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 17, 2014

Date of Report (Date of earliest event reported)

 

 

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Commission File No. 1-13300

 

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))

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

On July 17, 2014, Capital One Financial Corporation (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2014. 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.

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Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit No.		Description of Exhibit
99.1		Press Release, dated July 17, 2014 – Second Quarter 2014
99.2		Financial Supplement – Second Quarter 2014

Earnings Conference Call Webcast Information.

The Company will hold an earnings conference call on July 17, 2014 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. A replay of the webcast will be archived on the Company’s website through July 31, 2014 at 5:00 p.m. Eastern Time.

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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 17, 2014				By:		/s/ Stephen S. Crawford
						Stephen S. Crawford
						Chief Financial Officer

Exhibit 99.1

 

						News Release
		Contacts:
		Investor Relations				Media Relations
		Jeff Norris		Danielle Dietz		Julie Rakes		Tatiana Stead
		703.720.2455		703.720.2455		804.284.5800		703.720.2352

FOR IMMEDIATE RELEASE: July 17, 2014

Capital One Reports Second Quarter 2014 Net Income of $1.2 billion,

or $2.04 per share

McLean, Va. (July 17, 2014) – Capital One Financial Corporation (NYSE: COF) today announced net income for the second quarter of 2014 of $1.2 billion, or $2.04 per diluted common share, compared to the first quarter of 2014 with net income of $1.2 billion, or $1.96 per diluted common share, and the second quarter of 2013 with net income of $1.1 billion, or $1.85 per diluted common share.

“Capital One posted another quarter of solid growth and profitability, including the return of year-over-year growth in our Domestic Card business, and we continued to return capital to our shareholders as we began to execute our announced $2.5 billion share repurchase program,” said Richard D. Fairbank, Chairman and Chief Executive Officer. “We remain focused on sustaining high returns as we invest to drive future growth and be a leader in digital banking.”

All comparisons below are for the second quarter of 2014 compared with the first quarter of 2014 unless otherwise noted.

Second Quarter 2014 Income Highlights:

 

•

Total net revenue increased 2 percent to $5.5 billion.

 

•

Total non-interest expense increased 2 percent to $3.0 billion.

 

•

Pre-provision earnings increased 2 percent to $2.5 billion.

 

•

Provision for credit losses decreased 4 percent to $704 million.

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Capital One Second Quarter 2014 Earnings

Page 2

 

Second Quarter 2014 Balance Sheet Highlights:

 

•

Common equity Tier 1 capital ratio under Basel III Standardized Approach of 12.7 percent at June 30, 2014.

 

•

Net interest margin of 6.55 percent, down 7 basis points.

 

•

Period-end loans held for investment in the quarter increased $5.6 billion, or 3 percent, to $198.5 billion.

 

•

Domestic Card period-end loans increased $2.9 billion, or 4 percent, to $71.2 billion.

 

•

Commercial Banking period-end loans increased $2.1 billion, or 5 percent, to $48.3 billion.

 

•

Consumer Banking:

 

•

Auto period-end loans increased $1.7 billion, or 5 percent, to $34.8 billion.

 

•

Home loans period-end loans decreased $1.4 billion, or 4 percent, to $32.6 billion, driven by run-off of acquired portfolios.

 

•

Average loans held for investment in the quarter increased $1.3 billion, or less than 1 percent, to $195.0 billion.

 

•

Domestic Card average loans decreased $434 million, or 1 percent, to $69.4 billion.

 

•

Commercial Banking average loans increased $1.6 billion, or 3 percent, to $47.0 billion.

 

•

Consumer Banking:

 

•

Auto average loans increased $1.6 billion, or 5 percent, to $34.0 billion.

 

•

Home loans average loans decreased by $1.3 billion, or 4 percent, to $33.3 billion, driven by run-off of acquired portfolios.

 

•

Period-end total deposits decreased $2.4 billion, or 1 percent, to $205.9 billion, while average deposits increased $473 million, or less than 1 percent, to $206.3 billion.

 

•

Interest-bearing deposit rate remained flat at 0.60 percent.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on July 17, 2014, at 5:00 PM, Eastern Time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the company’s home page (www.capitalone.com). Choose “About Us”, then choose “Investors” to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation of non-GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company’s website through July 31, 2014 at 5:00 PM.

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Capital One Second Quarter 2014 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, 2013.

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 $205.9 billion in deposits and $298.3 billion in total assets as of June 30, 2014. 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 approximately 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.

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Table of Contents

Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

Second Quarter 2014^(1)(2)(3)

Table of Contents

 

				Page
Capital One Financial Corporation Consolidated Results
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 Segments Detail
Table 8:		Financial Summary—Business Segments			8
Table 9:		Financial & Statistical Summary—Credit Card Business			9
Table 10:		Financial & Statistical Summary—Consumer Banking Business			10
Table 11:		Financial & Statistical Summary—Commercial Banking Business			11
Table 12:		Financial & Statistical Summary—Other and Total			12
Table 13:		Notes to Loan and Business Segments Disclosures (Tables 7 — 12)			13
Other
Table 14:		Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures			14

 

(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, 2014 once it is filed with the Securities and Exchange Commission.

(2)

References to ING Direct refers to 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 adopted ASU 2014-01 “Accounting for Investments in Qualified Affordable Housing Projects” as of January 1, 2014. Prior period results and related metrics have been recast to conform to this presentation.

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Table of Contents

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated⁽¹⁾

 

																						2014 Q2 vs.
		2014				2014				2013				2013				2013				2014				2013
(Dollars in millions, except per share data and as noted) (unaudited)		Q2				Q1				Q4				Q3				Q2				Q1				Q2
Earnings
Net interest income		$	4,315			$	4,350			$	4,423			$	4,560			$	4,553				(1	)%			(5	)%
Non-interest income(2)			1,153				1,020				1,121				1,091				1,085				13				6
Total net revenue(3)			5,468				5,370				5,544				5,651				5,638				2				(3	)
Provision for credit losses			704				735				957				849				762				(4	)			(8	)
Non-interest expense:
Marketing			335				325				427				299				330				3				2
Amortization of intangibles			136				143				166				161				167				(5	)			(19	)
Acquisition-related(4)			18				23				60				37				50				(22	)			(64	)
Operating expenses			2,490				2,441				2,582				2,612				2,471				2				1
Total non-interest expense			2,979				2,932				3,235				3,109				3,018				2				(1	)
Income from continuing operations before income taxes			1,785				1,703				1,352				1,693				1,858				5				(4	)
Income tax provision			581				579				477				575				631				—				(8	)
Income from continuing operations, net of tax			1,204				1,124				875				1,118				1,227				7				(2	)
Income (loss) from discontinued operations, net of tax(2)			(10	)			30				(23	)			(13	)			(119	)			**				92
Net income			1,194				1,154				852				1,105				1,108				3				8
Dividends and undistributed earnings allocated to participating securities(5)			(4	)			(5	)			(4	)			(5	)			(4	)			(20	)			—
Preferred stock dividends(5)			(13	)			(13	)			(13	)			(13	)			(13	)			—				—
Net income available to common stockholders		$	1,177			$	1,136			$	835			$	1,087			$	1,091				4				8
Common Share Statistics
Basic earnings per common share:(5)
Net income from continuing operations		$	2.09			$	1.94			$	1.50			$	1.89			$	2.08				8				—
Income (loss) from discontinued operations			(0.02	)			0.05				(0.04	)			(0.02	)			(0.20	)			**				(90	)
Net income per basic common share		$	2.07			$	1.99			$	1.46			$	1.87			$	1.88				4				10
Diluted earnings per common share:(5)
Net income from continuing operations		$	2.06			$	1.91			$	1.46			$	1.86			$	2.05				8				—
Income (loss) from discontinued operations			(0.02	)			0.05				(0.03	)			(0.02	)			(0.20	)			**				(90	)
Net income per diluted common share		$	2.04			$	1.96			$	1.43			$	1.84			$	1.85				4				10
Weighted average common shares outstanding (in millions) for:
Basic common shares			567.5				571.0				573.4				582.3				581.5				(1	)			(2	)
Diluted common shares			577.6				580.3				582.6				591.1				588.8				—				(2	)
Common shares outstanding (period end, in millions)			561.8				572.9				572.7				582.0				584.9				(2	)			(4	)
Dividends per common share		$	0.30			$	0.30			$	0.30			$	0.30			$	0.30				—				—
Tangible book value per common share (period end)(6)			47.90				45.88				43.64				43.01				41.41				4				16
Balance Sheet (Period End)
Loans held for investment(7)		$	198,528			$	192,941			$	197,199			$	191,814			$	191,512				3				4
Interest-earning assets			266,720				259,422				265,170				259,152				265,693				3				—
Total assets			298,317				290,500				296,933				289,866				296,524				3				1
Interest-bearing deposits			180,970				184,214				181,880				184,553				187,768				(2	)			(4	)
Total deposits			205,890				208,324				204,523				206,834				209,865				(1	)			(2	)
Borrowings			39,114				30,118				40,654				31,845				36,231				30				8
Common equity			42,477				41,948				40,779				40,792				40,094				1				6
Total stockholders’ equity			43,815				42,801				41,632				41,645				40,947				2				7
Balance Sheet (Quarterly Average Balances)
Loans held for investment(7)		$	194,996			$	193,722			$	192,813			$	191,135			$	190,562				1				2
Interest-earning assets			263,570				262,659				262,957				264,796				266,544				—				(1	)
Total assets			294,744				294,275				294,040				294,919				297,748				—				(1	)
Interest-bearing deposits			182,053				184,183				184,206				186,752				189,311				(1)				(4	)
Total deposits			206,315				205,842				205,706				208,340				210,650				—				(2	)
Borrowings			35,658				35,978				36,463				36,355				36,915				(1	)			(3	)
Common equity			42,797				42,006				41,502				40,332				40,637				2				5
Total stockholders’ equity			43,767				42,859				42,355				41,185				41,490				2				5

 

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Table of Contents

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated⁽¹⁾

 

																						2014 Q2 vs.
		2014				2014				2013				2013				2013				2014				2013
(Dollars in millions) (unaudited)		Q2				Q1				Q4				Q3				Q2				Q1				Q2
Performance Metrics
Net interest income growth (quarter over quarter)			(1	)%			(2	)%			(3	)%			0	%			0	%			**				**
Non-interest income growth (quarter over quarter)			13				(9	)			3				1				11				**				**
Total net revenue growth (quarter over quarter)			2				(3	)			(2	)			0				2				**				**
Total net revenue margin(8)			8.30				8.18				8.43				8.54				8.46				12	bps			(16	)bps
Net interest margin(9)			6.55				6.62				6.73				6.89				6.83				(7	)			(28	)
Return on average assets			1.63				1.53				1.19				1.52				1.65				10				(2	)
Return on average tangible assets(10)			1.73				1.61				1.26				1.60				1.74				12				(1	)
Return on average common equity(11)			11.09				10.53				8.27				10.91				11.91				56				(82	)
Return on average tangible common equity(12)			17.47				16.83				13.38				17.96				19.62				64				(215	)
Non-interest expense as a % of average loans held for investment			6.11				6.05				6.71				6.51				6.33				6				(22	)
Efficiency ratio(13)			54.48				54.60				58.35				55.02				53.53				(12	)			95
Effective income tax rate for continuing operations			32.5				34.0				35.3				34.0				34.0				(150	)			(150	)
Employees (in thousands), period end(14)			44.6				44.9				45.4				43.5				43.3				(1	)%			3	%
Credit Quality Metrics(7)
Allowance for loan and lease losses		$	3,998			$	4,098			$	4,315			$	4,333			$	4,407				(2	)			(9	)
Allowance as a % of loans held for investment			2.01	%			2.12	%			2.19	%			2.26	%			2.30	%			(11	)bps			(29	)bps
Allowance as a % of loans held for investment (excluding acquired loans)			2.30				2.45				2.54				2.66				2.74				(15	)			(44	)
Net charge-offs		$	812			$	931			$	969			$	917			$	969				(13	)%			(16	)%
Net charge-off rate(15)			1.67	%			1.92	%			2.01	%			1.92	%			2.03	%			(25	)bps			(36	)bps
Net charge-off rate (excluding acquired loans)(15)			1.93				2.24				2.37				2.29				2.46				(31	)			(53	)
30+ day performing delinquency rate			2.24				2.22				2.63				2.54				2.35				2				(11	)
30+ day performing delinquency rate (excluding acquired loans)			2.58				2.59				3.08				3.01				2.83				(1	)			(25	)
30+ day delinquency rate			2.53				2.51				2.96				2.88				2.71				2				(18	)
30+ day delinquency rate (excluding acquired loans)			2.91				2.93				3.46				3.41				3.26				(2	)			(35	)
Capital Ratios(16)
Common equity Tier 1 capital ratio			12.7	%			13.0	%			n/a				n/a				n/a				(30	)bps			n/a
Tier 1 common ratio			n/a				n/a				12.2	%			12.7	%			12.0	%			n/a				n/a
Tier 1 risk-based capital ratio			13.3	%			13.4	%			12.6				13.1				12.4				(10	)bps			90	bps
Total risk-based capital ratio			15.4				15.4				14.7				15.2				14.6				—				80
Tier 1 leverage ratio			10.7				10.4				10.1				10.0				9.7				30				100
Tangible common equity (“TCE”) ratio(17)			9.5				9.6				8.9				9.1				8.6				(10	)			90

 

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Table of Contents

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income⁽¹⁾

 

		Three Months Ended												Q2 2014 vs.								Six Months Ended								2014
		2014				2014				2013				2014				2013				2014				2013				vs.
(Dollars in millions, except per share data and as noted) (unaudited)		Q2				Q1				Q2				Q1				Q2				Q2				Q2				2013
Interest income:
Loans, including loans held for sale		$	4,279			$	4,307			$	4,596				(1	)%			(7	)%		$	8,586			$	9,245				(7	)%
Investment securities			409				416				391				(2	)			5				825				765				8
Other			24				30				23				(20	)			4				54				51				6
Total interest income			4,712				4,753				5,010				(1	)			(6	)			9,465				10,061				(6	)
Interest expense:
Deposits			272				276				318				(1	)			(14	)			548				644				(15	)
Securitized debt obligations			39				38				45				3				(13	)			77				101				(24	)
Senior and subordinated notes			78				77				82				1				(5	)			155				164				(5	)
Other borrowings			8				12				12				(33	)			(33	)			20				29				(31	)
Total interest expense			397				403				457				(1	)			(13	)			800				938				(15	)
Net interest income			4,315				4,350				4,553				(1	)			(5	)			8,665				9,123				(5	)
Provision for credit losses			704				735				762				(4	)			(8	)			1,439				1,647				(13	)
Net interest income after provision for credit losses			3,611				3,615				3,791				—				(5	)			7,226				7,476				(3	)
Non-interest income:(2)
Service charges and other customer-related fees			460				474				534				(3	)			(14	)			934				1,084				(14	)
Interchange fees, net			535				440				486				22				10				975				931				5
Net other-than-temporary impairment recognized in earnings			(1	)			(5	)			(4	)			(80	)			(75	)			(6	)			(29	)			(79	)
Other			159				111				69				43				130				270				80				238
Total non-interest income			1,153				1,020				1,085				13				6				2,173				2,066				5
Non-interest expense:
Salaries and associate benefits			1,125				1,161				1,118				(3	)			1				2,286				2,213				3
Occupancy and equipment			447				405				371				10				20				852				728				17
Marketing			335				325				330				3				2				660				647				2
Professional services			296				287				340				3				(13	)			583				662				(12	)
Communications and data processing			203				196				236				4				(14	)			399				452				(12	)
Amortization of intangibles			136				143				167				(5	)			(19	)			279				344				(19	)
Other			437				415				456				5				(4	)			852				963				(12	)
Total non-interest expense			2,979				2,932				3,018				2				(1	)			5,911				6,009				(2	)
Income from continuing operations before income taxes			1,785				1,703				1,858				5				(4	)			3,488				3,533				(1	)
Income tax provision			581				579				631				—				(8	)			1,160				1,172				(1	)
Income from continuing operations, net of tax			1,204				1,124				1,227				7				(2	)			2,328				2,361				(1	)
Income (loss) from discontinued operations, net of tax(2)			(10	)			30				(119	)			**				(92	)			20				(197	)			**
Net income			1,194				1,154				1,108				3				8				2,348				2,164				9
Dividends and undistributed earnings allocated to participating securities(5)			(4	)			(5	)			(4	)			(20	)			—				(9	)			(9	)			—
Preferred stock dividends(5)			(13	)			(13	)			(13	)			—				—				(26	)			(26	)			—
Net income available to common stockholders		$	1,177			$	1,136			$	1,091				4				8			$	2,313			$	2,129				9
Basic earnings per common share:(5)
Net income from continuing operations		$	2.09			$	1.94			$	2.08				8				—			$	4.03			$	4.00				1
Income (loss) from discontinued operations			(0.02	)			0.05				(0.20	)			**				(90	)			0.03				(0.34	)			**
Net income per basic common share		$	2.07			$	1.99			$	1.88				4				10			$	4.06			$	3.66				11
Diluted earnings per common share:(5)
Net income from continuing operations		$	2.06			$	1.91			$	2.05				8				—			$	3.97			$	3.96				—
Income (loss) from discontinued operations			(0.02	)			0.05				(0.20	)			**				(90	)			0.03				(0.34	)			**
Net income per diluted common share		$	2.04			$	1.96			$	1.85				4				10			$	4.00			$	3.62				10
Weighted average common shares outstanding (in millions):
Basic common shares			567.5				571.0				581.5				(1	)			(2	)			569.2				581.0				(2	)
Diluted common shares			577.6				580.3				588.8				—				(2	)			578.9				587.9				(2	)
Dividends paid per common share		$	0.30			$	0.30			$	0.30				—				—			$	0.60			$	0.35				71

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets⁽¹⁾

 

														June 30, 2014 vs.
(Dollars in millions) (unaudited)		June 30, 2014				December 31, 2013				June 30, 2013				December 31, 2013				June 30, 2013
Assets:
Cash and cash equivalents:
Cash and due from banks		$	3,598			$	2,821			$	2,176				28	%			65	%
Interest-bearing deposits with banks			2,954				3,131				2,279				(6	)			30
Federal funds sold and securities purchased under agreements to resell			180				339				198				(47	)			(9	)
Total cash and cash equivalents			6,732				6,291				4,653				7				45
Restricted cash for securitization investors			361				874				377				(59	)			(4	)
Securities available for sale, at fair value			41,113				41,800				62,602				(2	)			(34	)
Securities held to maturity, at carrying value			20,688				19,132				—				8				**
Loans held for investment:
Unsecuritized loans held for investment			161,224				157,651				151,231				2				7
Restricted loans for securitization investors			37,304				39,548				40,281				(6	)			(7	)
Total loans held for investment			198,528				197,199				191,512				1				4
Allowance for loan and lease losses			(3,998	)			(4,315	)			(4,407	)			(7	)			(9	)
Net loans held for investment			194,530				192,884				187,105				1				4
Loans held for sale, at lower of cost or fair value			709				218				6,248				225				(89	)
Premises and equipment, net			3,764				3,839				3,766				(2	)			—
Interest receivable			1,473				1,418				1,454				4				1
Goodwill			13,977				13,978				13,900				—				1
Other assets			14,970				16,499				16,419				(9	)			(9	)
Total assets		$	298,317			$	296,933			$	296,524				—				1
Liabilities:
Interest payable		$	309			$	307			$	324				1				(5	)
Customer deposits:
Non-interest bearing deposits			24,920				22,643				22,097				10				13
Interest-bearing deposits			180,970				181,880				187,768				(1	)			(4	)
Total customer deposits			205,890				204,523				209,865				1				(2	)
Securitized debt obligations			10,010				10,289				10,831				(3	)			(8	)
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase			2,030				915				1,766				122				15
Senior and subordinated notes			16,628				13,134				12,406				27				34
Other borrowings			10,446				16,316				11,228				(36	)			(7	)
Total other debt			29,104				30,365				25,400				(4	)			15
Other liabilities			9,189				9,817				9,157				(6	)			—
Total liabilities			254,502				255,301				255,577				—				—
Stockholders’ equity:
Preferred stock			0				0				0				—				—
Common stock			6				6				6				—				—
Additional paid-in capital, net			27,210				26,526				26,339				3				3
Retained earnings			22,270				20,292				18,710				10				19
Accumulated other comprehensive income (“AOCI”)			(371	)			(872	)			(792	)			(57	)			(53	)
Treasury stock, at cost			(5,300	)			(4,320	)			(3,316	)			23				60
Total stockholders’ equity			43,815				41,632				40,947				5				7
Total liabilities and stockholders’ equity		$	298,317			$	296,933			$	296,524				—				1

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 5: Notes to Financial & Selected Metrics and Consolidated Financial Statements (Tables 1 — 4)

 

**	Not meaningful.

 

(1)	Certain prior period amounts have been recast to conform to the current period presentation.

 

(2)

We recorded the following related to the mortgage representation and warranty reserve: a benefit of $18 million in Q2 2014 (which includes a provision of $11 million before taxes in discontinued operations and a benefit of $29 million before taxes in continuing operations), a benefit of $33 million in Q1 2014 (which includes a benefit of $47 million before taxes in discontinued operations and a provision of $14 million before taxes in continuing operations), a provision of $33 million in Q4 2013, a benefit of $4 million in Q3 2013, and a provision of $183 million in Q2 2013. Historically, 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 was $1.0 billion as of June 30 2014, and $1.2 billion as of both December 31, 2013 and June 30, 2013.

 

(3)	Total net revenue was reduced by $153 million in Q2 2014, $163 million in Q1 2014, $185 million in Q4 2013, $154 million in Q3 2013 and $192 million in Q2 2013 for the estimated uncollectible amount of billed finance charges and fees.

 

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

 

(5)	Dividends and undistributed earnings allocated to participating securities, earnings per share, and preferred stock dividends are computed independently for each period. Accordingly, the sum of each quarter may not agree to the year-to-date total.

 

(6)	Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See “Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for additional information.

 

(7)

Loans held for investment includes acquired loans accounted for based on cash flows expected to be collected. 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 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”). The table below presents amounts related to acquired loans accounted for under SOP 03-3:

 

		2014				2014				2013				2013				2013
(Dollars in millions) (unaudited)		Q2				Q1				Q4				Q3				Q2
Acquired loans accounted for under SOP 03-3:
Period-end unpaid principal balance		$	27,117			$	28,549			$	29,761			$	31,377			$	33,620
Period-end loans held for investment			26,019				27,390				28,550				30,080				32,275
Average loans held for investment			26,491				27,760				29,055				30,713				33,144

 

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

 

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

 

(10)	Calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible assets for the period. See “Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for additional information.

 

(11)

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 for the period. Our calculation of return on average common equity may not be comparable to similarly titled measures reported by other companies.

 

(12)

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 tangible common equity for the period. Our calculation of return on average tangible common equity may not be comparable to similarly titled measures reported by other companies. See “Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for additional information.

 

(13)	Calculated based on non-interest expense for the period divided by total net revenue for the period.

 

(14)

Effective Q2 2014, we changed our presentation from total full-time equivalent employees to total employees. All prior periods have been recast to conform to the current presentation. During this change, we determined that we had previously understated the total number of full-time equivalent employees by approximately 7%.

 

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

 

(16)

Beginning on January 1, 2014, we calculate our regulatory capital under Basel III Standardized Approach subject to transition provisions. We calculated regulatory capital measures for periods prior to the first quarter of 2014 under Basel I. Ratios as of the end of Q2 2014 are preliminary and therefore subject to change. See “Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for information on the calculation of each of these ratios.

 

(17)	TCE ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for additional information.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 6: Average Balances, Net Interest Income and Net Interest Margin

 

		2014 Q2												2014 Q1												2013 Q2
(Dollars in millions) (unaudited)		Average Balance				Interest Income/ Expense(1)				Yield/ Rate(1)				Average Balance				Interest Income/ Expense(1)				Yield/ Rate(1)				Average Balance				Interest Income/ Expense(1)				Yield/ Rate(1)
Interest-earning assets:
Loans, including loans held for sale		$	195,322			$	4,279				8.76	%		$	194,020			$	4,307				8.88	%		$	196,874			$	4,596				9.34	%
Investment securities			62,518				409				2.62				62,124				416				2.68				63,907				391				2.45
Cash equivalents and other			5,730				24				1.68				6,515				30				1.84				5,763				23				1.60
Total interest-earning assets		$	263,570			$	4,712				7.15			$	262,659			$	4,753				7.24			$	266,544			$	5,010				7.52
Interest-bearing liabilities:
Interest-bearing deposits		$	182,053			$	272				0.60			$	184,183			$	276				0.60			$	189,311			$	318				0.67
Securitized debt obligations			10,731				39				1.45				10,418				38				1.46				10,942				45				1.65
Senior and subordinated notes			16,004				78				1.95				14,162				77				2.17				12,692				82				2.58
Other borrowings			8,923				8				0.36				11,398				12				0.42				13,281				12				0.36
Total interest-bearing liabilities		$	217,711			$	397				0.73			$	220,161			$	403				0.73			$	226,226			$	457				0.81
Net interest income/spread						$	4,315				6.42							$	4,350				6.51							$	4,553				6.71
Impact of non-interest bearing funding											0.13												0.11												0.12
Net interest margin											6.55	%											6.62	%											6.83	%

 

		Six Months Ended June 30,
		2014												2013
(Dollars in millions) (unaudited)		Average Balance				Interest Income/ Expense(1)				Yield/ Rate(1)				Average Balance				Interest Income/ Expense(1)				Yield/ Rate(1)
Interest-earning assets:
Loans, including loans held for sale		$	194,674			$	8,586				8.82	%		$	198,648			$	9,245				9.31	%
Investment securities			62,322				825				2.65				63,930				765				2.39
Cash equivalents and other			6,123				54				1.76				6,430				51				1.59
Total interest-earning assets		$	263,119			$	9,465				7.19			$	269,008			$	10,061				7.48
Interest-bearing liabilities:
Interest-bearing deposits		$	182,431			$	548				0.60			$	189,958			$	644				0.68
Securitized debt obligations			10,576				77				1.46				11,348				101				1.78
Senior and subordinated notes			15,088				155				2.05				12,340				164				2.66
Other borrowings			10,153				20				0.39				15,544				29				0.37
Total interest-bearing liabilities		$	218,248			$	800				0.73			$	229,190			$	938				0.82
Net interest income/spread						$	8,665				6.46							$	9,123				6.66
Impact of non-interest bearing funding											0.13												0.12
Net interest margin											6.59	%											6.78	%

 

 

(1)	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.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics⁽¹⁾

 

																						2014 Q2 vs.
(Dollars in millions) (unaudited)		2014 Q2				2014 Q1				2013 Q4				2013 Q3				2013 Q2				2014 Q1				2013 Q2
Period-end Loans Held For Investment
Credit card:
Domestic credit card		$	71,165			$	68,275			$	73,255			$	69,936			$	70,490				4	%			1	%
International credit card			7,853				7,575				8,050				8,031				7,820				4				—
Total credit card			79,018				75,850				81,305				77,967				78,310				4				1
Consumer banking:
Auto			34,792				33,080				31,857				30,803				29,369				5				18
Home loan			32,644				34,035				35,282				36,817				39,163				(4	)			(17	)
Retail banking			3,626				3,612				3,623				3,665				3,686				—				(2	)
Total consumer banking			71,062				70,727				70,762				71,285				72,218				—				(2	)
Commercial banking:
Commercial and multifamily real estate			22,040				21,256				20,750				19,523				18,570				4				19
Commercial and industrial			25,402				24,064				23,309				21,848				21,170				6				20
Total commercial lending			47,442				45,320				44,059				41,371				39,740				5				19
Small-ticket commercial real estate			879				910				952				1,028				1,065				(3	)			(17	)
Total commercial banking			48,321				46,230				45,011				42,399				40,805				5				18
Other loans			127				134				121				163				179				(5	)			(29	)
Total loans held for investment		$	198,528			$	192,941			$	197,199			$	191,814			$	191,512				3				4
Average Loans Held For Investment
Credit card:
Domestic credit card		$	69,376			$	69,810			$	70,368			$	69,947			$	69,966				(1	)			(1	)
International credit card			7,621				7,692				7,899				7,782				7,980				(1	)			(4	)
Total credit card			76,997				77,502				78,267				77,729				77,946				(1	)			(1	)
Consumer banking:
Auto			33,972				32,387				31,424				30,157				28,677				5				18
Home loan			33,299				34,646				35,974				37,852				40,532				(4	)			(18	)
Retail banking			3,613				3,630				3,635				3,655				3,721				—				(3	)
Total consumer banking			70,884				70,663				71,033				71,664				72,930				—				(3	)
Commercial banking:
Commercial and multifamily real estate			21,484				20,962				19,928				19,047				18,084				2				19
Commercial and industrial			24,611				23,541				22,445				21,491				20,332				5				21
Total commercial lending			46,095				44,503				42,373				40,538				38,416				4				20
Small-ticket commercial real estate			896				932				986				1,038				1,096				(4	)			(18	)
Total commercial banking			46,991				45,435				43,359				41,576				39,512				3				19
Other loans			124				122				154				166				174				2				(29	)
Total average loans held for investment		$	194,996			$	193,722			$	192,813			$	191,135			$	190,562				1				2
Net Charge-off Rates
Credit card:
Domestic credit card			3.52	%			4.01	%			3.89	%			3.67	%			4.28	%			(49	)bps			(76	)bps
International credit card			3.93				4.17				4.74				4.71				5.08				(24	)			(115	)
Total credit card			3.56				4.02				3.98				3.78				4.36				(46	)			(80	)
Consumer banking:
Auto			1.31				1.66				2.30				2.01				1.28				(35	)			3
Home loan			0.05				0.06				0.03				0.06				0.03				(1	)			2
Retail banking			0.70				0.95				1.09				1.38				1.50				(25	)			(80	)
Total consumer banking			0.69				0.84				1.09				0.95				0.60				(15	)			9
Commercial banking:
Commercial and multifamily real estate			0.00				0.01				(0.11	)			(0.11	)			0.04				(1	)			(4	)
Commercial and industrial			0.04				0.03				0.04				0.18				0.03				1				1
Total commercial lending			0.02				0.02				(0.03	)			0.04				0.03				—				(1	)
Small-ticket commercial real estate			0.61				0.67				(0.81	)			1.26				0.45				(6	)			16
Total commercial banking			0.03				0.04				(0.05	)			0.07				0.04				(1	)			(1	)
Other loans			2.18				(0.68	)			4.68				12.17				13.10				*	*			*	*
Total charge-off			1.67				1.92				2.01				1.92				2.03				(25	)			(36	)

 

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																						2014 Q2 vs.
(Dollars in millions) (unaudited)		2014 Q2				2014 Q1				2013 Q4				2013 Q3				2013 Q2				2014 Q1				2013 Q2
30+ Day Performing Delinquency Rates
Credit card:
Domestic credit card			2.83	%			3.02	%			3.43	%			3.46	%			3.05	%			(19	)bps			(22	)bps
International credit card			3.40				3.59				3.71				3.86				3.84				(19	)			(44	)
Total credit card			2.89				3.08				3.46				3.51				3.13				(19	)			(24	)
Consumer banking:
Auto			5.77				5.29				6.85				6.29				6.03				48				(26	)
Home loan			0.13				0.12				0.16				0.14				0.12				1				1
Retail banking			0.48				0.74				0.69				0.68				0.68				(26	)			(20	)
Total consumer banking			2.91				2.57				3.20				2.82				2.55				34				36
Nonperforming Assets Rates(2)
Credit card:
International credit card			1.03				1.07				1.10				1.16				1.20				(4	)			(17	)
Total credit card			0.10				0.11				0.11				0.12				0.12				(1	)			(2	)
Consumer banking:
Auto(3)			0.88				0.81				1.11				0.92				0.81				7				7
Home loan			1.16				1.17				1.14				1.08				1.08				(1	)			8
Retail banking			0.79				1.15				1.13				1.10				1.11				(36	)			(32	)
Total consumer banking			1.01				1.00				1.12				1.01				0.97				1				4
Commercial banking:
Commercial and multifamily real estate			0.32				0.31				0.29				0.40				0.56				1				(24	)
Commercial and industrial			0.45				0.40				0.44				0.65				0.65				5				(20	)
Total commercial lending			0.39				0.35				0.37				0.53				0.61				4				(22	)
Small-ticket commercial real estate			1.40				0.73				0.43				1.49				1.11				67				29
Total commercial banking			0.41				0.36				0.37				0.56				0.62				5				(21	)
Total nonperforming assets			0.55				0.54				0.58				0.60				0.58				1				(3	)

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial Summary—Business Segments⁽¹⁾

 

		Three Months Ended June 30, 2014
(Dollars in millions) (unaudited)		Total				Credit Card				Consumer     Banking				Commercial     Banking				Other
Earnings:
Net interest income (expense)		$	4,315			$	2,461			$	1,431			$	436			$	(13	)
Non-interest income			1,153				839				170				109				35
Total net revenue(4)			5,468				3,300				1,601				545				22
Provision for credit losses			704				549				143				12				—
Non-interest expense			2,979				1,719				938				267				55
Income (loss) from continuing operations before taxes			1,785				1,032				520				266				(33	)
Income tax provision (benefit)			581				364				186				95				(64	)
Income from continuing operations, net of tax		$	1,204			$	668			$	334			$	171			$	31
		Three Months Ended March 31, 2014
(Dollars in millions) (unaudited)		Total				Credit Card				Consumer Banking				Commercial Banking				Other
Earnings:
Net interest income (expense)		$	4,350			$	2,525			$	1,433			$	421			$	(29	)
Non-interest income (expense)			1,020				785				150				87				(2	)
Total net revenue (loss)(4)			5,370				3,310				1,583				508				(31	)
Provision (benefit) for credit losses			735				558				140				40				(3	)
Non-interest expense			2,932				1,726				930				255				21
Income (loss) from continuing operations before taxes			1,703				1,026				513				213				(49	)
Income tax provision (benefit)			579				358				183				76				(38	)
Income (loss) from continuing operations, net of tax		$	1,124			$	668			$	330			$	137			$	(11	)
		Three Months Ended June 30, 2013
(Dollars in millions) (unaudited)		Total				Credit Card				Consumer Banking				Commercial Banking				Other
Earnings:
Net interest income (expense)		$	4,553			$	2,804			$	1,478			$	402			$	(131	)
Non-interest income (expense)			1,085				832				189				93				(29	)
Total net revenue (loss)(4)			5,638				3,636				1,667				495				(160	)
Provision (benefit) for credit losses			762				713				67				(14	)			(4	)
Non-interest expense			3,018				1,819				910				228				61
Income (loss) from continuing operations before taxes			1,858				1,104				690				281				(217	)
Income tax provision (benefit)			631				385				246				100				(100	)
Income (loss) from continuing operations, net of tax		$	1,227			$	719			$	444			$	181			$	(117	)

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary—Credit Card Business⁽¹⁾

 

																						2014 Q2 vs.
(Dollars in millions) (unaudited)		2014     Q2				2014     Q1				2013     Q4				2013     Q3				2013     Q2				2014     Q1				2013     Q2
Credit Card
Earnings:
Net interest income		$	2,461			$	2,525			$	2,576			$	2,757			$	2,804				(3	)%			(12	)%
Non-interest income			839				785				833				834				832				7				1
Total net revenue			3,300				3,310				3,409				3,591				3,636				—				(9	)
Provision for credit losses			549				558				751				617				713				(2	)			(23	)
Non-interest expense			1,719				1,726				1,868				1,904				1,819				—				(5	)
Income from continuing operations before taxes			1,032				1,026				790				1,070				1,104				1				(7	)
Income tax provision			364				358				274				376				385				2				(5	)
Income from continuing operations, net of tax		$	668			$	668			$	516			$	694			$	719				—				(7	)
Selected performance metrics:
Period-end loans held for investment		$	79,018			$	75,850			$	81,305			$	77,967			$	78,310				4				1
Average loans held for investment			76,997				77,502				78,267				77,729				77,946				(1	)			(1	)
Average yield on loans held for investment(5)			14.22	%			14.43	%			14.64	%			15.72	%			15.94	%			(21	)bps			(172	)bps
Total net revenue margin(6)			17.14				17.08				17.43				18.48				18.66				6				(152	)
Net charge-off rate			3.56				4.02				3.98				3.78				4.36				(46	)			(80	)
30+ day performing delinquency rate			2.89				3.08				3.46				3.51				3.13				(19	)			(24	)
30+ day delinquency rate			2.97				3.16				3.54				3.60				3.22				(19	)			(25	)
Nonperforming loan rate			0.10				0.11				0.11				0.12				0.12				(1	)			(2	)
Card loan premium amortization and other intangible accretion(7)		$	31			$	37			$	39			$	45			$	57				(16	)%			(46	)%
PCCR intangible amortization			94				98				102				106				110				(4	)			(15	)
Purchase volume(8)			56,358				47,434				54,245				50,943				50,788				19				11
Domestic Card
Earnings:
Net interest income		$	2,193			$	2,255			$	2,303			$	2,492			$	2,536				(3	)			(14	)
Non-interest income			768				702				747				749				737				9				4
Total net revenue			2,961				2,957				3,050				3,241				3,273				—				(10	)
Provision for credit losses			504				486				679				529				647				4				(22	)
Non-interest expense			1,513				1,545				1,664				1,713				1,635				(2	)			(7	)
Income from continuing operations before taxes			944				926				707				999				991				2				(5	)
Income tax provision			337				331				252				355				353				2				(5	)
Income from continuing operations, net of tax		$	607			$	595			$	455			$	644			$	638				2				(5	)
Selected performance metrics:
Period-end loans held for investment		$	71,165			$	68,275			$	73,255			$	69,936			$	70,490				4				1
Average loans held for investment			69,376				69,810				70,368				69,947				69,966				(1	)			(1	)
Average yield on loans held for investment(5)			13.95	%			14.19	%			14.44	%			15.65	%			15.91	%			(24	)bps			(196	)bps
Total net revenue margin(6)			17.07				16.94				17.34				18.53				18.71				13				(164	)
Net charge-off rate			3.52				4.01				3.89				3.67				4.28				(49	)			(76	)
30+ day performing delinquency rate			2.83				3.02				3.43				3.46				3.05				(19	)			(22	)
30+ day delinquency rate			2.83				3.02				3.43				3.46				3.05				(19	)			(22	)
Purchase volume(8)		$	52,653			$	44,139			$	50,377			$	47,420			$	47,273				19	%			11	%
International Card
Earnings:
Net interest income		$	268			$	270			$	273			$	265			$	268				(1	)			—
Non-interest income			71				83				86				85				95				(14	)			(25	)
Total net revenue			339				353				359				350				363				(4	)			(7	)
Provision for credit losses			45				72				72				88				66				(38	)			(32	)
Non-interest expense			206				181				204				191				184				14				12
Income from continuing operations before taxes			88				100				83				71				113				(12	)			(22	)
Income tax provision			27				27				22				21				32				—				(16	)
Income from continuing operations, net of tax		$	61			$	73			$	61			$	50			$	81				(16	)			(25	)
Selected performance metrics:
Period-end loans held for investment		$	7,853			$	7,575			$	8,050			$	8,031			$	7,820				4	%			—	%
Average loans held for investment			7,621				7,692				7,899				7,782				7,980				(1	)			(4	)
Average yield on loans held for investment			16.74	%			16.64	%			16.48	%			16.35	%			16.19	%			10	bps			55	bps
Total net revenue margin			17.76				18.38				18.20				17.99				18.20				(62	)			(44	)
Net charge-off rate			3.93				4.17				4.74				4.71				5.08				(24	)			(115	)
30+ day performing delinquency rate			3.40				3.59				3.71				3.86				3.84				(19	)			(44	)
30+ day delinquency rate			4.20				4.41				4.56				4.78				4.79				(21	)			(59	)
Nonperforming loan rate			1.03				1.07				1.10				1.16				1.20				(4	)			(17	)
Purchase volume(8)		$	3,705			$	3,295			$	3,868			$	3,523			$	3,515				12	%			5	%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

																						2014 Q2 vs.
(Dollars in millions) (unaudited)		2014     Q2				2014     Q1				2013     Q4				2013     Q3				2013     Q2				2014     Q1				2013     Q2
Consumer Banking
Earnings:
Net interest income		$	1,431			$	1,433			$	1,468			$	1,481			$	1,478				—	%			(3	)%
Non-interest income			170				150				195				184				189				13				(10	)
Total net revenue			1,601				1,583				1,663				1,665				1,667				1				(4	)
Provision for credit losses			143				140				212				202				67				2				113
Non-interest expense			938				930				1,018				927				910				1				3
Income from continuing operations before taxes			520				513				433				536				690				1				(25	)
Income tax provision			186				183				154				191				246				2				(24	)
Income from continuing operations, net of tax		$	334			$	330			$	279			$	345			$	444				1				(25	)
Selected performance metrics:
Period-end loans held for investment		$	71,062			$	70,727			$	70,762			$	71,285			$	72,218				—				(2	)
Average loans held for investment			70,884				70,663				71,033				71,664				72,930				—				(3	)
Average yield on loans held for investment			6.22	%			6.18	%			6.30	%			6.21	%			5.99	%			4	bps			23	bps
Auto loan originations		$	5,376			$	4,727			$	4,322			$	4,752			$	4,525				14	%			19	%
Period-end deposits			169,153				171,529				167,652				168,437				169,789				(1	)			—
Average deposits			169,694				168,676				167,870				169,082				170,733				1				(1	)
Average deposit interest rate			0.57	%			0.57	%			0.60	%			0.63	%			0.64	%			—	bps			(7	)bps
Core deposit intangible amortization		$	28			$	30			$	32			$	34			$	35				(7	)%			(20	)%
Net charge-off rate			0.69	%			0.84	%			1.09	%			0.95	%			0.60	%			(15	)bps			9	bps
30+ day performing delinquency rate			2.91				2.57				3.20				2.82				2.55				34				36
30+ day delinquency rate			3.49				3.14				3.89				3.46				3.15				35				34
Nonperforming loan rate			0.75				0.74				0.86				0.79				0.78				1				(3	)
Nonperforming asset rate(2)			1.01				1.00				1.12				1.01				0.97				1				4
Period-end loans serviced for others		$	6,944			$	6,868			$	7,665			$	14,043			$	14,313				1	%			(51	)%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Financial & Statistical Summary—Commercial Banking Business⁽¹⁾

 

																						2014 Q2 vs.
(Dollars in millions) (unaudited)		2014     Q2				2014     Q1				2013     Q4				2013     Q3				2013     Q2				2014     Q1				2013     Q2
Commercial Banking
Earnings:
Net interest income		$	436			$	421			$	447			$	424			$	402				4	%			8	%
Non-interest income			109				87				131				87				93				25				17
Total net revenue(4)(9)			545				508				578				511				495				7				10
Provision (benefit) for credit losses			12				40				(6	)			31				(14	)			(70	)				**
Non-interest expense			267				255				281				228				228				5				17
Income from continuing operations before taxes			266				213				303				252				281				25				(5	)
Income tax provision			95				76				108				90				100				25				(5	)
Income from continuing operations, net of tax		$	171			$	137			$	195			$	162			$	181				25				(6	)
Selected performance metrics:
Period-end loans held for investment		$	48,321			$	46,230			$	45,011			$	42,399			$	40,805				5				18
Average loans held for investment			46,991				45,435				43,359				41,576				39,512				3				19
Average yield on loans held for investment(9)			3.50	%			3.47	%			3.92	%			3.87	%			3.84	%			3	bps			(34	)bps
Period-end deposits		$	31,440			$	31,485			$	30,567			$	30,592			$	30,869				—	%			2	%
Average deposits			31,238				31,627				31,033				30,685				30,746				(1	)			2
Average deposit interest rate			0.24	%			0.25	%			0.25	%			0.27	%			0.26	%			(1	)bps			(2	)bps
Core deposit intangible amortization		$	5			$	6			$	6			$	6			$	8				(17	)%			(38	)%
Net charge-off rate			0.03	%			0.04	%			(0.05	)%			0.07	%			0.04	%			(1	)bps			(1	)bps
Nonperforming loan rate			0.38				0.33				0.33				0.47				0.60				5				(22	)
Nonperforming asset rate(2)			0.41				0.36				0.37				0.56				0.62				5				(21	)
Risk category:(10)
Noncriticized		$	46,689			$	44,904			$	43,593			$	40,940			$	39,168				4	%			19	%
Criticized performing			1,234				952				1,007				968				1,087				30				14
Criticized nonperforming			181				150				149				201				244				21				(26	)
Total risk-rated loans			48,104				46,006				44,749				42,109				40,499				5				19
Acquired commercial loans			217				224				262				290				306				(3	)			(29	)
Total commercial loans		$	48,321			$	46,230			$	45,011			$	42,399			$	40,805				5				18
% of period-end commercial loans held for investment:
Noncriticized			96.6	%			97.1	%			96.9	%			96.5	%			96.0	%			(50	)bps			60	bps
Criticized performing			2.6				2.1				2.2				2.3				2.7				50				(10	)
Criticized nonperforming			0.4				0.3				0.3				0.5				0.6				10				(20	)
Total risk-rated loans			99.6				99.5				99.4				99.3				99.3				10				30
Acquired commercial loans			0.4				0.5				0.6				0.7				0.7				(10	)			(30	)
Total commercial loans			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			—				—

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 12: Financial & Statistical Summary—Other and Total⁽¹⁾

 

																						2014 Q2 vs.
(Dollars in millions) (unaudited)		2014 Q2				2014 Q1				2013 Q4				2013 Q3				2013 Q2				2014     Q1				2013     Q2
Other
Earnings:
Net interest expense		$	(13	)		$	(29	)		$	(68	)		$	(102	)		$	(131	)			(55	)%			(90	)%
Non-interest income			35				(2	)			(38	)			(14	)			(29	)			**				**
Total net revenue (loss)(4)			22				(31	)			(106	)			(116	)			(160	)			**				**
Provision (benefit) for credit losses			—				(3	)			—				(1	)			(4	)			**				**
Non-interest expense			55				21				68				50				61				162				(10	)
Loss from continuing operations before taxes			(33	)			(49	)			(174	)			(165	)			(217	)			(33	)			(85	)
Income tax benefit			(64	)			(38	)			(59	)			(82	)			(100	)			68				(36	)
Income (loss) from continuing operations, net of tax		$	31			$	(11	)		$	(115	)		$	(83	)		$	(117	)			**				**
Selected performance metrics:
Period-end loans held for investment		$	127			$	134			$	121			$	163			$	179				(5	)			(29	)
Average loans held for investment			124				122				154				166				174				2				(29	)
Period-end deposits			5,297				5,310				6,304				7,805				9,207				—				(42	)
Average deposits			5,383				5,539				6,803				8,573				9,171				(3	)			(41	)
Total
Earnings:
Net interest income		$	4,315			$	4,350			$	4,423			$	4,560			$	4,553				(1	)			(5	)
Non-interest income			1,153				1,020				1,121				1,091				1,085				13				6
Total net revenue			5,468				5,370				5,544				5,651				5,638				2				(3	)
Provision for credit losses			704				735				957				849				762				(4	)			(8	)
Non-interest expense			2,979				2,932				3,235				3,109				3,018				2				(1	)
Income from continuing operations before taxes			1,785				1,703				1,352				1,693				1,858				5				(4	)
Income tax provision			581				579				477				575				631				—				(8	)
Income from continuing operations, net of tax		$	1,204			$	1,124			$	875			$	1,118			$	1,227				7				(2	)
Selected performance metrics:
Period-end loans held for investment		$	198,528			$	192,941			$	197,199			$	191,814			$	191,512				3				4
Average loans held for investment			194,996				193,722				192,813				191,135				190,562				1				2
Period-end deposits			205,890				208,324				204,523				206,834				209,865				(1	)			(2	)
Average deposits			206,315				205,842				205,706				208,340				210,650				—				(2	)

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 13: Notes to Loan and Business Segments Disclosures (Tables 7—12)

 

**	Not meaningful.

 

(1)	Certain prior period amounts have been recast to conform to the current period presentation.

 

(2)

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. Nonperforming assets related to acquired loans are excluded from the calculation for our home loans and auto businesses.

 

(3)	Includes the net realizable value of auto loans that have been charged down as a result of a bankruptcy filing and repossessed assets obtained in satisfaction of auto loans.

 

(4)

Commercial Banking revenue related to qualified housing credits is presented on a taxable-equivalent basis. As a result of the adoption of ASU 2014-01 “Accounting for Investments in Qualified Affordable Housing Projects” as of January 1, 2014, losses related to these investments are now recognized, along with the associated tax benefits, as a component of income taxes attributable to continuing operations instead of non-interest expense. As such, losses related to these investments decrease the overall tax benefits recognized as a component of income taxes attributable to continuing operations and taxable-equivalent revenue in the Commercial Banking segment. This decrease in revenue is offset by an increase in revenue in the Other segment. Prior period amounts have been recast to conform to this presentation.

 

(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 Credit Card of 121 basis points and 110 basis points, respectively, in Q3 2013, 168 basis points and 152 basis points, respectively, in Q2 2013 and 107 basis points and 97 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 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 Credit Card of 136 basis points and 123 basis points, respectively, in Q3 2013, 188 basis points and 169 basis points, respectively, in Q2 2013 and 123 basis points and 112 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.

 

(7)	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.

 

(8)	Includes credit card purchase transactions, net of returns for both loans classified as held for investment and held for sale. Excludes cash advance and balance transfer transactions.

 

(9)

Some of our tax-related commercial investments generate tax-exempt income or tax credits. Accordingly, we make certain reclassifications within our Commercial Banking business results to present revenues and yields on a taxable-equivalent basis, calculated assuming an effective tax rate approximately equal to our federal statutory tax rate of 35%.

 

(10)	Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures

Beginning on January 1, 2014, we calculate our regulatory capital under Basel III Standardized Approach subject to transition provisions. Prior to January 1, 2014, we calculated regulatory capital under Basel I as shown below:

 

		Basel III Standardized										Basel I
(Dollars in millions) (unaudited)		2014     Q2				2014     Q1						2013 Q4				2013 Q3				2013 Q2
Regulatory Capital Metrics(3)
Common equity Tier 1 capital		$	28,774			$	28,434						n/a				n/a				n/a
Tier 1 common capital			n/a				n/a					$	27,375			$	27,383			$	26,458
Tier 1 capital		$	30,111			$	29,257						28,230				28,238				27,313
Total risk-based capital(1)			34,737				33,784						32,987				32,881				32,210
Risk-weighted assets(2)			226,221				219,047						224,556				215,809				220,150
Average assets for the leverage ratio			281,345				280,907						280,574				281,978				282,962
Capital Ratios(3)
Common equity Tier 1 capital ratio(4)			12.7	%			13.0	%					n/a				n/a				n/a
Tier 1 common ratio			n/a				n/a						12.2	%			12.7	%			12.0	%
Tier 1 risk-based capital ratio(5)			13.3	%			13.4	%					12.6				13.1				12.4
Total risk-based capital ratio(6)			15.4				15.4						14.7				15.2				14.6
Tier 1 leverage ratio(7)			10.7				10.4						10.1				10.0				9.7
Tangible common equity (“TCE”) ratio(8)			9.5				9.6						8.9				9.1				8.6

Reconciliation of Non-GAAP Measures

We report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include tangible common equity (“TCE”) and tangible assets. The tables below provide the details of the calculation of our non-GAAP capital measures and regulatory capital. 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.

 

(Dollars in millions) (unaudited)		2014 Q2				2014 Q1				2013 Q4				2013 Q3				2013 Q2
Tangible Common Equity (Average)
Average stockholders’ equity		$	43,767			$	42,859			$	42,355			$	41,185			$	41,490
Average goodwill and other intangible assets(9)			(15,615)				(15,727)				(15,847)				(15,829)				(15,974)
Noncumulative perpetual preferred stock(10)			(970)				(853)				(853)				(853)				(853)
Average tangible common equity		$	27,182			$	26,279			$	25,655			$	24,503			$	24,663
Tangible Common Equity (Period End)
Stockholders’ equity		$	43,815			$	42,801			$	41,632			$	41,645			$	40,947
Goodwill and other intangible assets(9)			(15,564)				(15,666)				(15,784)				(15,760)				(15,872)
Noncumulative perpetual preferred stock(10)			(1,338)				(853)				(853)				(853)				(853)
Tangible common equity		$	26,913			$	26,282			$	24,995			$	25,032			$	24,222
Tangible Assets (Average)
Average total assets		$	294,744			$	294,275			$	294,040			$	294,919			$	297,748
Average goodwill and other intangible assets(9)			(15,615)				(15,727)				(15,847)				(15,829)				(15,974)
Average tangible assets		$	279,129			$	278,548			$	278,193			$	279,090			$	281,774
Tangible Assets (Period End)
Total assets		$	298,317			$	290,500			$	296,933			$	289,866			$	296,524
Goodwill and other intangible assets(9)			(15,564)				(15,666)				(15,784)				(15,760)				(15,872)
Tangible assets		$	282,753			$	274,834			$	281,149			$	274,106			$	280,652

 

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Table of Contents

Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach⁽³⁾

 

(Dollars in millions) (unaudited)		2014 Q2				2014 Q1
Common equity excluding AOCI		$	42,848			$	42,658
Adjustments:
AOCI(11)(12)			6				(182	)
Goodwill(9)			(13,811	)			(13,811	)
Intangible assets(9)(12)			(289	)			(314	)
Other			20				83
Common equity Tier 1 capital		$	28,774			$	28,434
Risk-weighted assets		$	226,221			$	219,047
Common equity Tier 1 capital ratio(4)			12.7	%			13.0	%

 

 

(1)	Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.

 

(2)	Risk-weighted assets continue to be calculated based on Basel I in 2014.

 

(3)	Regulatory capital metrics as of the end of Q2 2014 are preliminary and therefore subject to change.

 

(4)	Common equity Tier 1 capital ratio is a regulatory measure calculated based on Common equity Tier 1 capital divided by risk-weighted assets.

 

(5)	Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.

 

(6)	Total risk-based capital ratio is a regulatory capital measure calculated based on Total risk-based capital divided by risk-weighted assets.

 

(7)	Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments.

 

(8)	TCE ratio is a non-GAAP measure calculated based on TCE divided by tangible assets.

 

(9)	Includes impact of related deferred taxes.

 

(10)	Includes related surplus.

 

(11)	Amounts presented are net of tax.

 

(12)	Amounts based on transition provisions for regulatory capital deductions and adjustments of 20% for 2014.