (loss) from continuing operations, net of tax

$

694

$

719

$

741

Selected performance metrics:






Period-end loans held for investment

$

77,967

$

78,310

$

89,033

Average loans held for investment

77,729

77,946

88,656

Average yield on loans held for investment(4)

15.72

%

15.94

%

15.03

%

Total net revenue margin(5)

18.48

18.66

17.22

Net charge-off rate

3.78

4.36

3.22

30+ day performing delinquency rate

3.51

3.13

3.65

30+ day delinquency rate(6)

**

3.22

3.65

Nonperforming loan rate(3)

0.12

0.12

—

Card loan premium amortization and other intangible accretion(7)

$

45

$

57

$

82

PCCR intangible amortization

106

110

131

Purchase volume(8)

50,943

50,788

48,020

Domestic Card






Earnings:






Net interest income

$

2,492

$

2,536

$

2,715

Non-interest income

749

737

722

Total net revenue

3,241

3,273

3,437

Provision for credit losses

529

647

811

Non-interest expense

1,713

1,635

1,584

Income (loss) from continuing operations before taxes

999

991

1,042

Income tax provision (benefit)

355

353

369

Income (loss) from continuing operations, net of tax

$

644

$

638

$

673

Selected performance metrics:






Period-end loans held for investment

$

69,936

$

70,490

$

80,621

Average loans held for investment

69,947

69,966

80,502

Average yield on loans held for investment(4)

15.65

%

15.91

%

14.88

%

Total net revenue margin(5)

18.53

18.71

17.08

Net charge-off rate

3.67

4.28

3.04

30+ day performing delinquency rate

3.46

3.05

3.52

30+ day delinquency rate(6)

**

3.05

3.52

Purchase volume(8)

$

47,420

$

47,273

$

44,552

International Card






Earnings:






Net interest income

$

265

$

268

$

276

Non-interest income

85

95

104

Total net revenue

350

363

380

Provision for credit losses

88

66

81

Non-interest expense

191

184

206

Income (loss) from continuing operations before taxes

71

113

93

Income tax provision (benefit)

21

32

25

Income (loss) from continuing operations, net of tax

$

50

$

81

$

68

Selected performance metrics:






Period-end loans held for investment

$

8,031

$

7,820

$

8,412

Average loans held for investment

7,782

7,980

8,154

Average yield on loans held for investment

16.35

%

16.19

%

16.47

%

Total net revenue margin

17.99

18.20

18.64

Net charge-off rate

4.71

5.08

4.95

30+ day performing delinquency rate

3.86

3.84

4.92

30+ day delinquency rate(6)

**

4.79

4.92

Nonperforming loan rate(3)

1.16

1.20

—

Purchase volume(8)

$

3,523

$

3,515

$

3,468

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary—Consumer Banking Business(1)(2)




2013

2013

2012

(Dollars in millions) (unaudited)

Q3

Q2

Q3

Consumer Banking






Earnings:






Net interest income

$

1,481

$

1,478

$

1,501

Non-interest income

184

189

260

Total net revenue

1,665

1,667

1,761

Provision for credit losses

202

67

202

Non-interest expense

927

910

977

Income from continuing operations before taxes

536

690

582

Income tax provision

191

246

206

Income from continuing operations, net of tax

$

345

$

444

$

376









Selected performance metrics:






Period-end loans held for investment

$

71,285

$

72,218

$

76,738

Average loans held for investment

71,664

72,930

77,271

Average yield on loans held for investment

6.21

%

5.99

%

6.05

%

Auto loan originations

$

4,752

$

4,525

$

3,905

Period-end deposits

168,437

169,789

173,100

Average deposits

169,082

170,733

173,334

Deposit interest expense rate

0.63

%

0.64

%

0.71

%

Core deposit intangible amortization

$

34

$

35

$

41

Net charge-off rate

0.95

%

0.60

%

0.83

%

30+ day performing delinquency rate

2.82

2.55

2.23

30+ day delinquency rate(6)

**

3.15

2.91

Nonperforming loan rate

0.79

0.78

0.84

Nonperforming asset rate(3)

0.87

0.84

0.89

Period-end loans serviced for others

$

14,043

$

14,313

$

15,659

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary—Commercial Banking Business(1)(2)




2013

2013

2012

(Dollars in millions) (unaudited)

Q3

Q2

Q3

Commercial Banking






Earnings:






Net interest income

$

480

$

457

$

432

Non-interest income

87

93

87

Total net revenue(9)

567

550

519

Provision for credit losses

31

(14)

(87)

Non-interest expense

266

269

253

Income from continuing operations before taxes

270

295

353

Income tax provision

96

105

125

Income from continuing operations, net of tax

$

174

$

190

$

228









Selected performance metrics:






Period-end loans held for investment

$

42,399

$

40,805

$

37,209

Average loans held for investment

41,576

39,512

36,767

Average yield on loans held for investment

3.87

%

3.84

%

4.14

%

Period-end deposits

$

30,592

$

30,869

$

28,670

Average deposits

30,685

30,746

28,063

Deposit interest expense rate

0.27

%

0.26

%

0.31

%

Core deposit intangible amortization

$

6

$

8

$

8

Net charge-off rate

0.07

%

0.04

%

—

%

Nonperforming loan rate

0.47

0.60

0.82

Nonperforming asset rate(3)

0.56

0.62

0.87









Risk category:(10)






Noncriticized

$

40,940

$

39,168

$

35,112

Criticized performing

968

1,087

1,394

Criticized nonperforming

201

244

305

     Total risk-rated loans

42,109

40,499

36,811

Acquired commercial loans

290

306

398

     Total commercial loans

$

42,399

$

40,805

$

37,209









% of period-end commercial loans held for investment:






Noncriticized

96.5

%

96.0

%

94.4

%

Criticized performing

2.3

2.7

3.7

Criticized nonperforming

0.5

0.6

0.8

     Total risk-rated loans

99.3

99.3

98.9

Acquired commercial loans

0.7

0.7

1.1

     Total commercial loans

100.0

%

100.0

%

100.0

%

 

CAPITAL ONE FINANCIAL CORPORATION (COF)


Table 11: Financial & Statistical Summary—Other and Total(1)(2)








2013

2013

2012

(Dollars in millions) (unaudited)

Q3

Q2

Q3

Other






Earnings:






Net interest expense

$

(158)

$

(186)

$

(278)

Non-interest income

(14)

(29)

(37)

Total net revenue

(172)

(215)

(315)

Provision for credit losses

(1)

(4)

7

Non-interest expense

50

61

25

Income (loss) from continuing operations before taxes

(221)

(272)

(347)

Income tax benefit

(138)

(155)

(190)

Income (loss) from continuing operations, net of tax

$

(83)

$

(117)

$

(157)









Selected performance metrics:






Period-end loans held for investment

$

163

$

179

$

152

Average loans held for investment

166

174

162

Period-end deposits

7,805

9,207

11,485

Average deposits

8,573

9,171

11,926

Total






Earnings:






Net interest income

$

4,560

$

4,553

$

4,646

Non-interest income

1,091

1,085

1,136

Total net revenue

5,651

5,638

5,782

Provision for credit losses

849

762

1,014

Non-interest expense

3,147

3,059

3,045

Income from continuing operations before taxes

1,655

1,817

1,723

Income tax provision

525

581

535

Income from continuing operations, net of tax

$

1,130

$

1,236

$

1,188









Selected performance metrics:






Period-end loans held for investment

$

191,814

$

191,512

$

203,132

Average loans held for investment

191,135

190,562

202,856

Period-end deposits

206,834

209,865

213,255

Average deposits

208,340

210,650

213,323

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

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

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

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



2013

2013

2012

(Dollars in millions) (unaudited)

Q3

Q2

Q3

Acquired loans accounted for under SOP 03-3:





Period-end unpaid principal balance

$

31,377

$

33,620

$

40,749

Period-end loans held for investment

30,080

32,275

39,388

Average loans held for investment

30,713

33,144

40,158










(3) 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. The nonperforming loan ratios are calculated based on nonperforming loans for each category divided by period-end loans held for investment for each respective category.

(4) The transfer of the Best Buy Stores, L.P. ("Best Buy") portfolio to held for sale resulted in an increase in the average yield for Domestic Card and Total Card of 121 basis points and 110 basis points, respectively, in Q3 2013 and 168 basis points and 152 basis points, respectively, in Q2 2013. The sale of the Best Buy portfolio to Citi Bank, N.A was completed on September 6, 2013.

(5) The transfer of the Best Buy portfolio to held for sale resulted in an increase in the net revenue margin for Domestic Card and Total Card of 136 basis points and 123 basis points, respectively, in Q3 2013 and 188 basis points and 169 basis points, respectively, in Q2 2013. The sale of the Best Buy portfolio to Citi Bank, N.A was completed on September 6, 2013.

