Capital One Reports Second Quarter 2013 Net Income of $1.1 billion, or $1.87 per share

MCLEAN, Va., July 18, 2013 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the second quarter of 2013 of $1.1 billion, or $1.87 per diluted common share, compared with net income of $1.1 billion, or $1.79 per diluted common share, for the first quarter of 2013 and net income of $93 million, or $0.16 per diluted common share, for the second quarter of 2012.

"We delivered solid performance across each of our businesses during the quarter, and we continue to generate significant capital," said Richard D. Fairbank, Chairman and CEO. "We will continue to tightly manage costs and credit quality, drive resilient growth in businesses we are emphasizing, and focus on returning capital to our investors to deliver sustained shareholder value."

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

Second Quarter 2013 Income Highlights:

  • Total net revenue increased 2 percent to $5.6 billion
  • Total non-interest expense increased 1 percent to $3.1 billion 
  • Pre-provision earnings increased 2 percent to $2.6 billion 
  • Provision for credit losses decreased 14 percent to $762 million 
  • $183 million charge for mortgage representation & warranty expenses, primarily in discontinued operations

Second Quarter 2013 Balance Sheet Highlights: 

  • Tier 1 common ratio of 12.1 percent, up 30 basis points 
  • Net interest margin of 6.83 percent, up 12 basis points 
  • Period-end loans held for investment increased $179 million, or less than 1 percent, to $191.5 billion
    • Domestic Card period-end loans increased $129 million, or less than 1 percent, to $70.5 billion 
    • Commercial Banking period-end loans increased $1.7 billion, or 4 percent, to $40.8 billion 
    • Auto Finance period-end loans increased $1.4 billion, or 5 percent, to $29.4 billion 
    • Home loans period-end loans decreased $2.8 billion, or 7 percent, to $39.2 billion, driven by run-off of acquired portfolios
  • Average loans held for investment in the quarter decreased $5.4 billion, or 3 percent, to $190.6 billion
    • Domestic Card average loans declined $4.7 billion, or 6 percent, primarily driven by the movement of a portfolio to held for sale
    • Commercial Banking average loans increased $936 million, or 2 percent, to $39.5 billion
    • Auto Finance average loans increased $1.2 billion, or 4 percent, to $28.7 billion 
    • Home loans decreased by $2.5 billion, or 6 percent, to $40.5 billion, driven by run-off of acquired portfolios 
  • Period-end total deposits decreased $2.5 billion, or 1 percent, to $209.9 billion, while average deposits declined $905 million, or less than 1 percent, to $210.7 billion.  
    • Deposit interest rates declined 1 basis point to 0.67 percent.

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

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on July 18, 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 to GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company's website through August 8, 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 $209.9 billion in deposits and $296.5 billion in total assets as of June 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

Second Quarter 2013(1)(2)(3)

Table of Contents










Page

Capital One Financial Corporation Consolidated



Table 1:


Financial Summary―Consolidated

1


Table 2:


Selected Metrics―Consolidated

2


Table 3:


Consolidated Statements of Income

3


Table 4:


Consolidated Balance Sheets

4


Table 5:


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

5


Table 6:


Average Balances, Net Interest Income and Net Interest Margin

6


Table 7:


Loan Information and Performance Statistics

7

Business Segment Detail



Table 8:


Financial & Statistical Summary―Credit Card Business

8


Table 9:


Financial & Statistical Summary―Consumer Banking Business

9


Table 10:


Financial & Statistical Summary―Commercial Banking Business

10


Table 11:


Financial & Statistical Summary―Other and Total

11


Table 12:


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

12

Other





Table 13:


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







(3)

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"). Because SOP 03-3 takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with these loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans.




 

CAPITAL ONE FINANCIAL CORPORATION (COF)






Table 1: Financial Summary—Consolidated (1)(2)















2013


2013


2012

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


Q2


Q1


Q2

Earnings







Net interest income


$ 4,553


$ 4,570


$ 4,001

Non-interest income(3)


1,085


981


1,054

Total net revenue(4)


5,638


5,551


5,055

Provision for credit losses


762


885


1,677

Non-interest expense:







    Marketing


330


317


334

    Amortization of intangibles(5)


167


177


157

    Acquisition-related(6)


50


46


133

    Operating expenses


2,512


2,488


2,518

Total non-interest expense


3,059


3,028


3,142

Income from continuing operations before income taxes


1,817


1,638


236

Income tax provision


581


494


43

Income from continuing operations, net of tax


1,236


1,144


193

Loss from discontinued operations, net of tax(3)


(119)


(78)


(100)

Net income


1,117


1,066


93

Dividends and undistributed earnings allocated to participating securities(7)


(4)


(5)


(1)

Preferred stock dividends


(13)


(13)


Net income available to common stockholders


$ 1,100


$ 1,048


$ 92








Common Share Statistics







Basic EPS:(7)







    Income from continuing operations, net of tax


$ 2.09


$ 1.94


$ 0.33

    Loss from discontinued operations, net of tax


(0.20)


(0.13)


(0.17)

    Net income per common share


$ 1.89


$ 1.81


$ 0.16

Diluted EPS:(7)







    Income from continuing operations, net of tax


$ 2.07


$ 1.92


$ 0.33

    Loss from discontinued operations, net of tax


(0.20)


(0.13)


(0.17)

    Net income per common share


$ 1.87


$ 1.79


$ 0.16

Weighted average common shares outstanding (in millions) for:







    Basic EPS


581.5


580.5


577.7

    Diluted EPS


588.8


586.3


582.8

Common shares outstanding (period end, in millions)


584.9


584.0


580.7

Dividends per common share


$ 0.30


$ 0.05


$ 0.05

Tangible book value per common share (period end)(8)


41.57


41.87


35.67








Balance Sheet (Period End)







Loans held for investment(9)


$191,512


$191,333


$202,749

Interest-earning assets


265,693


268,479


264,331

Total assets


296,542


300,163


296,572

Interest-bearing deposits


187,768


191,093


193,859

Total deposits


209,865


212,410


213,931

Borrowings


36,231


37,492


35,874

Common equity


40,188


40,443


37,192

Total stockholders' equity


41,041


41,296


37,192








Balance Sheet (Quarterly Average Balances)







Loans held for investment(9)


$190,562


$195,997


$192,632

Interest-earning assets


266,544


272,345


265,019

Total assets


297,766


303,223


295,306

Interest-bearing deposits


189,311


190,612


195,597

Total deposits


210,650


211,555


214,914

Borrowings


36,915


41,574


35,418

Common equity


40,726


40,107


37,533

Total stockholders' equity


41,579


40,960


37,533

 

CAPITAL ONE FINANCIAL CORPORATION (COF)






Table 2: Selected Metrics—Consolidated (1)(2)

















2013


2013


2012


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


Q2


Q1


Q2










Performance Metrics








Net interest income growth (quarter over quarter)


 

%

1

%

17

%

Non-interest income growth(quarter over quarter)


11


(10)


(31)


Total net revenue growth(quarter over quarter)


2


(1)


2


Total net revenue margin(10)


8.46


8.15


7.63


Net interest margin(11)


6.83


6.71


6.04


Return on average assets(12)


1.66


1.51


0.26


Return on average common equity(13)


11.97


11.23


2.05


Return on average tangible common equity(14)


19.70


18.79


3.52


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


6.42


6.18


6.52


Efficiency ratio(16)


54.26


54.55


62.16


Effective income tax rate


32.0


30.2


18.2


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


39.6


39.3


37.4










Credit Quality Metrics(9)(17)








Allowance for loan and lease losses


$ 4,407


$ 4,606


$ 4,998


Allowance as a % of loans held for investment


2.30

%

2.41

%

2.47

%

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

2.74


2.91


3.08


Net charge-offs


$ 969


$ 1,079


$ 738


Net charge-off rate(18)


2.03

%

2.20

%

1.53

%

Net charge-off rate (excluding acquired loans)(18)


2.46


2.69


1.96


30+ day performing delinquency rate


2.35


2.37


2.06


30+ day performing delinquency rate (excluding acquired loans)


2.83


2.90


2.59


30+ day delinquency rate(19)


**


2.74


2.43


30+ day delinquency rate (excluding acquired loans)(19)


**


3.35


3.06










Capital Ratios (20)








Tier 1 common ratio


12.1

%

11.8

%

9.9

%

Tier 1 risk-based capital ratio


12.4


12.2


11.6


Total risk-based capital ratio


14.7


14.4


14.0


Tangible common equity ("TCE") ratio


8.7


8.6


7.4



 

CAPITAL ONE FINANCIAL CORPORATION (COF)









Table 3: Consolidated Statements of Income(1)(2)














































Three Months Ended












June 30,


March 31,


June 30,




Six Months Ended June 30,

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


2013


2013


2012




2013


2012

















Interest income:













Loans, including loans held for sale


$ 4,596


$ 4,649


$ 4,257




$ 9,245


$ 7,914

Investment securities


391


374


335




765


633

Other



23


28


24




51


48

    Total interest income


5,010


5,051


4,616




10,061


8,595

















Interest expense:













Deposits



318


326


373




644


684

Securitized debt obligations


45


56


69




101


149

Senior and subordinated notes


82


82


87




164


175

Other borrowings


12


17


86




29


172

    Total interest expense


457


481


615




938


1,180

















Net interest income


4,553


4,570


4,001




9,123


7,415

Provision for credit losses


762


885


1,677




1,647


2,250

          Net interest income after provision for credit losses


3,791


3,685


2,324




7,476


5,165

















Non-interest income:













Service charges and other customer-related fees


534


550


539




1,084


954

Interchange fees, net


486


445


408




931


736

Net other-than-temporary impairment losses recognized in earnings


(4)


(25)


(13)




(29)


(27)

Bargain purchase gain(21)








594

Other



69


11


120




80


318

    Total non-interest income


1,085


981


1,054




2,066


2,575

















Non-interest expense:













Salaries and associate benefits


1,104


1,080


971




2,184


1,835

Occupancy and equipment


356


350


323




706


593

Marketing



330


317


334




647


655

Professional services


329


307


313




636


606

Communications and data processing


233


210


203




443


375

Amortization of intangibles(5)


167


177


157




344


219

Acquisition-related(6)


50


46


133




96


219

Other



490


541


708




1,031


1,144

    Total non-interest expense


3,059


3,028


3,142




6,087


5,646

Income from continuing operations before income taxes


1,817


1,638


236




3,455


2,094

Income tax provision


581


494


43




1,075


396

Income from continuing operations, net of tax


1,236


1,144


193




2,380


1,698

Loss from discontinued operations, net of tax(3)


(119)


(78)


(100)




(197)


(202)

    Net income


1,117


1,066


93




2,183


1,496

Dividends and undistributed earnings allocated to participating securities(7)


(4)


(5)


(1)




(9)


(8)

Preferred stock dividends


(13)


(13)





(26)


    Net income available to common stockholders


$ 1,100


$ 1,048


$ 92




$ 2,148


$ 1,488

















Basic earnings per common share:(7)













    Income from continuing operations


$ 2.09


$ 1.94


$ 0.33




$ 4.04


$ 3.11

    Loss from discontinued operations


(0.20)


(0.13)


(0.17)




(0.34)


(0.37)

    Net income per basic common share


$ 1.89


$ 1.81


$ 0.16




$ 3.70


$ 2.74

















Diluted earnings per common share:(7)













    Income from continuing operations


$ 2.07


$ 1.92


$ 0.33




$ 3.99


$ 3.09

    Loss from discontinued operations


(0.20)


(0.13)


(0.17)




(0.34)


(0.37)

    Net income per diluted common share


$ 1.87


$ 1.79


$ 0.16




$ 3.65


$ 2.72

















Weighted average common shares outstanding (in millions) for:













    Basic EPS


581.5


580.5


577.7




581.0


543.3

    Diluted EPS


588.8


586.3


582.8




587.9


548.0

















Dividends paid per common share


$ 0.30


$ 0.05


$ 0.05




$ 0.35


$ 0.10

 

CAPITAL ONE FINANCIAL CORPORATION (COF)







Table 4: Consolidated Balance Sheets


























June 30,


December 31,


June 30,

(Dollars in millions)(unaudited)


2013


2012


2012









Assets:







Cash and cash equivalents:








Cash and due from banks


$ 2,176


$ 3,440


$ 2,297


Interest-bearing deposits with banks


2,279


7,617


3,352


Federal funds sold and securities purchased under agreements to resell


198


1


330

Total cash and cash equivalents


4,653


11,058


5,979

Restricted cash for securitization investors


377


428


370

Securities available for sale, at fair value


62,602


63,979


55,289

Loans held for investment:








Unsecuritized loans held for investment


151,231


162,059


158,680


Restricted loans for securitization investors


40,281


43,830


44,069

Total loans held for investment


191,512


205,889


202,749


Less: Allowance for loan and lease losses


(4,407)


(5,156)


(4,998)

Net loans held for investment


187,105


200,733


197,751

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


6,248


201


1,047

Premises and equipment, net


3,766


3,587


3,556

Interest receivable


1,454


1,694


1,623

Goodwill


13,900


13,904


13,864

Other


16,437


17,334


17,093

Total assets


$ 296,542


$ 312,918


$ 296,572

















Liabilities:







Interest payable


$ 324


$ 450


$ 462

Customer deposits:








Non-interest bearing deposits


22,097


22,467


20,072


Interest-bearing deposits


187,768


190,018


193,859

Total customer deposits


209,865


212,485


213,931

Securitized debt obligations


10,831


11,398


13,608

Other debt:








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


1,766


1,248


1,101


Senior and subordinated notes


12,406


12,686


12,079


Other borrowings


11,228


24,578


9,086

Total other debt


25,400


38,512


22,266

Other liabilities


9,081


9,574


9,113

Total liabilities


255,501


272,419


259,380









Stockholders' equity:







Preferred stock




Common stock


6


6


6

Additional paid-in capital, net


26,339


26,188


25,217

Retained earnings


18,804


16,853


14,905

Accumulated other comprehensive income ("AOCI")


(792)


739


350

Treasury stock, at cost


(3,316)


(3,287)


(3,286)

Total stockholders' equity


41,041


40,499


37,192

Total liabilities and stockholders' equity


$ 296,542


$ 312,918


$ 296,572


 

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)

 

Results for Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the 2012 U.S. card acquisition, which resulted in the addition of $28.2 billion in credit card receivables at closing.
















(3)

 

 

 

We recorded a provision for mortgage representation and warranty losses of $183 million in Q2 2013, $97 million in Q1 2013 and $180 million in Q2 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 increased to $1.2 billion as of June 30, 2013, from $994 million as of March 31, 2013 and $899 million as of December 31, 2012.
















(4)

 

 

 

Total net revenue was reduced by $192 million in Q2 2013, $265 million in Q1 2013 and $311 million in Q2 2012 for the estimated uncollectible amount of billed finance charges and fees. 
















(5)

 

 

 

Includes purchased credit card relationship ("PCCR") intangible amortization of $110 million in Q2 2013, $116 million in Q1 2013, and $88 million in Q2 2012, the substantial majority of which is attributable to the 2012 U.S. card acquisition. Includes core deposit intangible amortization of $43 million in Q2 2013, $44 million in Q1 2013, and $51 million in Q2 2012.
















(6)

 

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
















(7)

 

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.
















(8)

 

 

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.
















(9)

 

 

Loans held for investment includes acquired loans accounted for based on cash flows expected to be collected. 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.
















(10)

 

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
















(11)

 

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
















(12)

 

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
















(13)

Prior to Q2 2013, we disclosed return on average total stockholders' equity, which we calculated based on annualized income from continuing operations, net of tax, for the period divided by average stockholders' equity for the period. Effective Q2 2013, we began disclosing return on average common equity ("ROCE"), which is 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. We believe ROCE is a more useful measure to assess operating performance and capital adequacy because ROCE better reflects income available to common equity holders after taking into account consideration paid on securities senior to our common equity. Our calculation of ROCE may not be comparable to similarly titled measures reported by other companies.

















(14)

Prior to Q2 2013, we calculated return on average tangible common equity ("ROTCE"), a non-GAAP measure, based on annualized income from continuing operations, net of tax, for the period divided by average tangible common equity for the period. Effective Q2 2013, we revised our method of calculating ROTCE to reflect 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. We believe our revised calculation of ROTCE is a more useful measure to assess operating performance and capital adequacy because the revised calculation better reflects income available to common equity holders after taking into account consideration paid on securities senior to our common equity. Our calculation of ROTCE 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)

 

 

Loans acquired as part of the 2012 U.S. card, ING Direct and CCB acquisitions classified as held for investment are included in the denominator used in calculating our reported credit quality metrics. We supplement certain reported credit quality metrics with metrics adjusted to exclude from the denominator acquired loans accounted for based on estimated expected cash flows to be collected (formerly SOP 03-3).
















(18)

 

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
















(19)

 

The 30+ day delinquency rate as of the end of Q2 2013 will be provided in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
















(20)

 

 

 

Capital ratios are calculated under Basel I. Ratios as of the end of Q2 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.
















(21)

 

 

 

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 of February 17, 2012 over the consideration transferred.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)
















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





























































2013 Q2



2013 Q1



2012 Q2






Average


Interest Income/


Yield/



Average


Interest Income/


Yield/



Average


Interest Income/


Yield/


(Dollars in millions)(unaudited)


Balance


Expense(2)


Rate(2)



Balance


Expense(2)


Rate(2)



Balance


Expense(2)


Rate(2)


Interest-earning assets:






















    Loans, including loans held for sale


$196,874


$ 4,596


9.34

%


$200,441


$ 4,649


9.28

%


$193,610


$ 4,257


8.80

%

    Investment securities(3)


63,907


391


2.45



64,798


374


2.31



56,972


335


2.35


    Cash equivalents and other


5,763


23


1.60



7,106


28


1.58



14,437


24


0.66


Total interest-earning assets


$266,544


$ 5,010


7.52

%


$272,345


$ 5,051


7.42

%


$265,019


$ 4,616


6.97

%

























Interest-bearing liabilities:






















    Interest-bearing deposits


$189,311


$ 318


0.67

%


$190,612


$ 326


0.68

%


$195,597


$ 373


0.76

%

    Securitized debt obligations


10,942


45


1.65



11,758


56


1.91



14,948


69


1.85


    Senior and subordinated notes


12,692


82


2.58



11,984


82


2.74



11,213


87


3.10


    Other borrowings


13,281


12


0.36



17,832


17


0.38



9,257


86


3.72


Total interest-bearing liabilities


$226,226


$ 457


0.81

%


$232,186


$ 481


0.83

%


$231,015


$ 615


1.06

%

Net interest income/spread




$ 4,553


6.71

%




$ 4,570


6.59

%




$ 4,001


5.90

%

Impact of non-interest bearing funding






0.12







0.12







0.14


Net interest margin






6.83

%






6.71

%






6.04

%




















































































Six Months Ended June 30,













2013



2012













Average


Interest Income/


Yield/



Average


Interest Income/


Yield/


(Dollars in millions)(unaudited)









Balance


Expense(2)


Rate(2)



Balance


Expense(2)


Rate(2)


Interest-earning assets:






















    Loans, including loans held for sale









$198,648


$ 9,245


9.31

%


$173,472


$ 7,914


9.12

%

    Investment securities(3)









63,930


765


2.39



53,757


633


2.36


    Cash equivalents and other









6,430


51


1.59



10,438


48


0.92


Total interest-earning assets









$269,008


$10,061


7.48

%


$237,667


$ 8,595


7.23

%

























Interest-bearing liabilities:






















    Interest-bearing deposits









$189,958


$ 644


0.68

%


$173,611


$ 684


0.79

%

    Securitized debt obligations









11,348


101


1.78



15,567


149


1.91


    Senior and subordinated notes









12,340


164


2.66



10,740


175


3.26


    Other borrowings









15,544


29


0.37



9,399


172


3.66


Total interest-bearing liabilities









$229,190


$ 938


0.82

%


$209,317


$ 1,180


1.13

%

Net interest income/spread











$ 9,123


6.66

%




$ 7,415


6.11

%

Impact of non-interest bearing funding













0.12







0.13


Net interest margin













6.78

%






6.24

%

























____________






















(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 yield is not material.



 

CAPITAL ONE FINANCIAL CORPORATION (COF)






Table 7: Loan Information and Performance Statistics(1)(2)(3)














2013


2013


2012


(Dollars in millions)(unaudited)


Q2


Q1


Q2


Period-end Loans Held For Investment








Credit card:








    Domestic credit card


$ 70,490


$ 70,361


$ 80,798


    International credit card


7,820


8,036


8,116


      Total credit card


78,310


78,397


88,914


Consumer banking:








    Automobile


29,369


27,940


25,251


    Home loan


39,163


41,931


48,224


    Retail banking


3,686


3,742


4,140


      Total consumer banking


72,218


73,613


77,615


Commercial banking:








    Commercial and multifamily real estate


18,570


17,878


16,254


    Commercial and industrial


21,170


20,127


18,467


      Total commercial lending


39,740


38,005


34,721


    Small-ticket commercial real estate


1,065


1,145


1,335


      Total commercial banking


40,805


39,150


36,056


Other loans


179


173


164


      Total


$ 191,512


$ 191,333


$ 202,749










Average Loans Held For Investment








Credit card:








    Domestic credit card


$ 69,966


$ 74,714


$ 71,468


    International credit card


7,980


8,238


8,194


      Total credit card


77,946


82,952


79,662


Consumer banking:








    Automobile


28,677


27,477


24,487


    Home loan


40,532


43,023


48,966


    Retail banking


3,721


3,786


4,153


      Total consumer banking


72,930


74,286


77,606


Commercial banking:








    Commercial and multifamily real estate


18,084


17,454


15,838


    Commercial and industrial


20,332


19,949


18,001


      Total commercial lending


38,416


37,403


33,839


    Small-ticket commercial real estate


1,096


1,173


1,388


      Total commercial banking


39,512


38,576


35,227


Other loans


174


183


137


      Total


$ 190,562


$ 195,997


$ 192,632










Net Charge-off Rates








Credit card:








    Domestic credit card


4.28

%

4.43

%

2.86

%

    International credit card


5.08


4.59


5.49


      Total credit card


4.36


4.45


3.13


Consumer banking:








    Automobile


1.28


1.78


1.11


    Home loan


0.03


0.04


0.09


    Retail banking


1.50


1.85


1.27


      Total consumer banking


0.60


0.78


0.48


Commercial banking:








    Commercial and multifamily real estate


0.04


0.01


0.18


    Commercial and industrial


0.03


0.04


0.10


      Total commercial lending


0.03


0.03


0.14


    Small-ticket commercial real estate


0.45


1.41


1.46


      Total commercial banking


0.04


0.07


0.19


Other loans


13.10


14.53


18.04


      Total


2.03

%

2.20

%

1.53

%









30+ Day Performing Delinquency Rates








Credit card:








    Domestic credit card


3.05

%

3.37

%

2.79

%

    International credit card


3.84


4.04


4.84


      Total credit card


3.13

%

3.44

%

2.97

%

Consumer banking:








    Automobile


6.03

%

5.58

%

5.20

%

    Home loan


0.12


0.14


0.15


    Retail banking


0.68


0.83


0.69


     Total consumer banking


2.55

%

2.24

%

1.82

%









Nonperforming Asset Rates(4)








Credit card:








    International credit card


1.20

%

1.13

%

%

      Total credit card


0.12

%

0.12

%

%

Consumer banking:








    Automobile


0.50

%

0.40

%

0.41

%

    Home loan


1.08


1.02


0.94


    Retail banking


1.11


1.24


2.21


      Total consumer banking


0.84

%

0.80

%

0.83

%

Commercial banking:








    Commercial and multifamily real estate


0.56

%

0.76

%

1.28

%

    Commercial and industrial


0.65


0.64


0.81


      Total commercial lending


0.61

%

0.69

%

1.03

%

    Small-ticket commercial real estate


1.11


2.42


1.25


      Total commercial banking


0.62

%

0.74

%

1.04

%

 

CAPITAL ONE FINANCIAL CORPORATION (COF)





Table 8: Financial & Statistical Summary—Credit Card Business(1)(2)(3)













2013


2013


2012

(Dollars in millions) (unaudited)


Q2


Q1


Q2

Credit Card







Earnings:








Net interest income


$ 2,804


$ 2,830


$ 2,350


Non-interest income


832


821


771


Total net revenue


3,636


3,651


3,121


Provision for credit losses


713


743


1,711


Non-interest expense


1,819


1,848


1,863


Income (loss) from continuing operations before taxes


1,104


1,060


(453)


Income tax provision (benefit)


385


374


(156)


Income (loss) from continuing operations, net of tax


$ 719


$ 686


$ (297)









Selected performance metrics:








Period-end loans held for investment


$ 78,310


$ 78,397


$ 88,914


Average loans held for investment


77,946


82,952


79,662


Average yield on loans held for investment(5)


15.94

%

15.16

%

13.42


Total net revenue margin(6)


18.66


17.61


15.67


Net charge-off rate


4.36


4.45


3.13


30+ day performing delinquency rate


3.13


3.44


2.97


30+ day delinquency rate(7)


**


3.53


2.97


Nonperforming loan rate(4)


0.12


0.12



Card loan premium amortization and other intangible accretion (8)


$ 57


$ 57


$ 59


PCCR intangible amortization


110


116


88


Purchase volume(9)


50,788


45,098


45,228









Domestic Card







Earnings:








Net interest income


$ 2,536


$ 2,556


$ 2,118


Non-interest income


737


724


708


Total net revenue


3,273


3,280


2,826


Provision for credit losses


647


647


1,600


Non-interest expense


1,635


1,633


1,634


Income (loss) from continuing operations before taxes


991


1,000


(408)


Income tax provision (benefit)


353


356


(144)


Income (loss) from continuing operations, net of tax


$ 638


$ 644


$ (264)









Selected performance metrics:








Period-end loans held for investment


$ 70,490


$ 70,361


$ 80,798


Average loans held for investment


69,966


74,714


71,468


Average yield on loans held for investment(5)


15.91

%

15.07

%

13.33


Total net revenue margin(6)


18.71


17.56


15.82


Net charge-off rate


4.28


4.43


2.86


30+ day performing delinquency rate


3.05


3.37


2.79


30+ day delinquency rate(7)


**


3.37


2.79


Purchase volume(9)


$ 47,273


$ 41,831


$ 41,807









International Card







Earnings:








Net interest income


$ 268


$ 274


$ 232


Non-interest income


95


97


63


Total net revenue


363


371


295


Provision for credit losses


66


96


111


Non-interest expense


184


215


229


Income (loss) from continuing operations before taxes


113


60


(45)


Income tax provision (benefit)


32


18


(12)


Income (loss) from continuing operations, net of tax


$ 81


$ 42


$ (33)









Selected performance metrics:








Period-end loans held for investment


$ 7,820


$ 8,036


$ 8,116


Average loans held for investment


7,980


8,238


8,194


Average yield on loans held for investment


16.19

%

15.97

%

14.18


Total net revenue margin


18.20


18.01


14.40


Net charge-off rate


5.08


4.59


5.49


30+ day performing delinquency rate


3.84


4.04


4.84


30+ day delinquency rate(7)


**


4.93


4.84


Nonperforming loan rate(4)


1.20


1.13



Purchase volume(9)


$ 3,515


$ 3,267


$ 3,421


 

CAPITAL ONE FINANCIAL CORPORATION (COF)






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














2013


2013


2012


(Dollars in millions) (unaudited)


Q2


Q1


Q2


Consumer Banking








Earnings:









Net interest income


$ 1,478


$ 1,478


$ 1,496



Non-interest income


189


181


185



Total net revenue


1,667


1,659


1,681



Provision for credit losses


67


175


44



Non-interest expense


910


890


959



Income from continuing operations before taxes


690


594


678



Income tax provision


246


211


240



Income from continuing operations, net of tax


$ 444


$ 383


$ 438











Selected performance metrics:









Period-end loans held for investment


$ 72,218


$ 73,613


$ 77,615



Average loans held for investment


72,930


74,286


77,606



Average yield on loans held for investment


5.99

%

5.93

%

6.17

%


Auto loan originations


$ 4,525


$ 3,789


$ 4,306



Period-end deposits


169,789


172,605


173,966



Average deposits


170,733


171,089


174,416



Deposit interest expense rate


0.64

%

0.64

%

0.70

%


Core deposit intangible amortization


$ 35


$ 37


$ 42



Net charge-off rate


0.60

%

0.78

%

0.48

%


30+ day performing delinquency rate


2.55


2.24


1.82



30+ day delinquency rate(7)


**


2.81


2.47



Nonperforming loan rate


0.78


0.74


0.79



Nonperforming asset rate(4)


0.84


0.80


0.83



Period-end loans serviced for others


$ 14,313


$ 14,869


$ 16,108


 

CAPITAL ONE FINANCIAL CORPORATION (COF)






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














2013


2013


2012


(Dollars in millions) (unaudited)


Q2


Q1


Q2


Commercial Banking








Earnings:









Net interest income


$ 457


$ 454


$ 427



Non-interest income


93


84


82



Total net revenue(10)


550


538


509



Provision for credit losses


(14)


(35)


(94)



Non-interest expense


269


258


251



Income from continuing operations before taxes


295


315


352



Income tax provision


105


112


124



Income from continuing operations, net of tax


$ 190


$ 203


$ 228











Selected performance metrics:









Period-end loans held for investment


$ 40,805


$ 39,150


$ 36,056



Average loans held for investment


39,512


38,576


35,227



Average yield on loans held for investment


3.84

%

3.91

%

4.27

%


Period-end deposits


$ 30,869


$ 30,275


$ 27,784



Average deposits


30,746


30,335


27,943



Deposit interest expense rate


0.26

%

0.28

%

0.33

%


Core deposit intangible amortization


$ 8


$ 7


$ 9



Net charge-off rate


0.04

%

0.07

%

0.19

%


Nonperforming loan rate


0.60


0.71


0.99



Nonperforming asset rate(4)


0.62


0.74


1.04











Risk category:(11)









Noncriticized


$ 39,168


$ 37,359


$ 33,745



Criticized performing


1,087


1,191


1,524



Criticized nonperforming


244


277


356



Total risk-rated loans


40,499


38,827


35,625



Acquired commercial loans


306


323


431



Total commercial loans


$ 40,805


$ 39,150


$ 36,056












% of period-end commercial loans held for investment:









Noncriticized


96.0

%

95.4

%

93.6

%


Criticized performing


2.7


3.1


4.2



Criticized nonperforming


0.6


0.7


1.0



Total risk-rated loans


99.3


99.2


98.8



Acquired commercial loans


0.7


0.8


1.2



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)


Q2


Q1


Q2

Other







Earnings:








Net interest expense


$ (186)


$ (192)


$ (272)


Non-interest income


(29)


(105)


16


Total net revenue


(215)


(297)


(256)


Provision for credit losses


(4)


2


16


Non-interest expense


61


32


69


Income (loss) from continuing operations before taxes


(272)


(331)


(341)


Income tax benefit


(155)


(203)


(165)


Income (loss) from continuing operations, net of tax


$ (117)


$ (128)


$ (176)









Selected performance metrics:








Period-end loans held for investment


$ 179


$ 173


$ 164


Average loans held for investment


174


183


137


Period-end deposits


9,207


9,530


12,181


Average deposits


9,171


10,131


12,555









Total







Earnings:








Net interest income


$ 4,553


$ 4,570


$ 4,001


Non-interest income


1,085


981


1,054


Total net revenue


5,638


5,551


5,055


Provision for credit losses


762


885


1,677


Non-interest expense


3,059


3,028


3,142


Income from continuing operations before taxes


1,817


1,638


236


Income tax provision


581


494


43


Income from continuing operations, net of tax


$ 1,236


$ 1,144


$ 193









Selected performance metrics:








Period-end loans held for investment


$ 191,512


$ 191,333


$ 202,749


Average loans held for investment


190,562


195,997


192,632


Period-end deposits


209,865


212,410


213,931


Average deposits


210,650


211,555


214,914

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 2012 U.S. card, ING Direct and CCB 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)


Q2


Q1


Q2







Acquired loans accounted for under SOP 03-3:














Period-end unpaid principal balance


$ 33,620


$ 36,216


$ 43,333








Period-end loans held for investment


32,275


34,943


41,673








Average loans held for investment


33,144


35,706


42,182




















(3)

 

Results for Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the 2012 U.S. card acquisition, which resulted in the addition of approximately $28.2 billion in credit card receivables at closing.















(4)

 

 

 

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.















(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 Card of 168 basis points and 152 basis points, respectively, in Q2 2013 and 107 basis points and 97 basis points, respectively, in Q1 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 Card of 188 basis points and 169 basis points, respectively, in Q2 2013 and 123 basis points and 112 basis points, respectively, in Q1 2013.















(7)

 

The 30+ day delinquency rate as of the end of Q2 2013 will be provided in our Quarterly Report on Form 10-Q for the period ended June 30, 2013.















(8)

 

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.



(9)

Includes credit card purchase transactions, net of returns. Excludes cash advance transactions.















(10)

 

 

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%.















(11)

 

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 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)


Q2


Q1


Q2




Average Equity to Non-GAAP Average Tangible Common Equity










Average total stockholders' equity


$ 41,579


$ 40,960


$ 37,533




Less: Average goodwill and other intangible assets(1)


(15,974)


(16,141)


(15,689)




      Noncumulative perpetual preferred stock(2)


(853)


(853)





Average tangible common equity(3)


$ 24,752


$ 23,966


$ 21,844














Stockholders' Equity to Non-GAAP Tangible Common Equity










Total stockholders' equity


$ 41,041


$ 41,296


$ 37,192




Less: Goodwill and other intangible assets(1)


(15,872)


(15,992)


(16,477)




      Noncumulative perpetual preferred stock(2)


(853)


(853)





Tangible common equity(3)


$ 24,316


$ 24,451


$ 20,715














Total Assets to Tangible Assets










Total assets


$ 296,542


$ 300,163


$ 296,572




Less: Assets from discontinued operations


(310)


(309)


(310)




Total assets from continuing operations


296,232


299,854


296,262




Less: Goodwill and other intangible assets(1)


(15,872)


(15,992)


(16,477)




Tangible assets


$ 280,360


$ 283,862


$ 279,785














Non-GAAP TCE Ratio










Tangible common equity(3)


$ 24,316


$ 24,451


$ 20,715




Tangible assets


280,360


283,862


279,785




TCE ratio(3)


8.7

%

8.6

%

7.4

%













Regulatory Capital Ratios(4)










Total stockholders' equity


$ 41,041


$ 41,296


$ 37,192




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


503


(583)


(422)




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


175


15


34




          Disallowed goodwill and other intangible assets


(14,309)


(14,361)


(14,563)




          Disallowed deferred tax assets




(758)




          Noncumulative perpetual preferred stock(2)


(853)


(853)





          Other


(5)


(4)


(12)




Tier 1 common capital


26,552


25,510


21,471




Plus: Noncumulative perpetual preferred stock(2)


853


853





      Tier 1 restricted core capital items(6)


2


1


3,636




Tier 1 capital


27,407


26,364


25,107




Plus: Long-term debt qualifying as Tier 2 capital


2,124


2,121


2,318




      Qualifying allowance for loan and lease losses


2,781


2,738


2,740




      Other Tier 2 components


12


11


15




Tier 2 capital


4,917


4,870


5,073




Total risk-based capital(7)


$ 32,324


$ 31,234


$ 30,180














Risk-weighted assets(8)


$ 220,204


$ 216,458


$ 216,341














Tier 1 common ratio(9)


12.1

%

11.8

%

9.9

%



Tier 1 risk-based capital ratio(10)


12.4


12.2


11.6




Total risk-based capital ratio(11)


14.7


14.4


14.0




___________________




















(1)  Includes impact from related deferred taxes.










(2)  Noncumulative perpetual preferred stock qualifies for Tier 1 capital; however, it is not includable in 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 Q2 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



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