FORM 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

July 18, 2013

Date of Report (Date of earliest event reported)

Commission File No. 1-13300

 

 

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   54-1719854
(State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.)
1680 Capital One Drive McLean, Virginia   22102
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (703) 720-1000

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On July 18, 2013, Capital One Financial Corporation (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2013. Copies of the Company’s press release and financial supplement are attached and furnished herewith as Exhibits 99.1 and 99.2 to this Form 8-K and are incorporated herein by reference.

Note: Information in this report (including Exhibits 99.1 and 99.2) furnished pursuant to Item 2.02 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.


Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

  Exhibit  
  No.  

  

Description of Exhibit

99.1    Press Release, dated July 18, 2013 – Second Quarter 2013
99.2    Financial Supplement – Second Quarter 2013

Earnings Conference Call Webcast Information.

The Company will hold an earnings conference call on July 18, 2013 at 5:00 p.m. Eastern Time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the Company’s home page (www.capitalone.com). Choose “About Us”, then choose “Investors” to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation of non-GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the Company’s Web site through August 8, 2013 at 5:00 p.m. Eastern Time.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto duly authorized.

 

    CAPITAL ONE FINANCIAL CORPORATION
Dated: July 18, 2013     By:  

  /s/ Stephen S. Crawford

        Stephen S. Crawford
        Chief Financial Officer
EX-99.1

Exhibit 99.1

 

LOGO

   News Release
   Contacts:

Investor Relations

   Media Relations
   Jeff Norris

703.720.2455

   Danielle Dietz

703.720.2455

   Julie Rakes

804.284.5800

   Tatiana Stead

703.720.2352

FOR IMMEDIATE RELEASE: July 18, 2013

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

McLean, Va. (July 18, 2013) – 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


Capital One Second Quarter 2013 Earnings

Page 2

 

   

$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.


Capital One Second Quarter 2013 Earnings

Page 3

 

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.

###

EX-99.2

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)

 

 

(Dollars in millions, except per share data and as noted) (unaudited)    2013
Q2
    2013
Q1
    2012
Q4
    2012
Q3
    2012
Q2
 

Earnings

          

Net interest income

   $ 4,553      $ 4,570      $ 4,528      $ 4,646      $ 4,001   

Non-interest income(3)

     1,085        981        1,096        1,136        1,054   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue(4)

     5,638        5,551        5,624        5,782        5,055   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for credit losses

     762        885        1,151        1,014        1,677   

Non-interest expense:

          

Marketing

     330        317        393        316        334   

Amortization of intangibles(5)

     167        177        191        199        157   

Acquisition-related(6)

     50        46        69        48        133   

Operating expenses

     2,512        2,488        2,602        2,482        2,518   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expense

     3,059        3,028        3,255        3,045        3,142   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     1,817        1,638        1,218        1,723        236   

Income tax provision

     581        494        370        535        43   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations, net of tax

     1,236        1,144        848        1,188        193   

Loss from discontinued operations, net of tax(3)

     (119     (78     (5     (10     (100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,117        1,066        843        1,178        93   

Dividends and undistributed earnings allocated to participating securities(7)

     (4     (5     (3     (5     (1

Preferred stock dividends

     (13     (13     (15              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

   $ 1,100      $ 1,048      $ 825      $ 1,173      $ 92   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common Share Statistics

          

Basic EPS:(7)

          

Income from continuing operations, net of tax

   $ 2.09      $ 1.94      $ 1.43      $ 2.05      $ 0.33   

Loss from discontinued operations, net of tax

     (0.20     (0.13     (0.01     (0.02     (0.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share

   $ 1.89      $ 1.81      $ 1.42      $ 2.03      $ 0.16   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS:(7)

          

Income from continuing operations, net of tax

   $ 2.07      $ 1.92      $ 1.42      $ 2.03      $ 0.33   

Loss from discontinued operations, net of tax

     (0.20     (0.13     (0.01     (0.02     (0.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share

   $ 1.87      $ 1.79      $ 1.41      $ 2.01      $ 0.16   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding (in millions) for:

          

Basic EPS

     581.5        580.5        579.2        578.3        577.7   

Diluted EPS

     588.8        586.3        585.6        584.1        582.8   

Common shares outstanding (period end, in millions)

