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Capital One Reports First Quarter 2020 Net Loss of $1.3 billion, or $3.10 per share

April 23, 2020 at 4:05 PM EDT
Excluding adjusting items, First Quarter 2020 Net Loss of $3.02 per share(1)

MCLEAN, Va., April 23, 2020 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net loss for the first quarter of 2020 of $1.3 billion, or $3.10 per diluted common share, compared with net income of $1.2 billion, or $2.25 per diluted common share in the fourth quarter of 2019, and with net income of $1.4 billion, or $2.86 per diluted common share in the first quarter of 2019. Excluding adjusting items, net loss for the first quarter of 2020 was $3.02 per diluted common share(1).

"In the first quarter, Capital One rapidly mobilized to respond to COVID-19 and the disruption it is causing, with a focus on our associates, our customers, and our communities," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "We are well positioned to navigate and manage through these uncertain times, and to emerge with strength on the other side."

Adjusting items in the first quarter of 2020, which are excluded from diluted earnings per share (EPS), efficiency ratio and operating efficiency ratio metrics (see Table 15 in our Financial Supplement for additional information):


Pre-Tax

Diluted EPS

(Dollars in millions, except per share data)

Impact

Impact

Legal reserve build

$

45


$

0.07


Cybersecurity Incident expenses, net of insurance

4


0.01


All comparisons below are for the first quarter of 2020 compared with the fourth quarter of 2019 unless otherwise noted.

First Quarter 2020 Income Statement Summary:

  • Total net revenue decreased 2 percent to $7.2 billion.
  • Total non-interest expense decreased 10 percent to $3.7 billion:
    • 31 percent decrease in marketing.
    • 6 percent decrease in operating expenses.
  • Pre-provision earnings increased 8 percent to $3.5 billion(2).
  • Provision for credit losses increased 198 percent to $5.4 billion:
    • Net charge-offs of $1.8 billion.
    • $3.6 billion reserve build.
  • Net interest margin of 6.78 percent, decreased 17 basis points.
  • Efficiency ratio of 51.44 percent.
    • Efficiency ratio excluding adjusting items of 50.77 percent(1).
  • Operating efficiency ratio of 44.67 percent.
    • Operating efficiency ratio excluding adjusting items of 43.99 percent(1).

First Quarter 2020 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 12.0 percent at March 31, 2020.
  • Period-end loans held for investment in the quarter decreased $2.8 billion, or 1 percent, to $263.0 billion.
    • Credit Card period-end loans decreased $10.4 billion, or 8 percent, to $117.8 billion.
      • Domestic Card period-end loans decreased $9.1 billion, or 8 percent, to $109.5 billion.
    • Consumer Banking period-end loans increased $968 million, or 2 percent, to $64.0 billion.
      • Auto period-end loans increased $1.0 billion, or 2 percent, to $61.4 billion.
    • Commercial Banking period-end loans increased $6.7 billion, or 9 percent, to $81.2 billion.
  • Average loans held for investment in the quarter increased $4.0 billion, or 2 percent, to $262.9 billion.
    • Credit Card average loans increased $691 million, or 1 percent, to $122.8 billion.
      • Domestic Card average loans increased $746 million, or 1 percent, to $113.7 billion.
    • Consumer Banking average loans increased $1.1 billion, or 2 percent, to $63.7 billion.
      • Auto average loans increased $1.1 billion, or 2 percent, to $61.0 billion.
    • Commercial Banking average loans increased $2.3 billion, or 3 percent, to $76.4 billion.
  • Period-end total deposits increased $7.0 billion, or 3 percent, to $269.7 billion, while average deposits increased $4.6 billion, or 2 percent, to $264.7 billion.
  • Interest-bearing deposits rate paid decreased 20 basis points to 1.21 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, both in the current period and across periods. 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 April 23, 2020 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). Under "About," 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 May 7, 2020 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, 2019.

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 $269.7 billion in deposits and $396.9 billion in total assets as of  March 31, 2020. 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)

First Quarter 2020

Table of Contents


Capital One Financial Corporation Consolidated Results

Page


Table 1:

Financial Summary—Consolidated

1


Table 2:

Selected Metrics—Consolidated

4


Table 3:

Consolidated Statements of Income

5


Table 4:

Consolidated Balance Sheets

7


Table 5:

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

9


Table 6:

Average Balances, Net Interest Income and Net Interest Margin

10


Table 7:

Loan Information and Performance Statistics

11


Table 8:

Allowance for Credit 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

Other



Table 14:

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

20


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 March 31, 2020 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














2020 Q1 vs.

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


2020


2019


2019


2019


2019


2019


2019


Q1


Q4


Q3


Q2


Q1


Q4


Q1

Income Statement















Net interest income


$

6,025



$

6,066



$

5,737



$

5,746



$

5,791



(1)

%


4

%

Non-interest income


1,224



1,361



1,222



1,378



1,292



(10)



(5)


Total net revenue(1)


7,249



7,427



6,959



7,124



7,083



(2)



2


Provision for credit losses


5,423



1,818



1,383



1,342



1,693



198



220


Non-interest expense:















Marketing


491



710



501



546



517



(31)



(5)


Operating expense


3,238



3,451



3,371



3,233



3,154



(6)



3


Total non-interest expense


3,729



4,161



3,872



3,779



3,671



(10)



2


Income (loss) from continuing operations before income taxes


(1,903)



1,448



1,704



2,003



1,719



**



**


Income tax provision (benefit)


(563)



270



375



387



309



**



**


Income (loss) from continuing operations, net of tax


(1,340)



1,178



1,329



1,616



1,410



**



**


Income (loss) from discontinued operations, net of tax




(2)



4



9



2



**



**


Net income (loss)


(1,340)



1,176



1,333



1,625



1,412



**



**


Dividends and undistributed earnings allocated to participating securities(2)


(3)



(7)



(10)



(12)



(12)



(57)



(75)


Preferred stock dividends


(55)



(97)



(53)



(80)



(52)



(43)



6


Issuance cost for redeemed preferred stock(3)


(22)



(31)









(29)



**


Net income (loss) available to common stockholders


$

(1,420)



$

1,041



$

1,270



$

1,533



$

1,348



**



**


Common Share Statistics















Basic earnings per common share:(2)















Net income (loss) from continuing operations


$

(3.10)



$

2.26



$

2.70



$

3.24



$

2.87



**



**


Income from discontinued operations






0.01



0.02





**



**


Net income (loss) per basic common share


$

(3.10)



$

2.26



$

2.71



$

3.26



$

2.87



**



**


Diluted earnings per common share:(2)















Net income (loss) from continuing operations


$

(3.10)



$

2.25



$

2.68



$

3.22



$

2.86



**



**


Income from discontinued operations






0.01



0.02





**



**


Net income (loss) per diluted common share


$

(3.10)



$

2.25



$

2.69



$

3.24



$

2.86



**



**


Weighted-average common shares outstanding (in millions):















Basic


457.6



460.9



469.5



470.8



469.4



(1)

%


(3)

%

Diluted


457.6



463.4



471.8



473.0



471.6



(1)



(3)


Common shares outstanding (period-end, in millions)


455.3



456.6



465.7



470.3



469.6





(3)


Dividends declared and paid per common share


$

0.40



$

0.40



$

0.40



$

0.40



$

0.40






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


80.68



83.72



80.46



77.65



72.86



(4)



11















2020 Q1 vs.

(Dollars in millions)


2020


2019


2019


2019


2019


2019


2019


Q1


Q4


Q3


Q2


Q1


Q4


Q1

Balance Sheet (Period-End)















Loans held for investment


$

262,990



$

265,809



$

249,355



$

244,460



$

240,273



(1)

%


9

%

Interest-earning assets


364,472



355,202



344,643



339,160



340,071



3



7


Total assets


396,878



390,365



378,810



373,619



373,191



2



6


Interest-bearing deposits


245,142



239,209



234,084



231,161



230,199



2



6


Total deposits


269,689



262,697



257,148



254,535



255,107



3



6


Borrowings


55,681



55,697



50,149



49,233



50,358





11


Common equity


51,620



53,157



52,412



51,406



49,120



(3)



5


Total stockholders' equity


56,830



58,011



58,235



55,767



53,481



(2)



6


Balance Sheet (Average Balances)















Loans held for investment


$

262,889



$

258,870



$

246,147



$

242,653



$

241,959



2

%


9

%

Interest-earning assets


355,347



349,150



340,949



338,026



337,793



2



5


Total assets


390,380



383,162



374,905



371,095



370,394



2



5


Interest-bearing deposits


241,115



236,250



232,063



230,452



227,572



2



6


Total deposits


264,653



260,040



255,082



253,634



251,410



2



5


Borrowings


51,795



51,442



49,413



49,982



53,055



1



(2)


Common equity


53,186



52,641



52,566



50,209



48,359



1



10


Total stockholders' equity


58,568



58,148



57,245



54,570



52,720



1



11


 

               


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated














2020 Q1 vs.

(Dollars in millions, except as noted)


2020


2019


2019


2019


2019


2019


2019


Q1


Q4


Q3


Q2


Q1


Q4


Q1

Performance Metrics















Net interest income growth (period over period)


(1)

%


6

%




(1)

%




**



**


Non-interest income growth (period over period)


(10)



11



(11)

%


7



8

%


**



**


Total net revenue growth (period over period)


(2)



7



(2)



1



1



**



**


Total net revenue margin(5)


8.16



8.51



8.16



8.43



8.39



(35)

bps


(23)

bps

Net interest margin(6)


6.78



6.95



6.73



6.80



6.86



(17)



(8)


Return on average assets


(1.37)



1.23



1.42



1.74



1.52



**



**


Return on average tangible assets(7)


(1.43)



1.28



1.48



1.82



1.59



**



**


Return on average common equity(8)


(10.68)



7.93



9.63



12.14



11.13



**



**


Return on average tangible common equity(9)


(14.85)



11.07



13.45



17.26



16.11



**



**


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


5.67



6.43



6.29



6.23



6.07



(76)



(40)


Efficiency ratio(10)


51.44



56.03



55.64



53.05



51.83



(459)



(39)


Operating efficiency ratio(11)


44.67



46.47



48.44



45.38



44.53



(180)



14


Effective income tax rate for continuing operations


29.6



18.6



22.0



19.3



18.0



59

%


64

%

Employees (period-end, in thousands)


52.1



51.9



52.1



50.7



48.8





7


Credit Quality Metrics















Allowance for credit losses


$

14,073



$

7,208



$

7,037



$

7,133



$

7,313



95

%


92

%

Allowance coverage ratio


5.35

%


2.71

%


2.82

%


2.92

%


3.04

%


264

bps


231

bps

Net charge-offs


$

1,791



$

1,683



$

1,462



$

1,508



$

1,599



6

%


12

%

Net charge-off rate(12)


2.72

%


2.60

%


2.38

%


2.48

%


2.64

%


12

bps


8

bps

30+ day performing delinquency rate(16)


2.95



3.51



3.28



3.15



3.23



(56)



(28)


30+ day delinquency rate(16)


3.16



3.74



3.51



3.35



3.40



(58)



(24)


Capital Ratios(13)















Common equity Tier 1 capital


12.0

%


12.2

%


12.5

%


12.3

%


11.9

%


(20)

bps


10

bps

Tier 1 capital


13.7



13.7



14.4



13.8



13.4





30


Total capital


16.1



16.1



16.8



16.2



15.8





30


Tier 1 leverage


11.0



11.7



11.9



11.4



11.0



(70)




Tangible common equity ("TCE")(14)


9.6



10.2



10.3



10.2



9.6



(60)




 


 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income














2020 Q1 vs.



2020


2019


2019


2019


2019


2019


2019

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


Q1


Q4


Q3


Q2


Q1


Q4


Q1

Interest income:















Loans, including loans held for sale


$

6,542



$

6,682



$

6,429



$

6,383



$

6,368



(2)

%


3

%

Investment securities


530



544



583



629



655



(3)



(19)


Other


37



44



63



64



69



(16)



(46)


Total interest income


7,109



7,270



7,075



7,076



7,092



(2)




Interest expense:















Deposits


731



832



901



870



817



(12)



(11)


Securitized debt obligations


99



118



123



139



143



(16)



(31)


Senior and subordinated notes


239



236



299



310



314



1



(24)


Other borrowings


15



18



15



11



27



(17)



(44)


Total interest expense


1,084



1,204



1,338



1,330



1,301



(10)



(17)


Net interest income


6,025



6,066



5,737



5,746



5,791



(1)



4


Provision for credit losses


5,423



1,818



1,383



1,342



1,693



198



220


Net interest income after provision for credit losses


602



4,248



4,354



4,404



4,098



(86)



(85)


Non-interest income:















Interchange fees, net


752



811



790



820



758



(7)



(1)


Service charges and other customer-related fees


327



342



283



352



353



(4)



(7)


Net securities gains (losses)




(18)



5



15



24



**



**


Other


145



226



144



191



157



(36)



(8)


Total non-interest income


1,224



1,361



1,222



1,378



1,292



(10)



(5)


Non-interest expense:















Salaries and associate benefits


1,627



1,652



1,605



1,558



1,573



(2)



3


Occupancy and equipment


517



565



519



521



493



(8)



5


Marketing


491



710



501



546



517



(31)



(5)


Professional services


287



318



314



314



291



(10)



(1)


Communications and data processing


302



346



312



329



303



(13)




Amortization of intangibles


22



28



25



29



30



(21)



(27)


Other(15)


483



542



596



482



464



(11)



4


Total non-interest expense


3,729



4,161



3,872



3,779



3,671



(10)



2


Income (loss) from continuing operations before income taxes


(1,903)



1,448



1,704



2,003



1,719



**



**


Income tax provision (benefit)


(563)



270



375



387



309



**



**


Income (loss) from continuing operations, net of tax


(1,340)



1,178



1,329



1,616



1,410



**



**


Income (loss) from discontinued operations, net of tax




(2)



4



9



2



**



**


Net income (loss)


(1,340)



1,176



1,333



1,625



1,412



**



**


Dividends and undistributed earnings allocated to participating securities(2)


(3)



(7)



(10)



(12)



(12)



(57)



(75)


Preferred stock dividends


(55)



(97)



(53)



(80)



(52)



(43)



6


Issuance cost for redeemed preferred stock(3)


(22)



(31)









(29)



**


Net income (loss) available to common stockholders


$

(1,420)



$

1,041



$

1,270



$

1,533



$

1,348



**



**












































2020 Q1 vs.



2020


2019


2019


2019


2019


2019


2019

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


Q1


Q4


Q3


Q2


Q1


Q4


Q1

Basic earnings per common share:(2)















Net income (loss) from continuing operations


$

(3.10)



$

2.26



$

2.70



$

3.24



$

2.87



**



**


Income from discontinued operations






0.01



0.02





**



**


Net income (loss) per basic common share


$

(3.10)



$

2.26



$

2.71



$

3.26



$

2.87



**



**


Diluted earnings per common share:(2)















Net income (loss) from continuing operations


$

(3.10)



$

2.25



$

2.68



$

3.22



$

2.86



**



**


Income from discontinued operations






0.01



0.02





**



**


Net income (loss) per diluted common share


$

(3.10)



$

2.25



$

2.69



$

3.24



$

2.86



**



**


Weighted-average common shares outstanding (in millions):















Basic common shares


457.6



460.9



469.5



470.8



469.4



(1)

%


(3)

%

Diluted common shares


457.6



463.4



471.8



473.0



471.6



(1)



(3)


 

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets














2020 Q1 vs.



2020


2019


2019


2019


2019


2019


2019

(Dollars in millions)


Q1


Q4


Q3


Q2


Q1


Q4


Q1

Assets:















Cash and cash equivalents:















Cash and due from banks


$

4,545



$

4,129



$

4,452



$

5,184



$

4,572



10

%


(1)

%

Interest-bearing deposits and other short-term investments


20,391



9,278



12,668



9,927



12,897



120



58


Total cash and cash equivalents


24,936



13,407



17,120



15,111



17,469



86



43


Restricted cash for securitization investors


364



342



417



710



1,969



6



(82)


Investment securities:















Securities available for sale


81,423



79,213



46,168



45,658



45,888



3



77


Securities held to maturity






33,894



35,475



36,503





(100)


Total investment securities


81,423



79,213



80,062



81,133



82,391



3



(1)


Loans held for investment:















Unsecuritized loans held for investment


231,318



231,992



215,892



211,556



208,591





11


Loans held in consolidated trusts


31,672



33,817



33,463



32,904



31,682



(6)




Total loans held for investment


262,990



265,809



249,355



244,460



240,273



(1)



9


Allowance for credit losses


(14,073)



(7,208)



(7,037)



(7,133)



(7,313)



95



92


Net loans held for investment


248,917



258,601



242,318



237,327



232,960



(4)



7


Loans held for sale


1,056



400



1,245



1,829



905



164



17


Premises and equipment, net


4,336



4,378



4,311



4,243



4,205



(1)



3


Interest receivable


1,687



1,758



1,627



1,544



1,615



(4)



4


Goodwill


14,645



14,653



14,624



14,545



14,546





1


Other assets


19,514



17,613



17,086



17,177



17,131



11



14


Total assets


$

396,878



$

390,365



$

378,810



$

373,619



$

373,191



2



6





























2020 Q1 vs.



2020


2019


2019


2019


2019


2019


2019

(Dollars in millions)


Q1


Q4


Q3


Q2


Q1


Q4


Q1

Liabilities:















Interest payable


$

359



$

439



$

370



$

437



$

382



(18)

%


(6)

%

Deposits: