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Capital One Reports Third Quarter 2020 Net Income of $2.4 billion, or $5.06 per share

October 22, 2020 at 4:05 PM EDT
Excluding adjusting items, Third Quarter 2020 Net Income of $5.05 per share(1)

MCLEAN, Va., Oct. 22, 2020 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2020 of $2.4 billion, or $5.06 per diluted common share, compared with a net loss of $918 million, or $2.21 per diluted common share in the second quarter of 2020, and with net income of $1.3 billion, or $2.69 per diluted common share in the third quarter of 2019. Excluding adjusting items, net income for the third quarter of 2020 was $5.05 per diluted common share(1).

"Capital One posted strong third quarter results. We are leaning in to resilience and we continue to be well served by the choices we made before the pandemic," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "Our investments to transform our technology are powering our response to the downturn, and positioning us for the acceleration of digital change driven by the pandemic."

Adjusting items in the third 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):

(Dollars in millions, except per share data)

Pre-Tax
Impact

Diluted EPS
Impact



U.K. Payment Protection Insurance customer refund reserve release ("U.K. PPI Reserve")

$

36


$

0.08



Legal reserve builds

(40)


(0.06)



Cybersecurity Incident expenses, net of insurance

(6)


(0.01)





The quarter included the following notable items:




(Dollars in millions, except per share data)

Pre-Tax
Impact

Diluted EPS
Impact



Equity investment gain

$

470


$

0.79



Allowance release associated with partnership loans moving to held-for-sale

327


0.54



All comparisons below are for the third quarter of 2020 compared with the second quarter of 2020 unless otherwise noted.

Third Quarter 2020 Income Statement Summary:

  • Total net revenue increased 13 percent to $7.4 billion.
  • Total non-interest expense decreased 6 percent to $3.5 billion:
    • 4 percent increase in marketing.
    • 7 percent decrease in operating expenses.
  • Pre-provision earnings increased 38 percent to $3.8 billion(2).
  • Provision for credit losses decreased 92 percent to $331 million:
    • Net charge-offs of $1.1 billion.
    • $742 million reserve release.
  • Net interest margin of 5.68 percent, decreased 10 basis points.
  • Efficiency ratio of 48.07 percent.
    • Efficiency ratio excluding adjusting items of 47.68 percent(1).
  • Operating efficiency ratio of 44.24 percent.
    • Operating efficiency ratio excluding adjusting items of 43.83 percent(1).

Third Quarter 2020 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 13.0 percent at September 30, 2020.
  • Period-end loans held for investment in the quarter decreased $3.3 billion, or 1 percent, to $248.2 billion.
    • Credit Card period-end loans decreased $3.7 billion, or 3 percent, to $103.6 billion.
      • Domestic Card period-end loans decreased $3.8 billion, or 4 percent, to $95.5 billion.
    • Consumer Banking period-end loans increased $2.0 billion, or 3 percent, to $68.7 billion.
      • Auto period-end loans increased $2.1 billion, or 3 percent, to $65.4 billion.
    • Commercial Banking period-end loans decreased $1.6 billion, or 2 percent, to $75.9 billion.
  • Average loans held for investment in the quarter decreased $3.8 billion, or 2 percent, to $249.5 billion.
    • Credit Card average loans decreased $3.4 billion, or 3 percent, to $105.4 billion.
      • Domestic Card average loans decreased $3.7 billion, or 4 percent, to $97.3 billion.
    • Consumer Banking average loans increased $3.0 billion, or 5 percent, to $67.8 billion.
      • Auto average loans increased $2.7 billion, or 4 percent, to $64.5 billion.
    • Commercial Banking average loans decreased $3.4 billion, or 4 percent, to $76.3 billion.
  • Period-end total deposits increased $1.5 billion, or less than 1 percent, to $305.7 billion, while average deposits increased $17.2 billion, or 6 percent, to $305.5 billion.
  • Interest-bearing deposits rate paid decreased 25 basis points to 0.69 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 October 22, 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 November 5, 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 $305.7 billion in deposits and $421.9 billion in total assets as of  September 30, 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)


Third Quarter 2020


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

7


Table 5:

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

10


Table 6:

Average Balances, Net Interest Income and Net Interest Margin

11


Table 7:

Loan Information and Performance Statistics

12


Table 8:

Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity

15

Business Segment Results



Table 9:

Financial Summary—Business Segment Results

17


Table 10:

Financial & Statistical Summary—Credit Card Business

18


Table 11:

Financial & Statistical Summary—Consumer Banking Business

20


Table 12:

Financial & Statistical Summary—Commercial Banking Business

21


Table 13:

Financial & Statistical Summary—Other and Total

22

Other



Table 14:

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

23


Table 15:

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

24

__________



(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, 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 Q3 vs.


Nine Months Ended September 30,


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


2020


2020


2020


2019


2019


2020


2019






2020 vs.



Q3


Q2


Q1


Q4


Q3


Q2


Q3


2020


2019


2019


Income Statement






















Net interest income


$

5,555



$

5,460



$

6,025



$

6,066



$

5,737



2

%


(3)

%


$

17,040



$

17,274



(1)

%


Non-interest income


1,826



1,096



1,224



1,361



1,222



67



49



4,146



3,892



7



Total net revenue(1)


7,381



6,556



7,249



7,427



6,959



13



6



21,186



21,166





Provision for credit losses


331



4,246



5,423



1,818



1,383



(92)



(76)



10,000



4,418



126



Non-interest expense:






















Marketing


283



273



491



710



501



4



(44)



1,047



1,564



(33)



Operating expense


3,265



3,497



3,238



3,451



3,371



(7)



(3)



10,000



9,758



2



Total non-interest expense


3,548



3,770



3,729



4,161



3,872



(6)



(8)



11,047



11,322



(2)



Income (loss) from continuing operations before income taxes


3,502



(1,460)



(1,903)



1,448



1,704



**



106



139



5,426



(97)



Income tax provision (benefit)


1,096



(543)



(563)



270



375



**



192



(10)



1,071



**



Income (loss) from continuing operations, net of tax


2,406



(917)



(1,340)



1,178



1,329



**



81



149



4,355



(97)



Income (loss) from discontinued operations, net of tax




(1)





(2)



4



**



**



(1)



15



**



Net income (loss)


2,406



(918)



(1,340)



1,176



1,333



**



80



148



4,370



(97)



Dividends and undistributed earnings allocated to participating securities(2)


(20)



(1)



(3)



(7)



(10)



**



100



(5)



(34)



(85)



Preferred stock dividends


(67)



(90)



(55)



(97)



(53)



(26)



26



(212)



(185)



15



Issuance cost for redeemed preferred stock(3)






(22)



(31)









(22)





**



Net income (loss) available to common stockholders


$

2,319



$

(1,009)



$

(1,420)



$

1,041



$

1,270



**



83



$

(91)



$

4,151



**



Common Share Statistics






















Basic earnings per common share:(2)






















Net income (loss) from continuing operations


$

5.07



$

(2.21)



$

(3.10)



$

2.26



$

2.70



**



88

%


$

(0.20)



$

8.80



**



Income from discontinued operations










0.01





**





0.03



**



Net income (loss) per basic common share


$

5.07



$

(2.21)



$

(3.10)



$

2.26



$

2.71



**



87



$

(0.20)



$

8.83



**



Diluted earnings per common share:(2)






















Net income (loss) from continuing operations


$

5.06



$

(2.21)



$

(3.10)



$

2.25



$

2.68



**



89



$

(0.20)



$

8.76



**



Income from discontinued operations










0.01





**





0.03



**



Net income (loss) per diluted common share


$

5.06



$

(2.21)



$

(3.10)



$

2.25



$

2.69



**



88



$

(0.20)



$

8.79



**



Weighted-average common shares outstanding (in millions):






















Basic


457.8



456.7



457.6



460.9



469.5





(2)



457.4



469.9



(3)

%


Diluted


458.5



456.7



457.6



463.4



471.8





(3)



457.4



472.1



(3)



Common shares outstanding (period-end, in millions)


457.4



456.3



455.3



456.6



465.7





(2)



457.4



465.7



(2)



Dividends declared and paid per common share


$

0.10



$

0.40



$

0.40



$

0.40



$

0.40



(75)

%


(75)



$

0.90



$

1.20



(25)



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


83.67



78.82



80.68



83.72



80.46



6



4



83.67



80.46



4































2020 Q3 vs.


Nine Months Ended September 30,


(Dollars in millions)


2020


2020


2020


2019


2019


2020


2019






2020 vs.



Q3


Q2


Q1


Q4


Q3


Q2


Q3


2020


2019


2019


Balance Sheet (Period-End)






















Loans held for investment


$

248,223



$

251,512



$

262,990



$

265,809



$

249,355



(1)

%




$

248,223



$

249,355





Interest-earning assets


390,040



389,829



364,472



355,202



344,643





13

%


390,040



344,643



13

%


Total assets


421,883



421,296



396,878



390,365



378,810





11



421,883



378,810



11



Interest-bearing deposits


276,092



275,183



245,142



239,209



234,084





18



276,092



234,084



18



Total deposits


305,725



304,238



269,689



262,697



257,148





19



305,725



257,148



19



Borrowings


42,795



44,900



55,681



55,697



50,149



(5)



(15)



42,795



50,149



(15)



Common equity


53,093



50,835



51,620



53,157



52,412



4



1



53,093



52,412



1



Total stockholders' equity


58,424



56,045



56,830



58,011



58,235



4





58,424



58,235





Balance Sheet (Average Balances)






















Loans held for investment


$

249,511



$

253,358



$

262,889



$

258,870



$

246,147



(2)

%


1

%


$

255,232



$

243,602



5

%


Interest-earning assets


391,451



378,145



355,347



349,150



340,949



4



15



375,041



338,936



11



Total assets


422,854



411,075



390,380



383,162



374,905



3



13



408,233



372,148



10



Interest-bearing deposits


276,339



261,256



241,115



236,250



232,063



6



19



259,631



230,045



13



Total deposits


305,516



288,344



264,653



260,040



255,082



6



20



286,242



253,389



13



Borrowings


44,161



49,827



51,795



51,442



49,413



(11)



(11)



48,577



50,804



(4)



Common equity


51,995



52,413



53,186



52,641



52,566



(1)



(1)



52,529



50,393



4



Total stockholders' equity


57,223



57,623



58,568



58,148



57,245



(1)





57,802



54,861



5



































 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated














2020 Q3 vs.


Nine Months Ended September 30,

(Dollars in millions, except as noted)


2020


2020


2020


2019


2019


2020


2019






2020 vs.


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2020


2019


2019

Performance Metrics





















Net interest income growth (period over period)


2

%


(9)

%


(1)

%


6

%




**



**



(1)

%


1

%


**


Non-interest income growth (period over period)


67



(10)



(10)



11



(11)

%


**



**



7



(3)



**


Total net revenue growth (period over period)


13



(10)



(2)



7



(2)



**



**







**


Total net revenue margin(5)


7.54



6.93



8.16



8.51



8.16



61

bps


(62)

bps


7.53



8.33



(80)

bps

Net interest margin(6)


5.68



5.78



6.78



6.95



6.73



(10)



(105)



6.06



6.80



(74)


Return on average assets


2.28



(0.89)



(1.37)



1.23



1.42



317



86



0.05



1.56



(151)


Return on average tangible assets(7)


2.36



(0.93)



(1.43)



1.28



1.48



329



88



0.05



1.63



(158)


Return on average common equity(8)


17.84



(7.69)



(10.68)



7.93



9.63



**



8

%


(0.23)



10.94



**


Return on average tangible common equity(9)


24.98



(10.74)



(14.85)



11.07



13.45



**



12



(0.32)



15.54



**


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


5.69



5.95



5.67



6.43



6.29



(26)



(60)

bps


5.77



6.20



(43)


Efficiency ratio(10)


48.07



57.50



51.44



56.03



55.64



(9)

%


(8)

%


52.14



53.49



(135)


Operating efficiency ratio(11)


44.24



53.34



44.67



46.47



48.44



(9)



(4)



47.20



46.10



110


Effective income tax rate for continuing operations


31.3



37.2



29.6



18.6



22.0



(6)



9



(7.2)



19.7



(27)

%

Employees (period-end, in thousands)


52.5



53.1



52.1



51.9



52.1



(1)



1



52.5



52.1



1


Credit Quality Metrics





















Allowance for credit losses


$

16,129



$

16,832



$

14,073



$

7,208



$

7,037



(4)

%


129

%


$

16,129



$

7,037



129

%

Allowance coverage ratio


6.50

%


6.69

%


5.35

%


2.71

%


2.82

%


(19)

bps


368

bps


6.50

%


2.82

%


368

bps

Net charge-offs


$

1,073



$

1,505



$

1,791



$

1,683



$

1,462



(29)

%


(27)

%


$

4,369



$

4,569



(4)

%

Net charge-off rate(12)


1.72

%


2.38

%


2.72

%


2.60

%


2.38

%


(66)

bps


(66)

bps


2.28

%


2.50

%


(22)

bps

30+ day performing delinquency rate(13)


1.97



2.09



2.95



3.51



3.28



(12)



(131)



1.97



3.28



(131)


30+ day delinquency rate(13)


2.22



2.30



3.16



3.74



3.51



(8)



(129)



2.22



3.51



(129)


Capital Ratios(14)





















Common equity Tier 1 capital


13.0

%


12.4

%


12.0

%


12.2

%


12.5

%


60

bps


50

bps


13.0

%


12.5

%


50

bps

Tier 1 capital


14.8



14.2



13.7



13.7



14.4



60



40



14.8



14.4



40


Total capital


17.3



16.7



16.1



16.1



16.8



60



50



17.3



16.8



50


Tier 1 leverage


10.6



10.3



11.0



11.7



11.9



30



(130)



10.6



11.9



(130)


Tangible common equity ("TCE")(15)


9.4



8.8



9.6



10.2



10.3



60



(90)



9.4



10.3



(90)








































 

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income














2020 Q3 vs.


Nine Months Ended September 30,



2020


2020


2020


2019


2019


2020


2019






2020 vs.

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


Q3


Q2


Q1


Q4


Q3


Q2


Q3


2020


2019


2019

Interest income:





















Loans, including loans held for sale


$

5,758



$

5,820



$

6,542



$

6,682



$

6,429



(1)

%


(10)

%


$

18,120



$

19,180



(6)

%

Investment securities


443



482



530



544



583



(8)



(24)



1,455



1,867



(22)


Other


14



16



37



44



63



(13)



(78)



67



196



(66)


Total interest income


6,215



6,318



7,109



7,270



7,075



(2)



(12)



19,642



21,243



(8)


Interest expense:





















Deposits


476



611



731



832



901



(22)



(47)



1,818



2,588



(30)


Securitized debt obligations


43



56



99



118



123



(23)



(65)



198



405



(51)


Senior and subordinated notes


132



180



239



236



299



(27)



(56)



551



923



(40)


Other borrowings


9



11



15



18



15



(18)



(40)



35



53



(34)


Total interest expense


660



858



1,084



1,204



1,338



(23)



(51)



2,602



3,969



(34)


Net interest income


5,555



5,460



6,025



6,066



5,737



2



(3)



17,040



17,274



(1)


Provision for credit losses


331



4,246



5,423



1,818



1,383



(92)



(76)



10,000



4,418



126


Net interest income after provision for credit losses


5,224



1,214



602



4,248



4,354



**



20



7,040



12,856



(45)


Non-interest income:





















Interchange fees, net


775



672



752



811



790



15



(2)



2,199



2,368



(7)


Service charges and other customer-related fees


320



258



327



342



283



24



13



905



988



(8)


Net securities gains (losses)


25







(18)



5



**



**



25



44



(43)


Other


706



166



145



226



144



**



**



1,017



492



107


Total non-interest income


1,826



1,096



1,224



1,361



1,222



67



49



4,146



3,892



7


Non-interest expense:





















Salaries and associate benefits


1,719



1,704



1,627



1,652



1,605



1



7



5,050



4,736



7


Occupancy and equipment


506



523



517



565



519



(3)



(3)



1,546



1,533



1


Marketing


283



273



491



710



501



4



(44)



1,047



1,564



(33)


Professional services


327



304



287



318



314



8



4



918



919




Communications and data processing


310



308



302



346



312



1



(1)



920



944



(3)


Amortization of intangibles


14



16



22



28



25



(13)



(44)



52



84



(38)


Other(16)


389



642



483



542



596



(39)



(35)



1,514



1,542



(2)


Total non-interest expense


3,548



3,770



3,729



4,161



3,872



(6)



(8)



11,047



11,322



(2)


Income (loss) from continuing operations before income taxes


3,502



(1,460)



(1,903)



1,448



1,704



**



106



139



5,426



(97)


Income tax provision (benefit)


1,096



(543)



(563)



270



375



**



192



(10)



1,071



**


Income (loss) from continuing operations, net of tax


2,406



(917)



(1,340)



1,178



1,329



**



81



149



4,355



(97)


Income (loss) from discontinued operations, net of tax




(1)