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Capital One Reports Third Quarter 2017 Net Income of $1.1 billion, or $2.14 per share

October 24, 2017 at 4:06 PM EDT
Excluding adjusting items, Third Quarter 2017 Net Income of $2.42 per share(1)

MCLEAN, Va., Oct. 24, 2017 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2017 of $1.1 billion, or $2.14 per diluted common share, compared with net income of $1.0 billion, or $1.94 per diluted common share in the second quarter of 2017, and with net income of $1.0 billion, or $1.90 per diluted common share in the third quarter of 2016. Excluding adjusting items, net income for the third quarter of 2017 was $2.42 per diluted common share(1).

Capital One

"We posted another quarter of resilient and responsible growth," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "We continue to carefully manage risk across our businesses. And, we're driving improving efficiency even as we invest to grow and to transform our company as banking goes digital."

Adjusting items in the third quarter of 2017 included:









Pre-Tax

Diluted EPS

(Dollars in millions, except per share data)

Impact

Impact

Deal-specific impacts of the Cabela's acquisition

$

(105)


$

(0.14)


Restructuring charges

(108)


(0.14)


Notable items in the third quarter of 2017 included:









Pre-Tax

Diluted EPS

(Dollars in millions, except per share data)

Impact

Impact

Impact of hurricanes Harvey and Irma

$

(114)


$

(0.15)


Gains on investment portfolio repositioning

69


0.09


All comparisons below are for the third quarter of 2017 compared with the second quarter of 2017 unless otherwise noted.

Third Quarter 2017 Income Statement Summary:

  • Total net revenue increased 4 percent to $7.0 billion.
  • Total non-interest expense increased 4 percent to $3.6 billion:
    • 7 percent increase in operating expenses.
    • 13 percent decrease in marketing.
  • Pre-provision earnings increased 4 percent to $3.4 billion(2).
  • Provision for credit losses increased 2 percent to $1.8 billion:
    • Net charge-offs of $1.6 billion.
    • $227 million reserve build.
  • Net interest margin of 7.08 percent, up 20 basis points.
  • Efficiency ratio of 51.07 percent:
    • Efficiency ratio excluding adjusting items was 49.28 percent(1).

Third Quarter 2017 Balance Sheet Summary:  

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 10.7 percent at September 30, 2017.
  • Period-end loans held for investment in the quarter increased $8.1 billion, or 3 percent, to $252.4 billion.
    • Domestic Card period-end loans increased $7.1 billion, or 8 percent, to $100.0 billion.
    • Consumer Banking period-end loans increased $591 million, or 1 percent, to $75.6 billion:
      • Auto period-end loans increased $1.5 billion, or 3 percent, to $53.3 billion.
      • Home loans period-end loans decreased $904 million, or 5 percent, to $18.8 billion, driven by run-off of acquired portfolios.
    • Commercial Banking period-end loans decreased $2 million, or less than 1 percent, to $67.7 billion.
  • Average loans held for investment in the quarter increased $3.6 billion, or 1 percent, to $245.8 billion.
    • Domestic Card average loans increased $2.0 billion, or 2 percent, to $93.7 billion.
    • Consumer Banking average loans increased $894 million, or 1 percent, to $75.4 billion:
      • Auto average loans increased $1.8 billion, or 4 percent, to $52.6 billion.
      • Home loans average loans decreased $901 million, or 4 percent, to $19.3 billion, driven by run-off of acquired portfolios.
    • Commercial Banking average loans increased $190 million, or less than 1 percent, to $67.9 billion.
  • Period-end total deposits decreased $701 million, or less than 1 percent, to $239.1 billion, while average deposits decreased $1.7 billion, or 1 percent, to $238.8 billion.
  • Interest-bearing deposits rate paid increased 6 basis points to 0.77 percent.

 

(1)

Amounts excluding adjusting items are non-GAAP measures that we believe help investors and users of our financial information understand the effect of adjusting items on our selected reported results and provide alternate measurements of our performance. See Table 15 in Exhibit 99.2 for a reconciliation of our selected reported results to these non-GAAP measures. 



(2)

Pre-provision earnings is calculated based on the sum of net interest income and non-interest income, less non-interest expense for the period.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on October 24, 2017 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 7, 2017 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, 2016.

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 $239.1 billion in deposits and $361.4 billion in total assets as of September 30, 2017. 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(1)(2)

Third Quarter 2017

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

17


Table 12:

Financial & Statistical Summary—Commercial Banking Business

18


Table 13:

Financial & Statistical Summary—Other and Total

19


Table 14:

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

20

Other



Table 15:

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

21





(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, 2017 once it is filed with the Securities and Exchange Commission.

(2)

This Financial Supplement includes non-GAAP measures. We believe these non-GAAP measures are useful to investors and users of our financial information as they provide an alternate measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non-GAAP measures should not be viewed as a substitute for reported results determined in accordance with generally accepted accounting principles in the U.S. ("GAAP"), nor are they necessarily comparable to non-GAAP measures that may be presented by other companies.

 

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated














2017 Q3 vs


Nine Months Ended September 30,

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


2017


2017


2017


2016


2016


2017


2016






2017 vs


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2017


2016


2016

Income Statement





















Net interest income


$

5,700



$

5,473



$

5,474



$

5,447



$

5,277



4

%


8

%


$

16,647



$

15,426



8

%

Non-interest income


1,285



1,231



1,061



1,119



1,184



4



9



3,577



3,509



2


Total net revenue(1)


6,985



6,704



6,535



6,566



6,461



4



8



20,224



18,935



7


Provision for credit losses


1,833



1,800



1,992



1,752



1,588



2



15



5,625



4,707



20


Non-interest expense:





















Marketing


379



435



396



575



393



(13)



(4)



1,210



1,236



(2)


Amortization of intangibles


61



61



62



101



89





(31)



184



285



(35)


Operating expenses


3,127



2,918



2,976



3,003



2,879



7



9



9,021



8,358



8


Total non-interest expense


3,567



3,414



3,434



3,679



3,361



4



6



10,415



9,879



5


Income from continuing operations before income taxes


1,585



1,490



1,109



1,135



1,512



6



5



4,184



4,349



(4)


Income tax provision


448



443



314



342



496



1



(10)



1,205



1,372



(12)


Income from continuing operations, net of tax


1,137



1,047



795



793



1,016



9



12



2,979



2,977




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


(30)



(11)



15



(2)



(11)



173



173



(26)



(17)



53


Net income


1,107



1,036



810



791



1,005



7



10



2,953



2,960




Dividends and undistributed earnings allocated to participating securities(3)


(8)



(8)



(5)



(6)



(6)





33



(21)



(18)



17


Preferred stock dividends


(52)



(80)



(53)



(75)



(37)



(35)



41



(185)



(139)



33


Net income available to common stockholders


$

1,047



$

948



$

752



$

710



$

962



10



9



$

2,747



$

2,803



(2)


Common Share Statistics





















Basic earnings per common share:(3)





















Net income from continuing operations


$

2.22



$

1.98



$

1.53



$

1.47



$

1.94



12

%


14

%


$

5.73



$

5.50



4

%

Income (loss) from discontinued operations


(0.06)



(0.02)



0.03





(0.02)



200



200



(0.05)



(0.03)



67


Net income per basic common share


$

2.16



$

1.96



$

1.56



$

1.47



$

1.92



10



13



$

5.68



$

5.47



4


Diluted earnings per common share:(3)





















Net income from continuing operations


$

2.20



$

1.96



$

1.51



$

1.45



$

1.92



12



15



$

5.68



$

5.45



4


Income (loss) from discontinued operations


(0.06)



(0.02)



0.03





(0.02)



200



200



(0.05)



(0.03)



67


Net income per diluted common share


$

2.14



$

1.94



$

1.54



$

1.45



$

1.90



10



13



$

5.63



$

5.42



4


Weighted-average common shares outstanding (in millions):





















Basic


484.9



484.0



482.3



483.5



501.1





(3)



483.7



512.0



(6)


Diluted


489.0



488.1



487.9



489.2



505.9





(3)



488.1



516.8



(6)


Common shares outstanding (period-end, in millions)


484.4



483.7



482.8



480.2



489.2





(1)



484.4



489.2



(1)


Dividends paid per common share


$

0.40



$

0.40



$

0.40



$

0.40



$

0.40







$

1.20



$

1.20




Tangible book value per common share (period-end)(4)


63.06



60.94



58.66



57.76



59.00



3



7



63.06



59.00



7















2017 Q3 vs


Nine Months Ended September 30,

(Dollars in millions)


2017


2017


2017


2016


2016


2017


2016






2017 vs


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2017


2016


2016

Balance Sheet (Period-End)





















Loans held for investment(5)


$

252,422



$

244,302



$

240,588



$

245,586



$

238,019



3

%


6

%


$

252,422



$

238,019



6

%

Interest-earning assets


329,002



319,286



316,712



321,807



313,431



3



5



329,002



313,431



5


Total assets


361,402



350,593



348,549



357,033



345,061



3



5



361,402



345,061



5


Interest-bearing deposits


212,956



213,810



214,818



211,266



200,416





6



212,956



200,416



6


Total deposits


239,062



239,763



241,182



236,768



225,981





6



239,062



225,981



6


Borrowings


59,458



49,954



48,439



60,460



59,820



19



(1)



59,458



59,820



(1)


Common equity


45,794



44,777



43,680



43,154



44,336



2



3



45,794



44,336



3


Total stockholders' equity


50,154



49,137



48,040



47,514



48,213



2



4



50,154



48,213



4


Balance Sheet (Average Balances)





















Loans held for investment(5)


$

245,822



$

242,241



$

241,505



$

240,027



$

235,843



1

%


4

%


$

243,205



$

231,004



5

%

Interest-earning assets


322,015



318,078



318,358



317,853



310,987



1



4



319,497



304,423



5


Total assets


355,191



349,891



351,641



350,225



343,153



2



4



352,216



336,539



5


Interest-bearing deposits


213,137



214,412



212,973



206,464



196,913



(1)



8



213,508



195,565



9


Total deposits


238,843



240,550



238,550



232,204



222,251



(1)



7



239,316



220,864



8


Borrowings


54,271



48,838



53,357



58,624



60,708



11



(11)



52,159



56,292



(7)


Common equity


45,816



44,645



43,833



43,921



45,314



3



1



44,772



45,578



(2)


Total stockholders' equity


50,176



49,005



48,193



47,972



49,033



2



2



49,132



49,015




 

 

               


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated














2017 Q3 vs


Nine Months Ended September 30,

(Dollars in millions, except as noted)


2017


2017


2017


2016


2016


2017


2016






2017 vs


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2017


2016


2016

Performance Metrics





















Net interest income growth (period over period)


4

%






3

%


4

%


**


**


8

%


11

%


**

Non-interest income growth (period over period)


4



16

%


(5)

%


(5)



2



**


**


2



5



**

Total net revenue growth (period over period)


4



3





2



3



**


**


7



10



**

Total net revenue margin(6)


8.68



8.43



8.21



8.26



8.31



25

bps


37

bps


8.44



8.29



15

bps

Net interest margin(7)


7.08



6.88



6.88



6.85



6.79



20



29



6.95



6.76



19


Return on average assets


1.28



1.20



0.90



0.91



1.18



8



10



1.13



1.18



(5)


Return on average tangible assets(8)


1.34



1.25



0.95



0.95



1.24



9



10



1.18



1.24



(6)


Return on average common equity(9)


9.40



8.59



6.73



6.48



8.59



81



81



8.26



8.25



1


Return on average tangible common equity(10)


14.11



13.09



10.37



10.00



13.06



102



105



12.56



12.54



2


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


5.80



5.64



5.69



6.13



5.70



16



10



5.71



5.70



1


Efficiency ratio(11)


51.07



50.92



52.55



56.03



52.02



15



(95)



51.50



52.17



(67)


Effective income tax rate for continuing operations


28.3



29.7



28.3



30.1



32.8



(140)



(450)



28.8



31.5



(270)


Employees (in thousands), period-end


50.4



49.9



48.4



47.3



46.5



1

%


8

%


50.4



46.5



8

%

Credit Quality Metrics





















Allowance for loan and lease losses


$

7,418



$

7,170



$

6,984



$

6,503



$

6,258



3

%


19

%


$

7,418



$

6,258



19

%

Allowance as a percentage of loans held for investment


2.94

%


2.93

%


2.90

%


2.65

%


2.63

%


1

bps


31

bps


2.94

%


2.63

%


31

bps

Net charge-offs


$

1,606



$

1,618



$

1,510



$

1,489



$

1,240



(1)

%


30

%


$

4,734



$

3,573



32

%

Net charge-off rate(12)


2.61

%


2.67

%


2.50

%


2.48

%


2.10

%


(6)

bps


51

bps


2.60

%


2.06

%


54

bps

30+ day performing delinquency rate(13)


2.93



2.69



2.61



2.93



2.71



24



22



2.93



2.71



22


30+ day delinquency rate


3.24



2.99



2.92



3.27



3.04



25



20



3.24



3.04



20


Capital Ratios(14)





















Common equity Tier 1 capital


10.7

%


10.7

%


10.4

%


10.1

%


10.6

%




10

bps


10.7

%


10.6

%


10

bps

Tier 1 capital


12.2



12.2



12.0



11.6



12.0





20



12.2



12.0



20


Total capital


14.8



14.9



14.7



14.3



14.7



(10)

bps


10



14.8



14.7



10


Tier 1 leverage


10.5



10.3



9.9



9.9



10.1



20



40



10.5



10.1



40


Tangible common equity ("TCE")(15)


8.8



8.8



8.5



8.1



8.8







8.8



8.8




 


 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income














2017 Q3 vs


Nine Months Ended September 30,



2017


2017


2017


2016


2016


2017


2016






2017 vs

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


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2017


2016


2016

Interest income:





















Loans, including loans held for sale


$

5,960



$

5,669



$

5,626



$

5,587



$

5,383



5

%


11

%


$

17,255



$

15,616



10

%

Investment securities


431



433



416



393



386





12



1,280



1,206



6


Other


29



26



28



29



25



12



16



83



60



38


Total interest income


6,420



6,128



6,070



6,009



5,794



5



11



18,618



16,882



10


Interest expense:





















Deposits


410



382



353



332



306



7



34



1,145



881



30


Securitized debt obligations


85



82



69



65



56



4



52



236



151



56


Senior and subordinated notes


194



179



149



138



121



8



60



522



338



54


Other borrowings


31



12



25



27



34



158



(9)



68



86



(21)


Total interest expense


720



655



596



562



517



10



39



1,971



1,456



35


Net interest income


5,700



5,473



5,474



5,447



5,277



4



8



16,647



15,426



8


Provision for credit losses


1,833



1,800



1,992



1,752



1,588



2



15



5,625



4,707



20


Net interest income after provision for credit losses


3,867



3,673



3,482



3,695



3,689



5



5



11,022



10,719



3


Non-interest income:(16)(17)





















Service charges and other customer-related fees


414



418



371



412



417



(1)



(1)



1,203



1,233



(2)


Interchange fees, net


662



676



570



624



603



(2)



10



1,908



1,828



4


Net securities gains (losses)


68



(4)





(4)



1



**


**


64



(7)



**

Other


141



141



120



87



163





(13)



402



455



(12)


Total non-interest income


1,285



1,231



1,061



1,119



1,184



4



9



3,577



3,509



2


Non-interest expense:(16)(17)





















Salaries and associate benefits


1,524



1,383



1,471



1,336



1,317



10



16



4,378



3,866



13


Occupancy and equipment


471



474



471



522



499



(1)



(6)



1,416



1,422




Marketing


379



435



396



575



393



(13)



(4)



1,210



1,236



(2)


Professional services


297



279



247



312



257



6



16



823



762



8


Communications and data processing


294



289



288



297



291



2



1



871



873




Amortization of intangibles


61



61



62



101



89





(31)



184



285



(35)


Other


541



493



499



536



515



10



5



1,533



1,435



7


Total non-interest expense


3,567



3,414



3,434



3,679



3,361



4



6



10,415



9,879



5


Income from continuing operations before income taxes


1,585



1,490



1,109



1,135



1,512



6



5



4,184



4,349



(4)


Income tax provision


448



443



314



342



496



1



(10)



1,205



1,372



(12)


Income from continuing operations, net of tax


1,137



1,047



795



793



1,016



9



12



2,979



2,977




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


(30)



(11)



15



(2)



(11)



173



173



(26)



(17)



53


Net income


1,107



1,036



810



791



1,005



7



10



2,953



2,960




Dividends and undistributed earnings allocated to participating securities(3)


(8)



(8)



(5)



(6)



(6)





33



(21)



(18)



17


Preferred stock dividends


(52)



(80)



(53)



(75)



(37)



(35)



41



(185)



(139)



33


Net income available to common stockholders


$

1,047



$

948



$

752



$

710



$

962



10



9



$

2,747



$

2,803



(2)



































2017 Q3 vs


Nine Months Ended September 30,



2017


2017


2017


2016


2016


2017


2016






2017 vs

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


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2017


2016


2016

Basic earnings per common share:(3)