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Capital One Reports Third Quarter 2016 Net Income of $1.0 billion, or $1.90 per share

October 25, 2016 at 4:06 PM EDT
Excluding adjusting items, Third Quarter 2016 Net Income of $1.1 billion or $2.03 per share

MCLEAN, Va., Oct. 25, 2016 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2016 of $1.0 billion, or $1.90 per diluted common share, compared to the second quarter of 2016 with net income of $942 million, or $1.69 per diluted common share, and the third quarter of 2015 with net income of $1.1 billion, or $1.98 per diluted common share. We recorded a build in the U.K. Payment Protection Insurance customer refund reserve of $63 million in third quarter of 2016. Excluding this adjusting item, net income for the third quarter of 2016 was $1.1 billion, or $2.03 per share.(1) 

"Capital One posted strong performance in the third quarter," said Richard D. Fairbank, Founder, Chair and Chief Executive Officer. "Our strong growth over the last two years puts us in a strong position to deliver attractive shareholder returns, driven by growth and sustained returns at the higher end of banks, as well as significant capital distribution, subject to regulatory approval."

All comparisons below are for the third quarter of 2016 compared with the second quarter of 2016 unless otherwise noted.

Third Quarter 2016 Income Statement Summary:

  • Total net revenue increased 3 percent to $6.5 billion.
  • Total non-interest expense increased 2 percent to $3.4 billion.
    • 5 percent decrease in marketing.
    • 3 percent increase in operating expenses.
  • Pre-provision earnings increased 5 percent to $3.1 billion.
  • Provision for credit losses flat at $1.6 billion.
    • Net charge-offs of $1.2 billion.
    • $377 million allowance build.
  • Net interest margin of 6.79 percent, up 6 basis points.
  • Efficiency ratio of 52.02 percent.
    • Efficiency ratio net of adjustments of 51.40 percent.(1)

 

(1)

These amounts are non-GAAP measures that we believe help investors and users of our financial information understand the effect of the adjustments on our reported results. See Table 5 in Exhibit 99.2 for a reconciliation of our reported results to these non-GAAP measures.

 

Third Quarter 2016 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 10.6 percent at September 30, 2016.
  • Period-end loans held for investment in the quarter increased $3.4 billion, or 1 percent, to $238.0 billion.
    • Domestic Card period-end loans increased $2.4 billion, or 3 percent, to $91.0 billion.
    • Consumer Banking period-end loans increased $870 million, or 1 percent, to $72.3 billion.
      • Auto period-end loans increased $1.8 billion, or 4 percent, to $46.3 billion.
      • Home loans period-end loans decreased $910 million, or 4 percent, to $22.4 billion, driven by planned run-off of acquired portfolios.
    • Commercial Banking period-end loans increased $255 million, or less than 1 percent, to $66.5 billion.
  • Average loans held for investment in the quarter increased $5.5 billion, or 2 percent, to $235.8 billion.
    • Domestic Card average loans increased $3.8 billion, or 4 percent, to $89.8 billion.
    • Consumer Banking average loans increased $739 million, or 1 percent, to $71.7 billion:
      • Auto average loans increased $1.8 billion, or 4 percent, to $45.4 billion.
      • Home loans average loans decreased $983 million, or 4 percent, to $22.9 billion, driven by planned run-off of acquired portfolios.
    • Commercial Banking average loans increased $1.1 billion, or 2 percent, to $66.0 billion.
  • Period-end total deposits increased $4.9 billion, or 2 percent, to $226.0 billion, while average deposits increased $1.1 billion, or less than 1 percent, to $222.3 billion.
  • Interest-bearing deposits rate paid increased 2 basis points to 0.62 percent.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on October 25, 2016 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 November 8, 2016 at 5:00 PM Eastern Time.

Forward-Looking Statements

Certain statements in this release may constitute 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, 2015.

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 $226.0 billion in deposits and $345.1 billion in total assets as of September 30, 2016. 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 branches located primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey 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 2016(1)

Table of Contents


Capital One Financial Corporation Consolidated Results

Page


Table 1:

Financial Summary—Consolidated

1


Table 2:

Selected Metrics—Consolidated

3


Table 3:

Consolidated Statements of Income

4


Table 4:

Consolidated Balance Sheets

6


Table 5:

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

8


Table 6:

Average Balances, Net Interest Income and Net Interest Margin

10


Table 7:

Loan Information and Performance Statistics

11


Table 8:

Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity

13

Business Segment Results



Table 9:

Financial Summary—Business Segment Results

14


Table 10:

Financial & Statistical Summary—Credit Card Business

15


Table 11:

Financial & Statistical Summary—Consumer Banking Business

18


Table 12:

Financial & Statistical Summary—Commercial Banking Business

19


Table 13:

Financial & Statistical Summary—Other and Total

20


Table 14:

Notes to Loan, Allowance and Business Segment Disclosures (Tables 7—13)

21

Other



Table 15:

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

22




(1)

The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation. Investors should refer to our Quarterly Report on Form 10-Q for the period ended September 30, 2016 once it is filed with the Securities and Exchange Commission.