     584.9        584.0        582.2        581.3        580.7   

Dividends per common share

   $ 0.30      $ 0.05      $ 0.05      $ 0.05      $ 0.05   

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

     41.57        41.87        40.23        38.70        35.67   

Balance Sheet (Period End)

          

Loans held for investment(9)

   $ 191,512      $ 191,333      $ 205,889      $ 203,132      $ 202,749   

Interest-earning assets

     265,693        268,479        280,096        270,661        264,331   

Total assets

     296,542        300,163        312,918        301,989        296,572   

Interest-bearing deposits

     187,768        191,093        190,018        192,488        193,859   

Total deposits

     209,865        212,410        212,485        213,255        213,931   

Borrowings

     36,231        37,492        49,910        38,377        35,874   

Common equity

     40,188        40,443        39,646        38,819        37,192   

Total stockholders’ equity

     41,041        41,296        40,499        39,672        37,192   

Balance Sheet (Quarterly Average Balances)

          

Loans held for investment(9)

   $ 190,562      $ 195,997      $ 202,944      $ 202,856      $ 192,632   

Interest-earning assets

     266,544        272,345        277,886        266,803        265,019   

Total assets

     297,766        303,223        308,096        297,154        295,306   

Interest-bearing deposits

     189,311        190,612        192,122        193,700        195,597   

Total deposits

     210,650        211,555        213,494        213,323        214,914   

Borrowings

     36,915        41,574        44,189        36,451        35,418   

Common equity

     40,726        40,107        39,359        38,079        37,533   

Total stockholders’ equity

     41,579        40,960        40,212        38,535        37,533   

 

Page 1


CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

(Dollars in millions, except per share data and as noted) (unaudited)    2013
Q2
    2013
Q1
    2012
Q4
    2012
Q3
    2012
Q2
 

Performance Metrics

          

Net interest income growth (quarter over quarter)

         1     (3 )%      16     17

Non-interest income growth (quarter over quarter)

     11        (10     (4     8        (31

Total net revenue growth (quarter over quarter)

     2        (1     (3     14        2   

Total net revenue margin(10)

     8.46        8.15        8.10        8.67        7.63   

Net interest margin(11)

     6.83        6.71        6.52        6.97        6.04   

Return on average assets(12)

     1.66        1.51        1.10        1.60        0.26   

Return on average common equity(13)

     11.97        11.23        8.44        12.43        2.05   

Return on average tangible common equity(14)

     19.70        18.79        14.42        21.84        3.52   

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

     6.42        6.18        6.42        6.00        6.52   

Efficiency ratio(16)

     54.26        54.55        57.88        52.66        62.16   

Effective income tax rate

     32.0        30.2        30.4        31.1        18.2   

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

     39.6        39.3        39.6        37.6        37.4   

Credit Quality Metrics(9)(17)

          

Allowance for loan and lease losses

   $ 4,407      $ 4,606      $ 5,156      $ 5,154      $ 4,998   

Allowance as a % of loans held for investment

     2.30     2.41     2.50     2.54     2.47

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

     2.74        2.91        3.02        3.11        3.08   

Net charge-offs

   $ 969      $ 1,079      $ 1,150      $ 887      $ 738   

Net charge-off rate(18)

     2.03     2.20     2.26     1.75     1.53

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

     2.46        2.69        2.78        2.18        1.96   

30+ day performing delinquency rate

     2.35        2.37        2.70        2.54        2.06   

30+ day performing delinquency rate (excluding acquired loans)

     2.83        2.90        3.29        3.15        2.59   

30+ day delinquency rate(19)

     **        2.74        3.09        2.92        2.43   

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

     **        3.35        3.77        3.62        3.06   

Capital Ratios (20)

          

Tier 1 common ratio

     12.1     11.8     11.0     10.7     9.9

Tier 1 risk-based capital ratio

     12.4        12.2        11.3        12.7        11.6   

Total risk-based capital ratio

     14.7        14.4        13.6        15.0        14.0   

Tangible common equity (“TCE”) ratio

     8.7        8.6        7.9        7.9        7.4   

 

Page 2


CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

     Three Months Ended          Six Months
Ended June 30,
 
     June  30,
2013
    March  31,
2013
    June  30,
2012
        
(Dollars in millions, except per share data) (unaudited)             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   

 

Page 3


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets

 

 

 

(Dollars in millions)(unaudited)    June 30,
2013
    December 31,
2012
    June 30,
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   
  

 

 

   

 

 

   

 

 

 

 

Page 4


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. We did not record a provision for mortgage representation and warranty losses in Q4 2012 or Q3 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, $318 million in Q4 2012, $185 million in Q3 2012 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, $127 million in Q4 2012, $131 million in Q3 2012 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, $47 million in Q4 2012, $49 million in Q3 2012 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.

 

Page 5


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 yields is not material.

 

Page 6


CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

     2013     2013     2012     2012     2012  
(Dollars in millions)(unaudited)    Q2     Q1     Q4     Q3     Q2  

Period-end Loans Held For Investment

          

Credit card:

          

Domestic credit card

   $ 70,490      $ 70,361      $ 83,141      $ 80,621      $ 80,798   

International credit card

     7,820        8,036        8,614        8,412        8,116   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total credit card

     78,310        78,397        91,755        89,033        88,914   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer banking:

          

Automobile

     29,369        27,940        27,123        26,434        25,251   

Home loan

     39,163        41,931        44,100        46,275        48,224   

Retail banking

     3,686        3,742        3,904        4,029        4,140   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer banking

     72,218        73,613        75,127        76,738        77,615   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial banking:

          

Commercial and multifamily real estate

     18,570        17,878        17,732        16,963        16,254   

Commercial and industrial

     21,170        20,127        19,892        18,965        18,467   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     39,740        38,005        37,624        35,928        34,721   

Small-ticket commercial real estate

     1,065        1,145        1,196        1,281        1,335   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial banking

     40,805        39,150        38,820        37,209        36,056   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other loans

     179        173        187        152        164   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 191,512      $ 191,333      $ 205,889      $ 203,132      $ 202,749   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average Loans Held For Investment

          

Credit card:

          

Domestic credit card

   $ 69,966      $ 74,714      $ 80,718      $ 80,502      $ 71,468   

International credit card

     7,980        8,238        8,372        8,154        8,194   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total credit card

     77,946        82,952        89,090        88,656        79,662   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer banking:

          

Automobile

     28,677        27,477        26,881        25,923        24,487   

Home loan

     40,532        43,023        45,250        47,262        48,966   

Retail banking

     3,721        3,786        3,967        4,086        4,153   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer banking

     72,930        74,286        76,098        77,271        77,606   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial banking:

          

Commercial and multifamily real estate

     18,084        17,454        17,005        16,654        15,838   

Commercial and industrial

     20,332        19,949        19,344        18,817        18,001   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     38,416        37,403        36,349        35,471        33,839   

Small-ticket commercial real estate

     1,096        1,173        1,249        1,296        1,388   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial banking

     39,512        38,576        37,598        36,767        35,227   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other loans

     174        183        158        162        137   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 190,562      $ 195,997      $ 202,944      $ 202,856      $ 192,632   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Charge-off Rates

          

Credit card:

          

Domestic credit card

     4.28     4.43     4.35     3.04     2.86

International credit card

     5.08        4.59        3.99        4.95        5.49   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total credit card

     4.36        4.45        4.32        3.22        3.13   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer banking:

          

Automobile

     1.28        1.78        2.24        1.79        1.11   

Home loan

     0.03        0.04        (0.06     0.28        0.09   

Retail banking

     1.50        1.85        2.45        1.20        1.27   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer banking

     0.60        0.78        0.88        0.83        0.48   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial banking:

          

Commercial and multifamily real estate

     0.04        0.01        (0.08     (0.05     0.18   

Commercial and industrial

     0.03        0.04        0.13        —           0.10   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     0.03        0.03        0.03        (0.03     0.14   

Small-ticket commercial real estate

     0.45        1.41        2.02        0.79        1.46   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial banking

     0.04        0.07        0.10        —           0.19   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other loans

     13.10        14.53        24.23        30.11        18.04   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2.03     2.20     2.26     1.75     1.53
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

30+ Day Performing Delinquency Rates

          

Credit card:

          

Domestic credit card

     3.05     3.37     3.61     3.52     2.79

International credit card

     3.84        4.04        3.58        4.92        4.84   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total credit card

     3.13     3.44     3.61     3.65     2.97
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer banking:

          

Automobile

     6.03     5.58     7.00     6.12     5.20

Home loan

     0.12        0.14        0.13        0.15        0.15   

Retail banking

     0.68        0.83        0.76        0.73        0.69   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer banking

     2.55     2.24     2.65     2.23     1.82
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Nonperforming Asset Rates(4)

          

Credit card:

          

International credit card

     1.20     1.13     1.16     —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total credit card

     0.12     0.12     0.11     —       —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer banking:

          

Automobile

     0.50     0.40     0.63     0.52     0.41

Home loan

     1.08        1.02        1.00        0.98        0.94   

Retail banking

     1.11        1.24        1.85        2.25        2.21   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer banking

     0.84     0.80     0.91     0.89     0.83
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial banking:

          

Commercial and multifamily real estate

     0.56     0.76     0.82     1.04     1.28

Commercial and industrial

     0.65        0.64        0.72        0.68        0.81   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     0.61     0.69     0.77     0.85     1.03

Small-ticket commercial real estate

     1.11        2.42        0.97        1.49        1.25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial banking

     0.62     0.74     0.77     0.87     1.04
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 7


CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

     2013     2013     2012     2012     2012  
(Dollars in millions) (unaudited)    Q2     Q1     Q4     Q3     Q2  

Credit Card

          

Earnings:

          

Net interest income

   $ 2,804      $ 2,830      $ 2,849      $ 2,991      $ 2,350   

Non-interest income

     832        821        883        826        771   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     3,636        3,651        3,732        3,817        3,121   

Provision for credit losses

     713        743        1,000        892        1,711   

Non-interest expense

     1,819        1,848        1,933        1,790        1,863   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     1,104        1,060        799        1,135        (453

Income tax provision (benefit)

     385        374        279        394        (156
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations, net of tax

   $ 719      $ 686      $ 520      $ 741      $ (297
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected performance metrics:

          

Period-end loans held for investment

   $ 78,310      $ 78,397      $ 91,755      $ 89,033      $ 88,914   

Average loans held for investment

     77,946        82,952        89,090        88,656        79,662   

Average yield on loans held for investment(5)

     15.94     15.16     14.33     15.03     13.42

Total net revenue margin(6)

     18.66        17.61        16.76        17.22        15.67   

Net charge-off rate

     4.36        4.45        4.32        3.22        3.13   

30+ day performing delinquency rate

     3.13        3.44        3.61        3.65        2.97   

30+ day delinquency rate(7)

     **        3.53        3.69        3.65        2.97   

Nonperforming loan rate(4)

     0.12        0.12        0.11        —          —     

Card loan premium amortization and other intangible accretion(8)

   $ 57      $ 57      $ 65      $ 82      $ 59   

PCCR intangible amortization

     110        116        127        131        88   

Purchase volume(9)

     50,788        45,098        52,853        48,020        45,228   

Domestic Card

          

Earnings:

          

Net interest income

   $ 2,536      $ 2,556      $ 2,583      $ 2,715      $ 2,118   

Non-interest income

     737        724        798        722        708   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     3,273        3,280        3,381        3,437        2,826   

Provision for credit losses

     647        647        911        811        1,600   

Non-interest expense

     1,635        1,633        1,727        1,584        1,634   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     991        1,000        743        1,042        (408

Income tax provision (benefit)

     353        356        263        369        (144
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations, net of tax

   $ 638      $ 644      $ 480      $ 673      $ (264
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected performance metrics:

          

Period-end loans held for investment

   $ 70,490      $ 70,361      $ 83,141      $ 80,621      $ 80,798   

Average loans held for investment

     69,966        74,714        80,718        80,502        71,468   

Average yield on loans held for investment(5)

     15.91     15.07     14.20     14.88     13.33

Total net revenue margin(6)

     18.71        17.56        16.75        17.08        15.82   

Net charge-off rate

     4.28        4.43        4.35        3.04        2.86   

30+ day performing delinquency rate

     3.05        3.37        3.61        3.52        2.79   

30+ day delinquency rate(7)

     **        3.37        3.61        3.52        2.79   

Purchase volume(9)

   $ 47,273      $ 41,831      $ 48,918      $ 44,552      $ 41,807   

International Card

          

Earnings:

          

Net interest income

   $ 268      $ 274      $ 266      $ 276      $ 232   

Non-interest income

     95        97        85        104        63   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     363        371        351        380        295   

Provision for credit losses

     66        96        89        81        111   

Non-interest expense

     184        215        206        206        229   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     113        60        56        93        (45

Income tax provision (benefit)

     32        18        16        25        (12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations, net of tax

   $ 81      $ 42      $ 40      $ 68      $ (33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected performance metrics:

          

Period-end loans held for investment

   $ 7,820      $ 8,036      $ 8,614      $ 8,412      $ 8,116   

Average loans held for investment

     7,980        8,238        8,372        8,154        8,194   

Average yield on loans held for investment

     16.19     15.97     15.59     16.47     14.18

Total net revenue margin

     18.20        18.01        16.77        18.64        14.40   

Net charge-off rate

     5.08        4.59        3.99        4.95        5.49   

30+ day performing delinquency rate

     3.84        4.04        3.58        4.92        4.84   

30+ day delinquency rate(7)

     **        4.93        4.49        4.92        4.84   

Nonperforming loan rate(4)

     1.20        1.13        1.16        —          —     

Purchase volume(9)

   $ 3,515      $ 3,267      $ 3,935      $ 3,468      $ 3,421   

 

Page 8


CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

(Dollars in millions) (unaudited)

   2013
Q2
    2013
Q1
    2012
Q4
    2012
Q3
    2012
Q2
 

Consumer Banking

          

Earnings:

          

Net interest income

   $ 1,478      $ 1,478      $ 1,503      $ 1,501      $ 1,496   

Non-interest income

     189        181        161        260        185   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     1,667        1,659        1,664        1,761        1,681   

Provision for credit losses

     67        175        169        202        44   

Non-interest expense

     910        890        992        977        959   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before taxes

     690        594        503        582        678   

Income tax provision

     246        211        178        206        240   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations, net of tax

   $ 444      $ 383      $ 325      $ 376      $ 438   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected performance metrics:

          

Period-end loans held for investment

   $ 72,218      $ 73,613      $ 75,127      $ 76,738      $ 77,615   

Average loans held for investment

     72,930        74,286        76,098        77,271        77,606   

Average yield on loans held for investment

     5.99     5.93     5.94     6.05     6.17

Auto loan originations

   $ 4,525      $ 3,789      $ 3,479      $ 3,905      $ 4,306   

Period-end deposits

     169,789        172,605        172,396        173,100        173,966   

Average deposits

     170,733        171,089        172,654        173,334        174,416   

Deposit interest expense rate

     0.64     0.64     0.68     0.71     0.70

Core deposit intangible amortization

   $ 35      $ 37      $ 39      $ 41      $ 42   

Net charge-off rate

     0.60     0.78     0.88     0.83     0.48

30+ day performing delinquency rate

     2.55        2.24        2.65        2.23        1.82   

30+ day delinquency rate(7)

     **        2.81        3.34        2.91        2.47   

Nonperforming loan rate

     0.78        0.74        0.85        0.84        0.79   

Nonperforming asset rate(4)

     0.84        0.80        0.91        0.89        0.83   

Period-end loans serviced for others

   $ 14,313      $ 14,869      $ 15,333      $ 15,659      $ 16,108   

 

Page 9


CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

     2013     2013     2012     2012     2012  

(Dollars in millions) (unaudited)

   Q2     Q1     Q4     Q3     Q2  

Commercial Banking

          

Earnings:

          

Net interest income

   $ 457      $ 454      $ 450      $ 432      $ 427   

Non-interest income

     93        84        86        87        82   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue(10)

     550        538        536        519        509   

Provision for credit losses

     (14     (35     (20     (87     (94

Non-interest expense

     269        258        294        253        251   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before taxes

     295        315        262        353        352   

Income tax provision

     105        112        93        125        124   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations, net of tax

   $ 190      $ 203      $ 169      $ 228      $ 228   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected performance metrics:

          

Period-end loans held for investment

   $ 40,805      $ 39,150      $ 38,820      $ 37,209      $ 36,056   

Average loans held for investment

     39,512        38,576        37,598        36,767        35,227   

Average yield on loans held for investment

     3.84     3.91     4.15     4.14     4.27

Period-end deposits

   $ 30,869      $ 30,275      $ 29,866      $ 28,670      $ 27,784   

Average deposits

     30,746        30,335        29,476        28,063        27,943   

Deposit interest expense rate

     0.26     0.28     0.28     0.31     0.33

Core deposit intangible amortization

   $ 8      $ 7      $ 8      $ 8      $ 9   

Net charge-off rate

     0.04     0.07     0.10         0.19

Nonperforming loan rate

     0.60        0.71        0.73        0.82        0.99   

Nonperforming asset rate(4)

     0.62        0.74        0.77        0.87        1.04   

Risk category:(11)

          

Noncriticized

   $ 39,168      $ 37,359      $ 36,839      $ 35,112      $ 33,745   

Criticized performing

     1,087        1,191        1,340        1,394        1,524   

Criticized nonperforming

     244        277        282        305        356   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total risk-rated loans

     40,499        38,827        38,461        36,811        35,625   

Acquired commercial loans

     306        323        359        398        431   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial loans

   $ 40,805      $ 39,150      $ 38,820      $ 37,209      $ 36,056   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of period-end commercial loans held for investment:

          

Noncriticized

     96.0     95.4     94.9     94.4     93.6

Criticized performing

     2.7        3.1        3.5        3.7        4.2   

Criticized nonperforming

     0.6        0.7        0.7        0.8        1.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total risk-rated loans

     99.3        99.2        99.1        98.9        98.8   

Acquired commercial loans

     0.7        0.8        0.9        1.1        1.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial loans

     100.0     100.0     100.0     100.0     100.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 10


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Financial & Statistical Summary—Other and Total(1)(2)

 

 

     2013     2013     2012     2012     2012  

(Dollars in millions) (unaudited)

   Q2     Q1     Q4     Q3     Q2  

Other

          

Earnings:

          

Net interest expense

   $ (186   $ (192   $ (274   $ (278   $ (272

Non-interest income

     (29     (105     (34     (37     16   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     (215     (297     (308     (315     (256

Provision for credit losses

     (4     2        2        7        16   

Non-interest expense

     61        32        36        25        69   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     (272     (331     (346     (347     (341

Income tax benefit

     (155     (203     (180     (190     (165
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations, net of tax

   $ (117   $ (128   $ (166   $ (157   $ (176
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected performance metrics:

          

Period-end loans held for investment

   $ 179      $ 173      $ 187      $ 152      $ 164   

Average loans held for investment

     174        183        158        162        137   

Period-end deposits

     9,207        9,530        10,223        11,485        12,181   

Average deposits

     9,171        10,131        11,364        11,926        12,555   

Total

          

Earnings:

          

Net interest income

   $ 4,553      $ 4,570      $ 4,528      $ 4,646      $ 4,001   

Non-interest income

     1,085        981        1,096        1,136        1,054   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     5,638        5,551        5,624        5,782        5,055   

Provision for credit losses

     762        885        1,151        1,014        1,677   

Non-interest expense

     3,059        3,028        3,255        3,045        3,142   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before taxes

     1,817        1,638        1,218        1,723        236   

Income tax provision

     581        494        370        535        43   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations, net of tax

   $ 1,236      $ 1,144      $ 848      $ 1,188      $ 193   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selected performance metrics:

          

Period-end loans held for investment

   $ 191,512      $ 191,333      $ 205,889      $ 203,132      $ 202,749   

Average loans held for investment

     190,562        195,997        202,944        202,856        192,632   

Period-end deposits

     209,865        212,410        212,485        213,255        213,931   

Average deposits

     210,650        211,555        213,494        213,323        214,914   

 

Page 11


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      2012      2012  

(Dollars in millions) (unaudited)

   Q2      Q1      Q4      Q3      Q2  

Acquired loans accounted for under SOP 03-3:

              

Period-end unpaid principal balance

   $ 33,620       $ 36,216       $ 38,477       $ 40,749       $ 43,333   

Period-end loans held for investment

     32,275         34,943         37,134         39,388         41,673   

Average loans held for investment

     33,144         35,706         37,899         40,158         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.