(6) The 30+ day delinquency rate as of the end of Q3 2013 will be provided in our Quarterly Report on Form 10-Q for the period ended September 30, 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. Excludes cash advance transactions.

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

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

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

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

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



2013

2013

2012

(Dollars in millions)(unaudited)

Q3

Q2

Q3

Average Equity to Non-GAAP Average Tangible Common Equity






Average total stockholders' equity

$

41,284

$

41,579

$

38,535

Adjustments:  Average goodwill and other intangible assets (1)

(15,829)

(15,974)

(16,408)

Noncumulative perpetual preferred stock(2)

(853)

(853)

(456)

Average tangible common equity(3)

$

24,602

$

24,752

$

21,671

Stockholders' Equity to Non-GAAP Tangible Common Equity






Total stockholders' equity

$

41,750

$

41,041

$

39,672

Adjustments:  Goodwill and other intangible assets (1)

(15,760)

(15,872)

(16,323)

Noncumulative perpetual preferred stock(2)

(853)

(853)

(853)

Tangible common equity(3)

$

25,137

$

24,316

$

22,496

Total Assets to Tangible Assets






Total assets

$

289,888

$

296,542

$

301,989

Adjustments:  Goodwill and other intangible assets(1)

(15,760)

(15,872)

(16,323)

Tangible assets

$

274,128

$

280,670

$

285,666

Total Average Assets to Average Tangible Assets






Average total assets

$

294,939

$

297,766

$

297,154

Adjustments:  Average goodwill and other intangible assets (1)

(15,829)

(15,974)

(16,408)

Average tangible assets

$

279,110

$

281,792

$

280,746

Non-GAAP TCE Ratio






Tangible common equity(3)

$

25,137

$

24,316

$

22,496

Tangible assets

274,128

280,670

285,666

TCE ratio(3)

9.2

%

8.7

%

7.9

%

Regulatory Capital Ratios(4)






Total stockholders' equity

$

41,750

$

41,041

$

39,672

Adjustments:  Net unrealized gains on AFS securities recorded in AOCI(5)

736

503

(752)

Net (gains) losses on cash flow hedges recorded in AOCI(5)

123

175

(6)

Disallowed goodwill and other intangible assets

(14,263)

(14,309)

(14,497)

Disallowed deferred tax assets

—

—

(221)

Noncumulative perpetual preferred stock(2)

(853)

(853)

(853)

Other

(5)

(5)

(12)

Tier 1 common capital

27,488

26,552

23,331

Adjustments:  Noncumulative perpetual preferred stock(2)

853

853

853

Tier 1 restricted core capital items(6)

2

2

3,636

Tier 1 capital

28,343

27,407

27,820

Adjustments:  Long-term debt qualifying as Tier 2 capital

1,909

2,104

2,119

Qualifying allowance for loan and lease losses

2,727

2,781

2,767

Other Tier 2 components

8

12

17

Tier 2 capital

4,644

4,897

4,903

Total risk-based capital(7)

$

32,987

$

32,304

$

32,723









Risk-weighted assets(8)

$

215,901

$

220,166

$

218,390

Tier 1 common ratio(9)

12.7

%

12.1

%

10.7

%

Tier 1 risk-based capital ratio(10)

13.1

12.4

12.7

Total risk-based capital ratio(11)

15.3

14.7

15.0












(1) Includes impact from related deferred taxes.

(2) Noncumulative perpetual preferred stock qualifies for Tier 1 capital; however, it is excluded from Tier 1 common capital.

(3) TCE ratio is a non-GAAP measure calculated based on tangible common equity divided by tangible assets.

(4) Regulatory capital ratios as of the end of Q3 2013 are preliminary and therefore subject to change.

(5) Amounts presented are net of tax.

(6) Consists primarily of trust preferred securities.

(7) Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.

(8) Calculated based on prescribed regulatory guidelines.

(9) Tier 1 common ratio is a regulatory measure calculated based on Tier 1 common capital divided by risk-weighted assets.

(10) Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.

(11) Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighted assets.

 

 

SOURCE Capital One Financial Corporation

Investor Relations: Jeff Norris, 703.720.2455 or Danielle Dietz, 703.720.2455; Media Relations: Julie Rakes, 804.284.5800 or Tatiana Stead, 703.720.2352