 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated














2016 Q3 vs.


Nine Months Ended September 30,

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


2016


2016


2016


2015


2015


2016


2015






2016 vs.


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2016


2015


2015

Income Statement





















Net interest income


$

5,277



$

5,093



$

5,056



$

4,961



$

4,760



4

%


11

%


$

15,426



$

13,873



11

%

Non-interest income


1,184



1,161



1,164



1,233



1,140



2



4



3,509



3,346



5


Total net revenue(1)


6,461



6,254



6,220



6,194



5,900



3



10



18,935



17,219



10


Provision for credit losses


1,588



1,592



1,527



1,380



1,092





45



4,707



3,156



49


Non-interest expense:





















Marketing


393



415



428



564



418



(5)



(6)



1,236



1,180



5


Amortization of intangibles


89



95



101



103



106



(6)



(16)



285



327



(13)


Operating expenses


2,879



2,785



2,694



2,813



2,636



3



9



8,358



8,009



4


Total non-interest expense


3,361



3,295



3,223



3,480



3,160



2



6



9,879



9,516



4


Income from continuing operations before income taxes


1,512



1,367



1,470



1,334



1,648



11



(8)



4,349



4,547



(4)


Income tax provision


496



424



452



426



530



17



(6)



1,372



1,443



(5)


Income from continuing operations, net of tax


1,016



943



1,018



908



1,118



8



(9)



2,977



3,104



(4)


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


(11)



(1)



(5)



12



(4)



**


175



(17)



26



**

Net income


1,005



942



1,013



920



1,114



7



(10)



2,960



3,130



(5)


Dividends and undistributed earnings allocated to participating securities(3)


(6)



(6)



(6)



(4)



(6)







(18)



(16)



13


Preferred stock dividends


(37)



(65)



(37)



(68)



(29)



(43)



28



(139)



(90)



54


Net income available to common stockholders


$

962



$

871



$

970



$

848



$

1,079



10



(11)



$

2,803



$

3,024



(7)


Common Share Statistics





















Basic earnings per common share:(3)





















Net income from continuing operations


$

1.94



$

1.70



$

1.86



$

1.58



$

2.01



14

%


(3)

%


$

5.50



$

5.49




Income (loss) from discontinued operations


(0.02)





(0.01)



0.02



(0.01)



**


**


(0.03)



0.05



**

Net income per basic common share


$

1.92



$

1.70



$

1.85



$

1.60



$

2.00



13



(4)



$

5.47



$

5.54



(1)

%

Diluted earnings per common share:(3)





















Net income from continuing operations


$

1.92



$

1.69



$

1.85



$

1.56



$

1.99



14



(4)



$

5.45



$

5.43




Income (loss) from discontinued operations


(0.02)





(0.01)



0.02



(0.01)



**


**


(0.03)



0.05



**

Net income per diluted common share(4)


$

1.90



$

1.69



$

1.84



$

1.58



$

1.98



12



(4)



$

5.42



$

5.48



(1)


Weighted-average common shares outstanding (in millions):





















Basic


501.1



511.7



523.5



530.8



540.6



(2)



(7)



512.0



545.5



(6)


Diluted


505.9



516.5



528.0



536.3



546.3



(2)



(7)



516.8



551.9



(6)


Common shares outstanding (period-end, in millions)


489.2



505.9



514.5



527.3



534.9



(3)



(9)



489.2



534.9



(9)


Dividends paid per common share


$

0.40



$

0.40



$

0.40



$

0.40



$

0.40







$

1.20



$

1.10



9


Tangible book value per common share (period-end)(5)


59.00



57.84



55.94



53.65



54.66



2



8



59.00



54.66



8













































2016 Q3 vs


Nine Months Ended September 30,

(Dollars in millions) (unaudited)


2016


2016


2016


2015


2015


2016


2015






2016 vs


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2016


2015


2015

Balance Sheet (Period-End)





















Loans held for investment(6)