 

Page 12


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     2012     2012  

(Dollars in millions)(unaudited)

   Q2     Q1     Q4     Q3     Q2  

Average Equity to Non-GAAP Average Tangible Common Equity

          

Average total stockholders’ equity

   $ 41,579      $ 40,960      $ 40,212      $ 38,535      $ 37,533   

Less: Average goodwill and other intangible assets(1)

     (15,974     (16,141     (16,340     (16,408     (15,689

Noncumulative perpetual preferred stock(2)

     (853     (853     (853     (456     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible common equity(3)

   $ 24,752      $ 23,966      $ 23,019      $ 21,671      $ 21,844   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                          

Stockholders’ Equity to Non-GAAP Tangible Common Equity

          

Total stockholders’ equity

   $ 41,041      $ 41,296      $ 40,499      $ 39,672      $ 37,192   

Less: Goodwill and other intangible assets(1)

     (15,872     (15,992     (16,224     (16,323     (16,477

Noncumulative perpetual preferred stock(2)

     (853     (853     (853     (853     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible common equity(3)

   $ 24,316      $ 24,451      $ 23,422      $ 22,496      $ 20,715   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                          

Total Assets to Tangible Assets

          

Total assets

   $ 296,542      $ 300,163      $ 312,918      $ 301,989      $ 296,572   

Less: Assets from discontinued operations

     (310     (309     (309     (309     (310
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets from continuing operations

     296,232        299,854        312,609        301,680        296,262   

Less: Goodwill and other intangible assets(1)

     (15,872     (15,992     (16,224     (16,323     (16,477
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible assets

   $ 280,360      $ 283,862      $ 296,385      $ 285,357      $ 279,785   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                          

Non-GAAP TCE Ratio

          

Tangible common equity(3)

   $ 24,316      $ 24,451      $ 23,422      $ 22,496      $ 20,715   

Tangible assets

     280,360        283,862        296,385        285,357        279,785   

TCE ratio(3)

     8.7     8.6     7.9     7.9     7.4

Regulatory Capital Ratios(4)

          

Total stockholders’ equity

   $ 41,041      $ 41,296      $ 40,499      $ 39,672      $ 37,192   

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

     503        (583     (712     (752     (422
          Net (gains) losses on cash flow hedges recorded in AOCI(5)      175        15        2        (6     34   
          Disallowed goodwill and other intangible assets      (14,309     (14,361     (14,428     (14,497     (14,563
          Disallowed deferred tax assets      —          —          —          (221     (758
          Noncumulative perpetual preferred stock(2)      (853     (853     (853     (853     —     
          Other      (5     (4     (12     (12     (12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tier 1 common capital

     26,552        25,510        24,496        23,331        21,471   

Plus:  Noncumulative perpetual preferred stock(2)

     853        853        853        853        —     
          Tier 1 restricted core capital items(6)      2        1        2        3,636        3,636   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tier 1 capital

     27,407        26,364        25,351        27,820        25,107   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Plus:  Long-term debt qualifying as Tier 2 capital

     2,124        2,121        2,119        2,119        2,318   
          Qualifying allowance for loan and lease losses      2,781        2,738        2,830        2,767        2,740   
          Other Tier 2 components      12        11        13        17        15   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tier 2 capital

     4,917        4,870        4,962        4,903        5,073   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total risk-based capital(7)

   $ 32,324      $ 31,234      $ 30,313      $ 32,723      $ 30,180   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Risk-weighted assets(8)

   $ 220,204      $ 216,458      $ 223,472      $ 218,390      $ 216,341   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tier 1 common ratio(9)

     12.1     11.8     11.0     10.7     9.9

Tier 1 risk-based capital ratio(10)

     12.4        12.2        11.3        12.7        11.6   

Total risk-based capital ratio(11)

     14.7        14.4        13.6        15.0        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.

 

Page 13