$

238,019



$

234,603



$

227,613



$

229,851



$

213,329



1

%


12

%


$

238,019



$

213,329



12

%

Interest-earning assets


313,431



307,163



298,348



302,007



283,073



2



11



313,431



283,073



11


Total assets


345,061



339,117



330,346



334,048



313,700



2



10



345,061



313,700



10


Interest-bearing deposits


200,416



195,635



196,597



191,874



187,848



2



7



200,416



187,848



7


Total deposits


225,981



221,059



221,779



217,721



212,903



2



6



225,981



212,903



6


Borrowings


59,820



59,181



50,497



59,115



42,778



1



40



59,820



42,778



40


Common equity


44,336



44,813



44,411



43,990



44,391



(1)





44,336



44,391




Total stockholders' equity


48,213



48,108



47,707



47,284



47,685





1



48,213



47,685



1


Balance Sheet (Average Balances)





















Loans held for investment(6)


$

235,843



$

230,379



$

226,736



$

220,052



$

211,227



2

%


12

%


$

231,004



$

207,608



11

%

Interest-earning assets


310,987



302,764



299,456



292,054



283,082



3



10



304,423



279,388



9


Total assets


343,153



334,479



331,919



323,354



313,822



3



9



336,539



310,146



9


Interest-bearing deposits


196,913



195,641



194,125



189,885



185,800



1



6



195,565



184,258



6


Total deposits


222,251



221,146



219,180



215,899



210,974





5



220,864



209,334



6


Borrowings


60,708



54,359



53,761



48,850



45,070



12



35



56,292



44,264



27


Common equity


45,314



45,640



45,782



45,418



45,407



(1)





45,578



44,956



1


Total stockholders' equity


49,033



48,934



49,078



48,712



48,456





1



49,015



47,376



3


 

 

               



CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated














2016 Q3 vs


Nine Months Ended September 30,

(Dollars in millions except as noted) (unaudited)


2016


2016


2016


2015


2015


2016


2015






2016 vs


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2016


2015


2015

Performance Metrics





















Net interest income growth (period over period)


4

%


1

%


2

%


4

%


5

%


**


**


11

%


5

%


**

Non-interest income growth (period over period)


2





(6)



8





**


**


5



1



**

Total net revenue growth (period over period)


3



1





5



4



**


**


10



5



**

Total net revenue margin(7)


8.31



8.26



8.31



8.48



8.34



5

bps


(3)

bps


8.29



8.22



7

bps

Net interest margin(8)


6.79



6.73



6.75



6.79



6.73



6



6



6.76



6.62



14


Return on average assets


1.18



1.13



1.23



1.12



1.43



5



(25)



1.18



1.33



(15)


Return on average tangible assets(9)


1.24



1.18



1.29



1.18



1.50



6



(26)



1.24



1.40



(16)


Return on average common equity(10)


8.59



7.64



8.52



7.36



9.54



95



(95)



8.25



8.89



(64)


Return on average tangible common equity(11)


13.06



11.61



12.94



11.11



14.33



145



(127)



12.54



13.46



(92)


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


5.70



5.72



5.69



6.33



5.98



(2)



(28)



5.70



6.11



(41)


Efficiency ratio(12)


52.02



52.69



51.82



56.18



53.56



(67)



(154)



52.17



55.26



(309)


Effective income tax rate for continuing operations


32.8



31.0



30.7



31.9



32.2



180



60



31.5



31.7



(20)


Employees (in thousands), period-end


46.5



46.1



45.8



45.4



46.9



1

%


(1)

%


46.5



46.9



(1)

%

Credit Quality Metrics





















Allowance for loan and lease losses


$

6,258



$

5,881



$

5,416



$

5,130



$

4,847



6

%


29

%


$

6,258



$

4,847



29

%

Allowance as a percentage of loans held for investment


2.63

%


2.51

%


2.38

%


2.23

%


2.27

%


12

bps


36

bps


2.63

%


2.27

%


36

bps

Net charge-offs


$

1,240



$

1,155



$

1,178



$

1,078



$

890



7

%


39

%


$

3,573



$

2,617



37

%

Net charge-off rate(13)


2.10

%


2.01

%


2.08

%


1.96

%


1.69

%


9

bps


41

bps


2.06

%


1.68

%


38

bps

30+ day performing delinquency rate


2.71



2.47



2.33



2.69



2.63



24



8



2.71



2.63



8


30+ day delinquency rate


3.04



2.79



2.64



3.00



2.95



25



9



3.04



2.95



9


Capital Ratios(14)





















Common equity Tier 1 capital


10.6

%


10.9

%


11.1

%


11.1

%


12.1

%


(30)

bps


(150)

bps


10.6

%


12.1

%


(150)

bps

Tier 1 capital


12.0



12.2



12.4



12.4



13.4



(20)



(140)



12.0



13.4



(140)


Total capital


14.7



14.4



14.6



14.6



15.1



30



(40)



14.7



15.1



(40)


Tier 1 leverage


10.1



10.2



10.2



10.6



11.1



(10)



(100)



10.1



11.1



(100)


Tangible common equity ("TCE")(15)


8.8



9.0



9.1



8.9



9.8



(20)



(100)



8.8



9.8



(100)


 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income




Three Months Ended


2016 Q3 vs


Nine Months Ended September 30,



2016


2016


2015


2016


2015






2016 vs

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


Q3


Q2


Q3


Q2


Q3


2016


2015


2015

Interest income:

















Loans, including loans held for sale


$

5,383



$

5,148



$

4,753



5

%


13

%


$

15,616



$

13,824



13

%

Investment securities


386



405



386



(5)





1,206



1,174



3


Other


25



18



25



39





60



77



(22)


Total interest income


5,794



5,571



5,164



4



12



16,882



15,075



12


Interest expense:

















Deposits


306



292



271



5



13



881



814



8


Securitized debt obligations


56



47



39



19



44



151



108



40


Senior and subordinated notes


121



111



82



9



48



338



241



40


Other borrowings


34



28



12



21



183



86



39



121


Total interest expense


517



478



404



8



28



1,456



1,202



21


Net interest income


5,277



5,093



4,760



4



11



15,426



13,873



11


Provision for credit losses


1,588



1,592



1,092





45



4,707



3,156



49


Net interest income after provision for credit losses


3,689



3,501



3,668



5



1



10,719



10,717




Non-interest income:

















Service charges and other customer-related fees


387



371



423



4



(9)



1,162



1,289



(10)


Interchange fees, net


603



616



555



(2)



9



1,815



1,618



12


Net other-than-temporary impairment recognized in earnings




(2)



(5)



**



**



(10)



(27)



(63)


Other


194



176



167



10



16



542



466



16


Total non-interest income


1,184



1,161



1,140



2



4



3,509



3,346



5


Non-interest expense:

















Salaries and associate benefits


1,317



1,279



1,189



3



11



3,866



3,760



3


Occupancy and equipment


499



465



444



7



12



1,422



1,318



8


Marketing


393



415



418



(5)



(6)



1,236



1,180



5


Professional services


296



304



313



(3)



(5)



878



943



(7)


Communications and data processing


252



262



226



(4)



12



757



636



19


Amortization of intangibles


89



95



106



(6)



(16)



285



327



(13)


Other


515



475



464



8



11



1,435



1,352



6


Total non-interest expense


3,361



3,295



3,160



2



6



9,879



9,516



4


Income from continuing operations before income taxes


1,512



1,367



1,648



11



(8)



4,349



4,547



(4)


Income tax provision


496



424



530



17



(6)



1,372



1,443



(5)


Income from continuing operations, net of tax


1,016



943



1,118



8



(9)



2,977



3,104



(4)


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


(11)



(1)



(4)



**



175



(17)



26



**


Net income


1,005



942



1,114



7



(10)



2,960



3,130



(5)


Dividends and undistributed earnings allocated to participating securities(3)


(6)



(6)



(6)







(18)



(16)



13


Preferred stock dividends


(37)



(65)



(29)



(43)



28



(139)



(90)



54


Net income available to common stockholders


$

962



$

871



$

1,079



10



(11)



$

2,803



$

3,024



(7)





















Three Months Ended


2016 Q3 vs


Nine Months Ended September 30,



2016


2016


2015


2016


2015






2016 vs

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


Q3


Q2


Q3


Q2


Q3


2016


2015


2015

Basic earnings per common share:(3)

















Net income from continuing operations


$

1.94



$

1.70



$

2.01



14

%


(3)

%


$

5.50



$

5.49




Income (loss) from discontinued operations


(0.02)





(0.01)



**



**



(0.03)



0.05



**


Net income per basic common share


$

1.92



$

1.70



$

2.00



13



(4)



$

5.47



$

5.54



(1)

%

Diluted earnings per common share:(3)

















Net income from continuing operations


$

1.92



$

1.69



$

1.99



14



(4)



$

5.45



$

5.43




Income (loss) from discontinued operations


(0.02)





(0.01)



**



**



(0.03)



0.05



**


Net income per diluted common share(4)


$

1.90



$

1.69



$

1.98



12



(4)



$

5.42



$

5.48



(1)


Weighted-average common shares outstanding (in millions):

















Basic common shares


501.1



511.7



540.6



(2)



(7)



512.0



545.5



(6)


Diluted common shares


505.9



516.5



546.3



(2)



(7)



516.8



551.9



(6)


Dividends paid per common share


$

0.40



$

0.40



$

0.40







$

1.20



$

1.10



9


 

 



CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets