SEC Filing | Capital One Financial Corp.

View:

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

___________________

FORM 8-K

___________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

July 19, 2018

Date of Report (Date of earliest event reported)

_____________________________________________

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

___________________



Delaware	1-13300	54-1719854
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS 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)

(Not applicable)

___________________

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):


o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02. Results of Operations and Financial Condition.

On July 19, 2018, Capital One Financial Corporation (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2018. 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 19, 2018 – Second Quarter 2018
99.2		Financial Supplement – Second Quarter 2018

Earnings Conference Call Webcast Information.

The Company will hold an earnings conference call on July 19, 2018 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. A replay of the webcast will be archived on the Company’s website through August 2, 2018 at 5:00 PM 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 19, 2018	By:	/s/ R. SCOTT BLACKLEY
		R. Scott Blackley
		Chief Financial Officer

EXHIBIT INDEX



Exhibit		Description
99.1		Press Release, dated July 19, 2018 – Second Quarter 2018
99.2		Financial Supplement – Second Quarter 2018

Exhibit

Capital One Second Quarter 2018 Earnings

Page 1

Exhibit 99.1

News Release

https://cdn.kscope.io/6f932a2ae21b8b13688cfe0f550c3d5e-earningsslidesvfinal1a45.jpg



Contacts:
Investor Relations		Media Relations
Jeff Norris	Danielle Dietz	Sie Soheili	Tatiana Stead
703.720.2455	703.720.2455	703.720.3929	703.720.2352

FOR IMMEDIATE RELEASE: July 19, 2018

Capital One Reports Second Quarter 2018 Net Income of $1.9 billion,
or $3.71 per share

Excluding adjusting items, Second Quarter 2018 Net Income of $3.22 per share⁽¹⁾

McLean, Va. (July 19, 2018) – Capital One Financial Corporation (NYSE: COF) today announced net income for the second quarter of 2018 of $1.9 billion, or $3.71 per diluted common share, compared with net income of $1.3 billion, or $2.62 per diluted common share, in the first quarter of 2018, and with net income of $1.0 billion, or $1.94 per diluted common share, in the second quarter of 2017. Excluding adjusting items, net income for the second quarter of 2018 was $3.22 per diluted common share⁽¹⁾.

“Capital One delivered another quarter of strong financial performance as we continued to invest to grow and drive our digital transformation,” said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. “We saw credit improvement across our businesses, and growth math is now helping overall domestic credit card trends .”

All comparisons below are for the second quarter of 2018 compared with the first quarter of 2018 unless otherwise noted.

Second Quarter 2018 Income Statement Summary:


•	Total net revenue increased 4 percent to $7.2 billion.


•	Recognized $400 million net gain on the sale of the substantial majority of our consumer home loan portfolio.


•	Total non-interest expense decreased 4 percent to $3.4 billion:


◦	5 percent decrease in operating expenses.


◦	3 percent increase in marketing.


•	Pre-provision earnings increased 13 percent to $3.8 billion⁽²⁾.


⁽¹⁾	Amounts excluding adjusting items are non-GAAP measures that we believe help investors and users of our financial information understand the effect of adjusting items on our selected reported results and provide alternate measurements of our performance. See Table 15 in Exhibit 99.2 for a reconciliation of our selected reported results to these non-GAAP measures.


⁽²⁾	Pre-provision earnings is calculated based on the sum of net interest income and non-interest income, less non-interest expense for the period.

Capital One Second Quarter 2018 Earnings

Page 2


•	Provision for credit losses decreased 24 percent to $1.3 billion:


◦	Net charge-offs of $1.5 billion.


◦	$183 million reserve release.


•	Net interest margin of 6.66 percent, down 27 basis points.


•	Efficiency ratio of 47.61 percent.


◦	Efficiency ratio excluding adjusting items was 49.28 percent⁽¹⁾.


•	Operating efficiency ratio of 41.70 percent.


◦	Operating efficiency ratio excluding adjusting items was 43.08 percent⁽¹⁾.

Second Quarter 2018 Balance Sheet Summary:


•	Common equity Tier 1 capital ratio under Basel III Standardized Approach of 11.1 percent at June 30, 2018.


•	Period-end loans held for investment in the quarter decreased $12.1 billion, or 5 percent, to $236.1 billion.


◦	Credit Card period-end loans increased $2.2 billion, or 2 percent, to $109.8 billion.


•	Domestic Card period-end loans increased $2.2 billion, or 2 percent, to $100.7 billion.


◦	Consumer Banking period-end loans decreased $15.9 billion, or 21 percent, to $58.7 billion:


•	Auto period-end loans increased $970 million, or 2 percent, to $55.8 billion.


•	Home loans period-end loans decreased $16.6 billion, driven by the sale of the substantial majority of our consumer home loan portfolio and the transfer of remaining portfolio to loans held for sale.


◦	Commercial Banking period-end loans increased $1.7 billion, or 3 percent, to $67.6 billion.


•	Average loans held for investment in the quarter decreased $9.0 billion, or 4 percent, to $240.8 billion.


◦	Credit Card average loans decreased $1.6 billion, or 1 percent, to $107.9 billion.


•	Domestic Card average loans decreased $1.6 billion, or 2 percent, to $98.9 billion.


◦	Consumer Banking average loans decreased $8.5 billion, or 11 percent, to $66.5 billion:


•	Auto average loans increased $954 million, or 2 percent, to $55.3 billion.


•	Home loans average loans decreased $9.1 billion, or 53 percent, to $8.1 billion, driven by the sale of the substantial majority of our consumer home loan portfolio and the transfer of remaining portfolio to loans held for sale.


◦	Commercial Banking average loans increased $1.2 billion, or 2 percent, to $66.4 billion.


•	Period-end total deposits decreased $2.6 billion, or 1 percent, to $248.2 billion, while average deposits increased $3.5 billion, or 1 percent, to $248.8 billion.


•	Interest-bearing deposits rate paid increased 14 basis points to 1.12 percent.


⁽¹⁾	Amounts excluding adjusting items are non-GAAP measures that we believe help investors and users of our financial information understand the effect of adjusting items on our selected reported results and provide alternate measurements of our performance. See Table 15 in Exhibit 99.2 for a reconciliation of our selected reported results to these non-GAAP measures.

Capital One Second Quarter 2018 Earnings

Page 3

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on July 19, 2018 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 August 2, 2018 at 5:00 PM Eastern Time.

Forward-Looking Statements

Certain statements in this release may constitute forward-looking statements, which involve a number of risks and uncertainties. Capital One cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information due to a number of factors, including those listed from time to time in reports that Capital One files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2017.

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 $248.2 billion in deposits and $364.0 billion in total assets as of June 30, 2018. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has branches located primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol “COF” and is included in the S&P 100 index.

###

Exhibit

Exhibit 99.2

Capital One Financial Corporation

Financial Supplement⁽¹⁾⁽²⁾

Second Quarter2018

Table of Contents



Capital One Financial Corporation Consolidated Results			Page
	Table 1:	Financial Summary—Consolidated	1
	Table 2:	Selected Metrics—Consolidated	3
	Table 3:	Consolidated Statements of Income	4
	Table 4:	Consolidated Balance Sheets	5
	Table 5:	Notes to Financial Summary, Selected Metrics and Consolidated Financial Statements (Tables 1—4)	7
	Table 6:	Average Balances, Net Interest Income and Net Interest Margin	8
	Table 7:	Loan Information and Performance Statistics	9
	Table 8:	Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity	11
Business Segment Results
	Table 9:	Financial Summary—Business Segment Results	12
	Table 10:	Financial & Statistical Summary—Credit Card Business	13
	Table 11:	Financial & Statistical Summary—Consumer Banking Business	15
	Table 12:	Financial & Statistical Summary—Commercial Banking Business	16
	Table 13:	Financial & Statistical Summary—Other and Total	17
	Table 14:	Notes to Loan, Allowance and Business Segment Disclosures (Tables 7—13)	18
Other
	Table 15:	Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures	19

__________


⁽¹⁾	The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation. Investors should refer to our Quarterly Report on Form 10-Q for the period ended June 30, 2018 once it is filed with the Securities and Exchange Commission.

⁽²⁾

This Financial Supplement includes non-GAAP measures. We believe these non-GAAP measures are useful to investors and users of our financial information as they provide an alternate measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non-GAAP measures should not be viewed as a substitute for reported results determined in accordance with generally accepted accounting principles in the U.S. (“GAAP”), nor are they necessarily comparable to non-GAAP measures that may be presented by other companies.

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated



																2018 Q2 vs.				Six Months Ended June 30,
(Dollars in millions, except per share data and as noted)	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except per share data and as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Income Statement
Net interest income	$	5,551		$	5,718		$	5,813		$	5,700		$	5,473		(3	)%	1	%	$	11,269		$	10,947		3	%
Non-interest income	1,641			1,191			1,200			1,285			1,231			38		33		2,832			2,292			24
Total net revenue⁽¹⁾	7,192			6,909			7,013			6,985			6,704			4		7		14,101			13,239			7
Provision for credit losses	1,276			1,674			1,926			1,833			1,800			(24	)	(29	)	2,950			3,792			(22	)
Non-interest expense:
Marketing	425			414			460			379			435			3		(2	)	839			831			1
Operating expenses	2,999			3,159			3,319			3,188			2,979			(5	)	1		6,158			6,017			2
Total non-interest expense	3,424			3,573			3,779			3,567			3,414			(4	)	—		6,997			6,848			2
Income from continuing operations before income taxes	2,492			1,662			1,308			1,585			1,490			50		67		4,154			2,599			60
Income tax provision	575			319			2,170			448			443			80		30		894			757			18
Income (loss) from continuing operations, net of tax	1,917			1,343			(862		)	1,137			1,047			43		83		3,260			1,842			77
Income (loss) from discontinued operations, net of tax	(11		)	3			(109		)	(30		)	(11		)	**		—		(8		)	4			**
Net income (loss)	1,906			1,346			(971		)	1,107			1,036			42		84		3,252			1,846			76
Dividends and undistributed earnings allocated to participating securities⁽²⁾	(12		)	(10		)	(1		)	(8		)	(8		)	20		50		(23		)	(13		)	77
Preferred stock dividends	(80		)	(52		)	(80		)	(52		)	(80		)	54		—		(132		)	(133		)	(1	)
Net income (loss) available to common stockholders	$	1,814		$	1,284		$	(1,052	)	$	1,047		$	948		41		91		$	3,097		$	1,700		82
Common Share Statistics
Basic earnings per common share:⁽²⁾
Net income (loss) from continuing operations	$	3.76		$	2.63		$	(1.95	)	$	2.22		$	1.98		43	%	90	%	$	6.39		$	3.51		82	%
Income (loss) from discontinued operations	(0.02		)	0.01			(0.22		)	(0.06		)	(0.02		)	**		—		(0.02		)	0.01			**
Net income (loss) per basic common share	$	3.74		$	2.64		$	(2.17	)	$	2.16		$	1.96		42		91		$	6.37		$	3.52		81
Diluted earnings per common share:⁽²⁾
Net income (loss) from continuing operations	$	3.73		$	2.61		$	(1.95	)	$	2.20		$	1.96		43		90		$	6.35		$	3.48		82
Income (loss) from discontinued operations	(0.02		)	0.01			(0.22		)	(0.06		)	(0.02		)	**		—		(0.02		)	0.01			**
Net income (loss) per diluted common share	$	3.71		$	2.62		$	(2.17	)	$	2.14		$	1.94		42		91		$	6.33		$	3.49		81
Weighted-average common shares outstanding (in millions):
Basic	485.1			486.9			485.7			484.9			484.0			—		—		485.9			483.1			1
Diluted	488.3			490.8			485.7			489.0			488.1			(1	)	—		489.6			487.7			—
Common shares outstanding (period-end, in millions)	478.4			485.9			485.5			484.4			483.7			(2	)	(1	)	478.4			483.7			(1	)
Dividends declared and paid per common share	$	0.40		$	0.40		$	0.40		$	0.40		$	0.40		—		—		$	0.80		$	0.80		—
Tangible book value per common share (period-end)⁽³⁾	63.86			61.29			60.28			63.06			60.94			4		5		63.86			60.94			5



											2018 Q2 vs.				Six Months Ended June 30,
(Dollars in millions)	2018		2018		2017		2017		2017		2018		2017						2018 vs.
(Dollars in millions)	Q2		Q1		Q4		Q3		Q2		Q1		Q2		2018		2017		2017
Balance Sheet (Period-End)
Loans held for investment	$	236,124	$	248,256	$	254,473	$	252,422	$	244,302	(5	)%	(3	)%	$	236,124	$	244,302	(3	)%
Interest-earning assets	332,167		332,251		334,124		329,002		319,286		—		4		332,167		319,286		4
Total assets	363,989		362,857		365,693		361,402		350,593		—		4		363,989		350,593		4
Interest-bearing deposits	222,605		224,671		217,298		212,956		213,810		(1	)	4		222,605		213,810		4
Total deposits	248,225		250,847		243,702		239,062		239,763		(1	)	4		248,225		239,763		4
Borrowings	53,310		50,693		60,281		59,458		49,954		5		7		53,310		49,954		7
Common equity	45,566		44,842		44,370		45,794		44,777		2		2		45,566		44,777		2
Total stockholders’ equity	49,926		49,203		48,730		50,154		49,137		1		2		49,926		49,137		2
Balance Sheet (Average Balances)
Loans held for investment	$	240,758	$	249,726	$	252,566	$	245,822	$	242,241	(4	)%	(1	)%	$	245,218	$	241,875	1	%
Interest-earning assets	333,495		330,183		330,742		322,015		318,078		1		5		331,850		318,215		4
Total assets	363,929		362,049		363,045		355,191		349,891		1		4		362,988		350,761		3
Interest-bearing deposits	223,079		219,670		215,258		213,137		214,412		2		4		221,384		213,696		4
Total deposits	248,790		245,270		241,562		238,843		240,550		1		3		247,040		239,555		3
Borrowings	52,333		54,588		58,109		54,271		48,838		(4	)	7		53,454		51,085		5
Common equity	45,466		44,670		46,350		45,816		44,645		2		2		45,070		44,241		2
Total stockholders’ equity	49,827		49,031		50,710		50,176		49,005		2		2		49,431		48,602		2

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated



																2018 Q2 vs.				Six Months Ended June 30,
(Dollars in millions, except as noted)	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Performance Metrics
Net interest income growth (period over period)	(3		)%	(2		)%	2		%	4		%	—			**		**		3		%	8		%	**
Non-interest income growth (period over period)	38			(1		)	(7		)	4			16		%	**		**		24			(1		)	**
Total net revenue growth (period over period)	4			(1		)	—			4			3			**		**		7			6			**
Total net revenue margin⁽⁴⁾	8.63			8.37			8.48			8.68			8.43			26	bps	20	bps	8.50			8.32			18	bps
Net interest margin⁽⁵⁾	6.66			6.93			7.03			7.08			6.88			(27	)	(22	)	6.79			6.88			(9	)
Return on average assets	2.11			1.48			(0.95		)	1.28			1.20			63		91		1.80			1.05			75
Return on average tangible assets⁽⁶⁾	2.20			1.55			(0.99		)	1.34			1.25			65		95		1.87			1.10			77
Return on average common equity⁽⁷⁾	16.06			11.47			(8.14		)	9.40			8.59			5	%	7	%	13.78			7.67			6	%
Return on average tangible common equity⁽⁸⁾	23.99			17.32			(12.12		)	14.11			13.09			7		11		20.70			11.75			9
Non-interest expense as a percentage of average loans held for investment	5.69			5.72			5.98			5.80			5.64			(3	)bps	5	bps	5.71			5.66			5	bps
Efficiency ratio⁽⁹⁾	47.61			51.72			53.89			51.07			50.92			(4	)%	(3	)%	49.62			51.73			(2	)%
Operating efficiency ratio⁽¹⁰⁾	41.70			45.72			47.33			45.64			44.44			(4	)	(3	)	43.67			45.45			(2	)
Effective income tax rate for continuing operations	23.1			19.2			165.9			28.3			29.7			4		(7	)	21.5			29.1			(8	)
Employees (in thousands), period-end	47.8			47.9			49.3			50.4			49.9			—		(4	)	47.8			49.9			(4	)
Credit Quality Metrics
Allowance for loan and lease losses	$	7,368		$	7,567		$	7,502		$	7,418		$	7,170		(3	)%	3	%	$	7,368		$	7,170		3	%
Allowance as a percentage of loans held for investment	3.12		%	3.05		%	2.95		%	2.94		%	2.93		%	7	bps	19	bps	3.12		%	2.93		%	19	bps
Net charge-offs	$	1,459		$	1,618		$	1,828		$	1,606		$	1,618		(10	)%	(10	)%	$	3,077		$	3,128		(2	)%
Net charge-off rate⁽¹¹⁾	2.42		%	2.59		%	2.89		%	2.61		%	2.67		%	(17	)bps	(25	)bps	2.51		%	2.59		%	(8	)bps
30+ day performing delinquency rate	2.88			2.72			3.23			2.93			2.69			16		19		2.88			2.69			19
30+ day delinquency rate	3.05			2.91			3.48			3.24			2.99			14		6		3.05			2.99			6
Capital Ratios⁽¹²⁾
Common equity Tier 1 capital	11.1		%	10.5		%	10.3		%	10.7		%	10.7		%	60	bps	40	bps	11.1		%	10.7		%	40	bps
Tier 1 capital	12.6			12.0			11.8			12.2			12.2			60		40		12.6			12.2			40
Total capital	15.1			14.5			14.4			14.8			14.9			60		20		15.1			14.9			20
Tier 1 leverage	10.3			10.1			9.9			10.5			10.3			20		—		10.3			10.3			—
Tangible common equity (“TCE”)⁽¹³⁾	8.8			8.6			8.3			8.8			8.8			20		—		8.8			8.8			—

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income



																2018 Q2 vs.				Six Months Ended June 30,
	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except per share data and as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Interest income:
Loans, including loans held for sale	$	5,989		$	6,134		$	6,133		$	5,960		$	5,669		(2	)%	6	%	$	12,123		$	11,295		7	%
Investment securities	539			452			431			431			433			19		24		991			849			17
Other	68			51			40			29			26			33		162		119			54			120
Total interest income	6,596			6,637			6,604			6,420			6,128			(1	)	8		13,233			12,198			8
Interest expense:
Deposits	622			539			457			410			382			15		63		1,161			735			58
Securitized debt obligations	124			107			91			85			82			16		51		231			151			53
Senior and subordinated notes	289			251			209			194			179			15		61		540			328			65
Other borrowings	10			22			34			31			12			(55	)	(17	)	32			37			(14	)
Total interest expense	1,045			919			791			720			655			14		60		1,964			1,251			57
Net interest income	5,551			5,718			5,813			5,700			5,473			(3	)	1		11,269			10,947			3
Provision for credit losses	1,276			1,674			1,926			1,833			1,800			(24	)	(29	)	2,950			3,792			(22	)
Net interest income after provision for credit losses	4,275			4,044			3,887			3,867			3,673			6		16		8,319			7,155			16
Non-interest income:
Interchange fees, net	723			643			665			662			676			12		7		1,366			1,246			10
Service charges and other customer-related fees	391			432			394			414			418			(9	)	(6	)	823			789			4
Net securities gains (losses)	(1		)	8			1			68			(4		)	**		(75	)	7			(4		)	**
Other⁽¹⁴⁾	528			108			140			141			141			**		**		636			261			144
Total non-interest income	1,641			1,191			1,200			1,285			1,231			38		33		2,832			2,292			24
Non-interest expense:
Salaries and associate benefits	1,430			1,520			1,521			1,524			1,383			(6	)	3		2,950			2,854			3
Occupancy and equipment	503			490			523			471			474			3		6		993			945			5
Marketing	425			414			460			379			435			3		(2	)	839			831			1
Professional services	234			210			274			297			279			11		(16	)	444			526			(16	)
Communications and data processing	317			306			306			294			289			4		10		623			577			8
Amortization of intangibles	43			44			61			61			61			(2	)	(30	)	87			123			(29	)
Other	472			589			634			541			493			(20	)	(4	)	1,061			992			7
Total non-interest expense	3,424			3,573			3,779			3,567			3,414			(4	)	—		6,997			6,848			2
Income from continuing operations before income taxes	2,492			1,662			1,308			1,585			1,490			50		67		4,154			2,599			60
Income tax provision	575			319			2,170			448			443			80		30		894			757			18
Income (loss) from continuing operations, net of tax	1,917			1,343			(862		)	1,137			1,047			43		83		3,260			1,842			77
Income (loss) from discontinued operations, net of tax	(11		)	3			(109		)	(30		)	(11		)	**		—		(8		)	4			**
Net income (loss)	1,906			1,346			(971		)	1,107			1,036			42		84		3,252			1,846			76
Dividends and undistributed earnings allocated to participating securities⁽²⁾	(12		)	(10		)	(1		)	(8		)	(8		)	20		50		(23		)	(13		)	77
Preferred stock dividends	(80		)	(52		)	(80		)	(52		)	(80		)	54		—		(132		)	(133		)	(1	)
Net income (loss) available to common stockholders	$	1,814		$	1,284		$	(1,052	)	$	1,047		$	948		41		91		$	3,097		$	1,700		82

																2018 Q2 vs.				Six Months Ended June 30,
	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except per share data and as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Basic earnings per common share:⁽²⁾
Net income (loss) from continuing operations	$	3.76		$	2.63		$	(1.95	)	$	2.22		$	1.98		43	%	90	%	$	6.39		$	3.51		82	%
Income (loss) from discontinued operations	(0.02		)	0.01			(0.22		)	(0.06		)	(0.02		)	**		—		(0.02		)	0.01			**
Net income (loss) per basic common share	$	3.74		$	2.64		$	(2.17	)	$	2.16		$	1.96		42		91		$	6.37		$	3.52		81
Diluted earnings per common share:⁽²⁾
Net income (loss) from continuing operations	$	3.73		$	2.61		$	(1.95	)	$	2.20		$	1.96		43		90		$	6.35		$	3.48		82
Income (loss) from discontinued operations	(0.02		)	0.01			(0.22		)	(0.06		)	(0.02		)	**		—		(0.02		)	0.01			**
Net income (loss) per diluted common share	$	3.71		$	2.62		$	(2.17	)	$	2.14		$	1.94		42		91		$	6.33		$	3.49		81
Weighted-average common shares outstanding (in millions):
Basic common shares	485.1			486.9			485.7			484.9			484.0			—		—		485.9			483.1			1
Diluted common shares	488.3			490.8			485.7			489.0			488.1			(1	)	—		489.6			487.7			—
Dividends declared and paid per common share	$	0.40		$	0.40		$	0.40		$	0.40		$	0.40		—		—		$	0.80		$	0.80		—

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets



																2018 Q2 vs.
	2018			2018			2017			2017			2017			2018		2017
(Dollars in millions)	Q2			Q1			Q4			Q3			Q2			Q1		Q2
Assets:
Cash and cash equivalents:
Cash and due from banks	$	4,499		$	4,220		$	4,458		$	4,154		$	3,352		7	%	34	%
Interest-bearing deposits and other short-term investments	7,774			9,788			9,582			4,330			3,363			(21	)	131
Total cash and cash equivalents	12,273			14,008			14,040			8,484			6,715			(12	)	83
Restricted cash for securitization investors	1,023			309			312			304			300			**		**
Investment securities:
Securities available for sale, at fair value	50,691			47,155			37,655			39,742			41,120			7		23
Securities held to maturity, at carrying value	33,464			23,075			28,984			28,650			27,720			45		21
Total investment securities	84,155			70,230			66,639			68,392			68,840			20		22
Loans held for investment:
Unsecuritized loans held for investment	201,222			213,313			218,806			217,659			214,864			(6	)	(6	)
Loans held in consolidated trusts	34,902			34,943			35,667			34,763			29,438			—		19
Total loans held for investment	236,124			248,256			254,473			252,422			244,302			(5	)	(3	)
Allowance for loan and lease losses	(7,368		)	(7,567		)	(7,502		)	(7,418		)	(7,170		)	(3	)	3
Net loans held for investment	228,756			240,689			246,971			245,004			237,132			(5	)	(4	)
Loans held for sale, at lower of cost or fair value	1,480			1,498			971			1,566			777			(1	)	90
Premises and equipment, net	4,095			4,055			4,033			3,955			3,825			1		7
Interest receivable	1,493			1,496			1,536			1,426			1,346			—		11
Goodwill	14,531			14,536			14,533			14,532			14,524			—		—
Other assets	16,183			16,036			16,658			17,739			17,134			1		(6	)
Total assets	$	363,989		$	362,857		$	365,693		$	361,402		$	350,593		—		4



																2018 Q2 vs.
	2018			2018			2017			2017			2017			2018		2017
(Dollars in millions)	Q2			Q1			Q4			Q3			Q2			Q1		Q2
Liabilities:
Interest payable	$	450		$	353		$	413		$	301		$	376		27	%	20	%
Deposits:
Non-interest-bearing deposits	25,620			26,176			26,404			26,106			25,953			(2	)	(1	)
Interest-bearing deposits	222,605			224,671			217,298			212,956			213,810			(1	)	4
Total deposits	248,225			250,847			243,702			239,062			239,763			(1	)	4
Securitized debt obligations	19,649			18,665			20,010			17,087			18,358			5		7
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase	553			656			576			767			958			(16	)	(42	)
Senior and subordinated notes	32,920			31,051			30,755			28,420			28,478			6		16
Other borrowings	188			321			8,940			13,184			2,160			(41	)	(91	)
Total other debt	33,661			32,028			40,271			42,371			31,596			5		7
Other liabilities	12,078			11,761			12,567			12,427			11,363			3		6
Total liabilities	314,063			313,654			316,963			311,248			301,456			—		4

Stockholders’ equity:
Preferred stock	0			0			0			0			0			—		—
Common stock	7			7			7			7			7			—		—
Additional paid-in capital, net	31,868			31,779			31,656			31,526			31,413			—		1
Retained earnings	33,626			31,996			30,700			31,946			31,086			5		8
Accumulated other comprehensive loss	(1,793		)	(1,599		)	(926		)	(622		)	(683		)	12		163
Treasury stock, at cost	(13,782		)	(12,980		)	(12,707		)	(12,703		)	(12,686		)	6		9
Total stockholders’ equity	49,926			49,203			48,730			50,154			49,137			1		2
Total liabilities and stockholders’ equity	$	363,989		$	362,857		$	365,693		$	361,402		$	350,593		—		4

CAPITAL ONE FINANCIAL CORPORATION (COF)

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


⁽¹⁾	Total net revenue was reduced by $309 million in Q2 2018, $335 million in Q1 2018, $377 million in Q4 2017, $356 million in Q3 2017 and $313 million in Q2 2017 for the estimated uncollectible amount of billed finance charges and fees and related losses.

⁽²⁾

Dividends and undistributed earnings allocated to participating securities and earnings per share are computed independently for each period. Accordingly, the sum of each quarterly amount may not agree to the year-to-date total. We also provide adjusted diluted earnings per share, which is a non-GAAP measure. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for additional information on our non-GAAP measures.


⁽³⁾	Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.


⁽⁴⁾	Total net revenue margin is calculated based on annualized total net revenue for the period divided by average interest-earning assets for the period.


⁽⁵⁾	Net interest margin is calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.


⁽⁶⁾	Return on average tangible assets is a non-GAAP measure calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible assets for the period. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.

⁽⁷⁾

Return on average common equity is calculated based on annualized (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.

⁽⁸⁾

Return on average tangible common equity (“ROTCE”) is a non-GAAP measure calculated based on annualized (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 ROTCE may not be comparable to similarly-titled measures reported by other companies. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.


⁽⁹⁾	Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period. We also provide an adjusted efficiency ratio, which is a non-GAAP measure. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for additional information on our non-GAAP measures.


⁽¹⁰⁾	Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period. We also provide an adjusted operating efficiency ratio, which is a non-GAAP measure. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for additional information on our non-GAAP measures.


⁽¹¹⁾	Net charge-off rate is calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.


⁽¹²⁾	Capital ratios as of the end of Q2 2018 are preliminary and therefore subject to change. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for information on the calculation of each of these ratios.


⁽¹³⁾	TCE ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.

⁽¹⁴⁾

In the second quarter of 2018, we sold the substantial majority of our consumer home loan portfolio and the related servicing. We also transferred the remaining consumer home loan portfolio of $398 million to loans held for sale as of June 30, 2018. These actions resulted in a net gain of approximately $400 million, including a benefit for credit losses of $46 million, which is reflected in the Other category.


**	Not meaningful.

CAPITAL ONE FINANCIAL CORPORATION (COF)

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



	2018 Q2						2018 Q1						2017 Q2
	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⁾
(Dollars in millions, except as noted)	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	$	242,043	$	5,989	9.90	%	$	250,906	$	6,134	9.78	%	$	242,967	$	5,669	9.33	%
Investment securities	79,829		539		2.70		69,576		452		2.60		68,857		433		2.52
Cash equivalents and other	11,623		68		2.34		9,701		51		2.10		6,254		26		1.66
Total interest-earning assets	$	333,495	$	6,596	7.91		$	330,183	$	6,637	8.04		$	318,078	$	6,128	7.71
Interest-bearing liabilities:
Interest-bearing deposits	$	223,079	$	622	1.12		$	219,670	$	539	0.98		$	214,412	$	382	0.71
Securitized debt obligations	19,147		124		2.59		19,698		107		2.17		18,400		82		1.78
Senior and subordinated notes	32,250		289		3.58		30,430		251		3.30		27,821		179		2.57
Other borrowings and liabilities	4,132		10		0.97		6,849		22		1.28		3,656		12		1.31
Total interest-bearing liabilities	$	278,608	$	1,045	1.50		$	276,647	$	919	1.33		$	264,289	$	655	0.99
Net interest income/spread			$	5,551	6.41				$	5,718	6.71				$	5,473	6.72
Impact of non-interest-bearing funding					0.25						0.22						0.16
Net interest margin					6.66	%					6.93	%					6.88	%



	Six Months Ended June 30,
	2018						2017
	Average Balance		Interest Income/Expense⁽¹⁾		Yield/Rate⁽¹⁾		Average Balance		Interest Income/Expense⁽¹⁾		Yield/Rate⁽¹⁾
(Dollars in millions, except as noted)	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	$	246,451	$	12,123	9.84	%	$	242,610	$	11,295	9.31	%
Investment securities	74,731		991		2.65		68,637		849		2.47
Cash equivalents and other	10,668		119		2.23		6,968		54		1.55
Total interest-earning assets	$	331,850	$	13,233	7.98		$	318,215	$	12,198	7.67
Interest-bearing liabilities:
Interest-bearing deposits	$	221,384	$	1,161	1.05		$	213,696	$	735	0.69
Securitized debt obligations	19,421		231		2.38		17,791		151		1.70
Senior and subordinated notes	31,345		540		3.45		26,321		328		2.49
Other borrowings and liabilities	5,483		32		1.17		7,981		37		0.93
Total interest-bearing liabilities	$	277,633	$	1,964	1.41		$	265,789	$	1,251	0.94
Net interest income/spread			$	11,269	6.57				$	10,947	6.73
Impact of non-interest-bearing funding					0.22						0.15
Net interest margin					6.79	%					6.88	%

__________

⁽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. In the first quarter of 2018, we adopted Accounting Standard Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. As a result, interest income and interest expense amounts shown above include $2 million and $16 million for Q2 2018, and $3 million and $46 million for the six months ended June 30, 2018, respectively, related to hedge ineffectiveness that was previously included in other non-interest income.

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics



											2018 Q2 vs.				Six Months Ended June 30,
(Dollars in millions, except as noted)	2018 Q2		2018 Q1		2017 Q4		2017 Q3		2017 Q2		2018 Q1		2017 Q2		2018		2017		2018 vs. 2017
Loans Held for Investment (Period-End)
Credit card:
Domestic credit card	$	100,714	$	98,535	$	105,293	$	99,981	$	92,866	2	%	8	%	$	100,714	$	92,866	8	%
International card businesses	9,063		9,041		9,469		9,149		8,724		—		4		9,063		8,724		4
Total credit card	109,777		107,576		114,762		109,130		101,590		2		8		109,777		101,590		8
Consumer banking:
Auto	55,781		54,811		53,991		53,290		51,765		2		8		55,781		51,765		8
Home loan⁽¹⁾	—		16,630		17,633		18,820		19,724		**		**		—		19,724		**
Retail banking	2,946		3,233		3,454		3,454		3,484		(9	)	(15	)	2,946		3,484		(15	)
Total consumer banking	58,727		74,674		75,078		75,564		74,973		(21	)	(22	)	58,727		74,973		(22	)
Commercial banking:
Commercial and multifamily real estate	28,292		27,360		26,150		27,944		27,428		3		3		28,292		27,428		3
Commercial and industrial	38,948		38,208		38,025		39,306		39,801		2		(2	)	38,948		39,801		(2	)
Total commercial lending	67,240		65,568		64,175		67,250		67,229		3		—		67,240		67,229		—
Small-ticket commercial real estate	369		385		400		420		443		(4	)	(17	)	369		443		(17	)
Total commercial banking	67,609		65,953		64,575		67,670		67,672		3		—		67,609		67,672		—
Other loans	11		53		58		58		67		(79	)	(84	)	11		67		(84	)
Total loans held for investment	$	236,124	$	248,256	$	254,473	$	252,422	$	244,302	(5	)	(3	)	$	236,124	$	244,302	(3	)
Loans Held for Investment (Average)
Credit card:
Domestic credit card	$	98,895	$	100,450	$	101,087	$	93,729	$	91,769	(2	)%	8	%	$	99,668	$	92,398	8	%
International card businesses	8,998		9,052		8,942		8,816		8,274		(1	)	9		9,025		8,205		10
Total credit card	107,893		109,502		110,029		102,545		100,043		(1	)	8		108,693		100,603		8
Consumer banking:
Auto	55,298		54,344		53,747		52,615		50,803		2		9		54,824		49,743		10
Home loan⁽¹⁾	8,098		17,224		18,109		19,302		20,203		(53	)	(60	)	12,635		20,674		(39	)
Retail banking	3,084		3,429		3,433		3,446		3,463		(10	)	(11	)	3,256		3,486		(7	)
Total consumer banking	66,480		74,997		75,289		75,363		74,469		(11	)	(11	)	70,715		73,903		(4	)
Commercial banking:
Commercial and multifamily real estate	27,302		26,542		27,770		27,703		27,401		3		—		26,924		26,997		—
Commercial and industrial	38,686		38,246		39,020		39,723		39,815		1		(3	)	38,467		39,845		(3	)
Total commercial lending	65,988		64,788		66,790		67,426		67,216		2		(2	)	65,391		66,842		(2	)
Small-ticket commercial real estate	376		393		410		433		453		(4	)	(17	)	385		463		(17	)
Total commercial banking	66,364		65,181		67,200		67,859		67,669		2		(2	)	65,776		67,305		(2	)
Other loans	21		46		48		55		60		(54	)	(65	)	34		64		(47	)
Total average loans held for investment	$	240,758	$	249,726	$	252,566	$	245,822	$	242,241	(4	)	(1	)	$	245,218	$	241,875	1



											2018 Q2 vs.				Six Months Ended June 30,
(Dollars in millions, except as noted)	2018 Q2		2018 Q1		2017 Q4		2017 Q3		2017 Q2		2018 Q1		2017 Q2		2018		2017		2018 vs. 2017
Net Charge-Off (Recovery) Rates
Credit card:
Domestic credit card	4.72	%	5.26	%	5.08	%	4.64	%	5.11	%	(54	)bps	(39	)bps	4.99	%	5.12	%	(13	)bps
International card businesses	4.14		2.49		3.92		3.08		4.08		165		6		3.32		3.88		(56	)
Total credit card	4.67		5.03		4.99		4.51		5.02		(36	)	(35	)	4.85		5.02		(17	)
Consumer banking:
Auto	1.32		1.53		2.12		1.96		1.70		(21	)	(38	)	1.42		1.67		(25	)
Home loan⁽¹⁾	—		(0.03	)	0.23		0.02		0.04		3		(4	)	(0.02	)	0.03		(5	)
Retail banking	2.07		1.89		1.94		2.10		1.71		18		36		1.97		1.81		16
Total consumer banking	1.19		1.19		1.66		1.47		1.25		—		(6	)	1.19		1.22		(3	)
Commercial banking:
Commercial and multifamily real estate	—		—		(0.01	)	(0.01	)	0.03		—		(3	)	—		0.02		(2	)
Commercial and industrial	(0.07	)	0.20		1.47		1.64		1.34		(27	)	(141	)	0.06		0.78		(72	)
Total commercial lending	(0.04	)	0.12		0.86		0.97		0.81		(16	)	(85	)	0.04		0.47		(43	)
Small-ticket commercial real estate	(0.40	)	(0.18	)	(0.05	)	0.12		(0.22	)	(22	)	(18	)	(0.29	)	0.43		(72	)
Total commercial banking	(0.04	)	0.11		0.85		0.96		0.80		(15	)	(84	)	0.04		0.47		(43	)
Total net charge-offs	2.42		2.59		2.89		2.61		2.67		(17	)	(25	)	2.51		2.59		(8	)
30+ Day Performing Delinquency Rates
Credit card:
Domestic credit card	3.32	%	3.57	%	4.01	%	3.94	%	3.63	%	(25	)bps	(31	)bps	3.32	%	3.63	%	(31	)bps
International card businesses	3.39		3.62		3.64		3.54		3.28		(23	)	11		3.39		3.28		11
Total credit card	3.32		3.58		3.98		3.91		3.60		(26	)	(28	)	3.32		3.60		(28	)
Consumer banking:
Auto	5.57		5.15		6.51		5.71		5.40		42		17		5.57		5.40		17
Home loan⁽¹⁾	—		0.20		0.20		0.17		0.14		(20	)	(14	)	—		0.14		(14	)
Retail banking	0.84		0.75		0.76		0.73		0.54		9		30		0.84		0.54		30
Total consumer banking	5.33		3.86		4.76		4.10		3.79		147		154		5.33		3.79		154
Nonperforming Loans and Nonperforming Assets Rates⁽²⁾⁽³⁾
Credit card:
International card businesses	0.22	%	0.25	%	0.25	%	0.28	%	0.37	%	(3	)bps	(15	)bps	0.22	%	0.37	%	(15	)bps
Total credit card	0.02		0.02		0.02		0.02		0.03		—		(1	)	0.02		0.03		(1	)
Consumer banking:
Auto	0.55		0.50		0.70		0.65		0.53		5		2		0.55		0.53		2
Home loan⁽¹⁾	—		0.86		1.00		0.84		1.31		(86	)	(131	)	—		1.31		(131	)
Retail banking	1.15		1.04		1.00		0.97		0.96		11		19		1.15		0.96		19
Total consumer banking	0.58		0.61		0.78		0.71		0.75		(3	)	(17	)	0.58		0.75		(17	)
Commercial banking:
Commercial and multifamily real estate	0.01		0.01		0.15		0.23		0.13		—		(12	)	0.01		0.13		(12	)
Commercial and industrial	0.57		0.78		0.63		1.82		1.62		(21	)	(105	)	0.57		1.62		(105	)
Total commercial lending	0.33		0.46		0.43		1.16		1.01		(13	)	(68	)	0.33		1.01		(68	)
Small-ticket commercial real estate	1.18		1.46		1.65		1.59		1.89		(28	)	(71	)	1.18		1.89		(71	)
Total commercial banking	0.34		0.47		0.44		1.16		1.01		(13	)	(67	)	0.34		1.01		(67	)
Total nonperforming loans	0.25		0.32		0.35		0.54		0.53		(7	)	(28	)	0.25		0.53		(28	)
Total nonperforming assets	0.30		0.35		0.41		0.60		0.60		(5	)	(30	)	0.30		0.60		(30	)

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity



	Three Months Ended June 30, 2018
	Credit Card									Consumer Banking
(Dollars in millions)	Domestic Card			International Card Businesses			Total Credit Card			Auto			Home Loan⁽¹⁾			Retail Banking			Total Consumer Banking			Commercial Banking			Other⁽¹⁾			Total
Allowance for loan and lease losses:
Balance as of March 31, 2018	$	5,332		$	394		$	5,726		$	1,137		$	53		$	63		$	1,253		$	587		$	1		$	7,567
Charge-offs	(1,549		)	(130		)	(1,679		)	(393		)	—			(21		)	(414		)	(7		)	(9		)	(2,109		)
Recoveries	383			36			419			211			—			5			216			14			1			650
Net charge-offs	(1,166		)	(94		)	(1,260		)	(182		)	—			(16		)	(198		)	7			(8		)	(1,459		)
Provision (benefit) for loan and lease losses	1,094			77			1,171			105			—			14			119			30			(47		)	1,273
Allowance build (release) for loan and lease losses	(72		)	(17		)	(89		)	(77		)	—			(2		)	(79		)	37			(55		)	(186		)
Other changes⁽¹⁾⁽⁴⁾	—			(13		)	(13		)	—			(53		)	(1		)	(54		)	—			54			(13		)
Balance as of June 30, 2018	5,260			364			5,624			1,060			—			60			1,120			624			—			7,368
Reserve for unfunded lending commitments:
Balance as of March 31, 2018	—			—			—			—			—			6			6			108			—			114
Provision (benefit) for losses on unfunded lending commitments	—			—			—			—			—			(1		)	(1		)	4			—			3
Balance as of June 30, 2018	—			—			—			—			—			5			5			112			—			117
Combined allowance and reserve as of June 30, 2018	$	5,260		$	364		$	5,624		$	1,060		$	—		$	65		$	1,125		$	736		$	—		$	7,485



	Six Months Ended June 30, 2018
	Credit Card									Consumer Banking
(Dollars in millions)	Domestic Card			International Card Businesses			Total Credit Card			Auto			Home Loan⁽¹⁾			Retail Banking			Total Consumer Banking			Commercial Banking			Other⁽¹⁾			Total
Allowance for loan and lease losses:
Balance as of December 31, 2017	$	5,273		$	375		$	5,648		$	1,119		$	58		$	65		$	1,242		$	611		$	1		$	7,502
Charge-offs	(3,246		)	(258		)	(3,504		)	(803		)	—			(42		)	(845		)	(28		)	(8		)	(4,385		)
Recoveries	759			108			867			413			1			10			424			16			1			1,308
Net charge-offs	(2,487		)	(150		)	(2,637		)	(390		)	1			(32		)	(421		)	(12		)	(7		)	(3,077		)
Provision (benefit) for loan and lease losses	2,474			153			2,627			331			(6		)	28			353			25			(48		)	2,957
Allowance build (release) for loan and lease losses	(13		)	3			(10		)	(59		)	(5		)	(4		)	(68		)	13			(55		)	(120		)
Other changes⁽¹⁾⁽⁴⁾	—			(14		)	(14		)	—			(53		)	(1		)	(54		)	—			54			(14		)
Balance as of June 30, 2018	5,260			364			5,624			1,060			—			60			1,120			624			—			7,368
Reserve for unfunded lending commitments:
Balance as of December 31, 2017	—			—			—			—			—			7			7			117			—			124
Benefit for losses on unfunded lending commitments	—			—			—			—			—			(2		)	(2		)	(5		)	—			(7		)
Balance as of June 30, 2018	—			—			—			—			—			5			5			112			—			117
Combined allowance and reserve as of June 30, 2018	$	5,260		$	364		$	5,624		$	1,060		$	—		$	65		$	1,125		$	736		$	—		$	7,485

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial Summary—Business Segment Results



	Three Months Ended June 30, 2018												Six Months Ended June 30, 2018
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking⁽⁶⁾⁽⁷⁾			Other⁽⁶⁾⁽⁷⁾			Total		Credit Card		Consumer Banking		Commercial Banking⁽⁶⁾⁽⁷⁾		Other⁽⁶⁾⁽⁷⁾			Total
Net interest income	$	3,396	$	1,609	$	549		$	(3	)	$	5,551	$	6,954	$	3,224	$	1,085	$	6		$	11,269
Non-interest income	884		175		209			373			1,641		1,741		349		396		346			2,832
Total net revenue	4,280		1,784		758			370			7,192		8,695		3,573		1,481		352			14,101
Provision (benefit) for credit losses	1,171		118		34			(47		)	1,276		2,627		351		20		(48		)	2,950
Non-interest expense	1,904		963		409			148			3,424		3,943		1,963		812		279			6,997
Income from continuing operations before income taxes	1,205		703		315			269			2,492		2,125		1,259		649		121			4,154
Income tax provision (benefit)	282		164		73			56			575		495		294		151		(46		)	894
Income from continuing operations, net of tax	$	923	$	539	$	242		$	213		$	1,917	$	1,630	$	965	$	498	$	167		$	3,260

	Three Months Ended March 31, 2018
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking⁽⁶⁾⁽⁷⁾			Other⁽⁶⁾⁽⁷⁾			Total
Net interest income	$	3,558	$	1,615	$	536		$	9		$	5,718
Non-interest income	857		174		187			(27		)	1,191
Total net revenue (loss)	4,415		1,789		723			(18		)	6,909
Provision (benefit) for credit losses	1,456		233		(14		)	(1		)	1,674
Non-interest expense	2,039		1,000		403			131			3,573
Income (loss) from continuing operations before income taxes	920		556		334			(148		)	1,662
Income tax provision (benefit)	213		130		78			(102		)	319
Income (loss) from continuing operations, net of tax	$	707	$	426	$	256		$	(46	)	$	1,343

	Three Months Ended June 30, 2017												Six Months Ended June 30, 2017
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking⁽⁶⁾			Other⁽⁶⁾			Total		Credit Card		Consumer Banking		Commercial Banking⁽⁶⁾		Other⁽⁶⁾			Total
Net interest income	$	3,294	$	1,578	$	569		$	32		$	5,473	$	6,640	$	3,095	$	1,135	$	77		$	10,947
Non-interest income	875		183		183			(10		)	1,231		1,613		378		341		(40		)	2,292
Total net revenue	4,169		1,761		752			22			6,704		8,253		3,473		1,476		37			13,239
Provision (benefit) for credit losses	1,397		268		140			(5		)	1,800		3,114		547		138		(7		)	3,792
Non-interest expense	1,918		1,059		381			56			3,414		3,847		2,101		772		128			6,848
Income (loss) from continuing operations before income taxes	854		434		231			(29		)	1,490		1,292		825		566		(84		)	2,599
Income tax provision (benefit)	301		158		85			(101		)	443		468		301		207		(219		)	757
Income from continuing operations, net of tax	$	553	$	276	$	146		$	72		$	1,047	$	824	$	524	$	359	$	135		$	1,842

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary—Credit Card Business



																2018 Q2 vs.				Six Months Ended June 30,
	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Credit Card
Earnings:
Net interest income	$	3,396		$	3,558		$	3,568		$	3,440		$	3,294		(5	)%	3	%	$	6,954		$	6,640		5	%
Non-interest income	884			857			847			865			875			3		1		1,741			1,613			8
Total net revenue	4,280			4,415			4,415			4,305			4,169			(3	)	3		8,695			8,253			5
Provision for credit losses	1,171			1,456			1,486			1,466			1,397			(20	)	(16	)	2,627			3,114			(16	)
Non-interest expense	1,904			2,039			2,108			1,961			1,918			(7	)	(1	)	3,943			3,847			2
Income from continuing operations before income taxes	1,205			920			821			878			854			31		41		2,125			1,292			64
Income tax provision	282			213			297			306			301			32		(6	)	495			468			6
Income from continuing operations, net of tax	$	923		$	707		$	524		$	572		$	553		31		67		$	1,630		$	824		98
Selected performance metrics:
Period-end loans held for investment	$	109,777		$	107,576		$	114,762		$	109,130		$	101,590		2		8		$	109,777		$	101,590		8
Average loans held for investment	107,893			109,502			110,029			102,545			100,043			(1	)	8		108,693			100,603			8
Average yield on loans held for investment⁽⁸⁾	15.06		%	15.24		%	15.13		%	15.58		%	15.14		%	(18	)bps	(8	)bps	15.15		%	15.06		%	9	bps
Total net revenue margin⁽⁹⁾	15.87			16.13			16.05			16.79			16.67			(26	)	(80	)	16.00			16.41			(41	)
Net charge-off rate	4.67			5.03			4.99			4.51			5.02			(36	)	(35	)	4.85			5.02			(17	)
30+ day performing delinquency rate	3.32			3.58			3.98			3.91			3.60			(26	)	(28	)	3.32			3.60			(28	)
30+ day delinquency rate	3.33			3.59			3.99			3.92			3.62			(26	)	(29	)	3.33			3.62			(29	)
Nonperforming loan rate⁽²⁾	0.02			0.02			0.02			0.02			0.03			—		(1	)	0.02			0.03			(1	)
Purchase volume⁽¹⁰⁾	$	97,392		$	86,545		$	95,659		$	84,505		$	83,079		13	%	17	%	$	183,937		$	156,276		18	%



																2018 Q2 vs.				Six Months Ended June 30,
	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Domestic Card
Earnings:
Net interest income	$	3,108		$	3,229		$	3,268		$	3,132		$	3,011		(4	)%	3	%	$	6,337		$	6,104		4	%
Non-interest income	818			774			781			787			802			6		2		1,592			1,501			6
Total net revenue	3,926			4,003			4,049			3,919			3,813			(2	)	3		7,929			7,605			4
Provision for credit losses	1,094			1,380			1,402			1,417			1,327			(21	)	(18	)	2,474			2,964			(17	)
Non-interest expense	1,683			1,832			1,880			1,754			1,727			(8	)	(3	)	3,515			3,444			2
Income from continuing operations before income taxes	1,149			791			767			748			759			45		51		1,940			1,197			62
Income tax provision	268			184			280			273			277			46		(3	)	452			437			3
Income from continuing operations, net of tax	$	881		$	607		$	487		$	475		$	482		45		83		$	1,488		$	760		96
Selected performance metrics:
Period-end loans held for investment	$	100,714		$	98,535		$	105,293		$	99,981		$	92,866		2		8		$	100,714		$	92,866		8
Average loans held for investment	98,895			100,450			101,087			93,729			91,769			(2	)	8		99,668			92,398			8
Average yield on loans held for investment⁽⁸⁾	15.05		%	15.10		%	15.08		%	15.51		%	15.07		%	(5	)bps	(2	)bps	15.07		%	15.04		%	3	bps
Total net revenue margin⁽⁹⁾	15.88			15.94			16.03			16.72			16.62			(6	)	(74	)	15.91			16.46			(55	)
Net charge-off rate	4.72			5.26			5.08			4.64			5.11			(54	)	(39	)	4.99			5.12			(13	)
30+ day delinquency rate	3.32			3.57			4.01			3.94			3.63			(25	)	(31	)	3.32			3.63			(31	)
Purchase volume⁽¹⁰⁾	$	88,941		$	79,194		$	87,287		$	76,806		$	75,781		12	%	17	%	$	168,135		$	142,731		18	%
Refreshed FICO scores:⁽¹¹⁾
Greater than 660	68		%	66		%	66		%	65		%	64		%	2		4		68		%	64		%	4
660 or below	32			34			34			35			36			(2	)	(4	)	32			36			(4	)
Total	100		%	100		%	100		%	100		%	100		%					100		%	100		%

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Financial & Statistical Summary—Consumer Banking Business



																2018 Q2 vs.				Six Months Ended June 30,
	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Consumer Banking
Earnings:
Net interest income	$	1,609		$	1,615		$	1,636		$	1,649		$	1,578		—		2	%	$	3,224		$	3,095		4	%
Non-interest income	175			174			179			192			183			1	%	(4	)	349			378			(8	)
Total net revenue	1,784			1,789			1,815			1,841			1,761			—		1		3,573			3,473			3
Provision for credit losses	118			233			340			293			268			(49	)	(56	)	351			547			(36	)
Non-interest expense	963			1,000			1,081			1,051			1,059			(4	)	(9	)	1,963			2,101			(7	)
Income from continuing operations before income taxes	703			556			394			497			434			26		62		1,259			825			53
Income tax provision	164			130			144			181			158			26		4		294			301			(2	)
Income from continuing operations, net of tax	$	539		$	426		$	250		$	316		$	276		27		95		$	965		$	524		84
Selected performance metrics:
Period-end loans held for investment⁽¹⁾	$	58,727		$	74,674		$	75,078		$	75,564		$	74,973		(21	)	(22	)	$	58,727		$	74,973		(22	)
Average loans held for investment⁽¹⁾	66,480			74,997			75,289			75,363			74,469			(11	)	(11	)	70,715			73,903			(4	)
Average yield on loans held for investment⁽⁸⁾	7.32		%	6.86		%	6.84		%	6.79		%	6.56		%	46	bps	76	bps	7.08		%	6.52		%	56	bps
Auto loan originations	$	6,994		$	6,707		$	6,215		$	7,043		$	7,453		4	%	(6	)%	$	13,701		$	14,478		(5	)%
Period-end deposits	194,962			193,073			185,842			184,719			186,607			1		4		194,962			186,607			4
Average deposits	193,278			187,785			184,799			185,072			186,989			3		3		190,547			185,471			3
Average deposits interest rate	0.88		%	0.80		%	0.69		%	0.62		%	0.59		%	8	bps	29	bps	0.84		%	0.58		%	26	bps
Net charge-off rate	1.19			1.19			1.66			1.47			1.25			—		(6	)	1.19			1.22			(3	)
30+ day performing delinquency rate	5.33			3.86			4.76			4.10			3.79			147		154		5.33			3.79			154
30+ day delinquency rate	5.80			4.27			5.34			4.61			4.33			153		147		5.80			4.33			147
Nonperforming loan rate⁽²⁾	0.58			0.61			0.78			0.71			0.75			(3	)	(17	)	0.58			0.75			(17	)
Nonperforming asset rate⁽³⁾	0.73			0.70			0.91			0.88			0.96			3		(23	)	0.73			0.96			(23	)
Auto—At origination FICO scores:⁽¹²⁾
Greater than 660	50		%	51		%	51		%	51		%	51		%	(1	)%	(1	)%	50		%	51		%	(1	)%
621-660	19			18			18			18			18			1		1		19			18			1
620 or below	31			31			31			31			31			—		—		31			31			—
Total	100		%	100		%	100		%	100		%	100		%					100		%	100		%

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 12: Financial & Statistical Summary—Commercial Banking Business



																2018 Q2 vs.				Six Months Ended June 30,
	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions, except as noted)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Commercial Banking
Earnings:
Net interest income	$	549		$	536		$	566		$	560		$	569		2	%	(4	)%	$	1,085		$	1,135		(4	)%
Non-interest income	209			187			188			179			183			12		14		396			341			16
Total net revenue⁽⁶⁾⁽⁷⁾	758			723			754			739			752			5		1		1,481			1,476			—
Provision (benefit) for credit losses	34			(14		)	100			63			140			**		(76	)	20			138			(86	)
Non-interest expense	409			403			437			394			381			1		7		812			772			5
Income from continuing operations before income taxes	315			334			217			282			231			(6	)	36		649			566			15
Income tax provision	73			78			79			103			85			(6	)	(14	)	151			207			(27	)
Income from continuing operations, net of tax	$	242		$	256		$	138		$	179		$	146		(5	)	66		$	498		$	359		39
Selected performance metrics:
Period-end loans held for investment	$	67,609		$	65,953		$	64,575		$	67,670		$	67,672		3		—		$	67,609		$	67,672		—
Average loans held for investment	66,364			65,181			67,200			67,859			67,669			2		(2	)	65,776			67,305			(2	)
Average yield on loans held for investment⁽⁶⁾⁽⁸⁾	4.43		%	4.16		%	4.03		%	3.98		%	3.81		%	27	bps	62	bps	4.30		%	3.73		%	57	bps
Period-end deposits	$	31,078		$	34,449		$	33,938		$	32,783		$	33,153		(10	)%	(6	)%	$	31,078		$	33,153		(6	)%
Average deposits	32,951			34,057			34,117			33,197			34,263			(3	)	(4	)	33,501			34,241			(2	)
Average deposits interest rate	0.65		%	0.52		%	0.46		%	0.42		%	0.36		%	13	bps	29	bps	0.59		%	0.34		%	25	bps
Net charge-off (recovery) rate	(0.04		)	0.11			0.85			0.96			0.80			(15	)	(84	)	0.04			0.47			(43	)
Nonperforming loan rate⁽²⁾	0.34			0.47			0.44			1.16			1.01			(13	)	(67	)	0.34			1.01			(67	)
Nonperforming asset rate⁽³⁾	0.37			0.49			0.52			1.22			1.04			(12	)	(67	)	0.37			1.04			(67	)
Risk category:⁽¹³⁾
Noncriticized	$	64,923		$	62,773		$	61,162		$	63,501		$	63,802		3	%	2	%	$	64,923		$	63,802		2	%
Criticized performing	2,088			2,432			2,649			2,878			2,660			(14	)	(22	)	2,088			2,660			(22	)
Criticized nonperforming	229			309			284			788			686			(26	)	(67	)	229			686			(67	)
PCI loans	369			439			480			503			524			(16	)	(30	)	369			524			(30	)
Total commercial loans	$	67,609		$	65,953		$	64,575		$	67,670		$	67,672		3		—		$	67,609		$	67,672		—
Risk category as a percentage of period-end loans held for investment:⁽¹³⁾
Noncriticized	96.1		%	95.1		%	94.7		%	93.8		%	94.3		%	100	bps	180	bps	96.1		%	94.3		%	180	bps
Criticized performing	3.1			3.7			4.1			4.3			3.9			(60	)	(80	)	3.1			3.9			(80	)
Criticized nonperforming	0.3			0.5			0.4			1.2			1.0			(20	)	(70	)	0.3			1.0			(70	)
PCI loans	0.5			0.7			0.8			0.7			0.8			(20	)	(30	)	0.5			0.8			(30	)
Total commercial loans	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%					100.0		%	100.0		%

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 13: Financial & Statistical Summary—Other and Total



																2018 Q2 vs.				Six Months Ended June 30,
	2018			2018			2017			2017			2017			2018		2017								2018 vs.
(Dollars in millions)	Q2			Q1			Q4			Q3			Q2			Q1		Q2		2018			2017			2017
Other⁽⁵⁾
Earnings:
Net interest income	$	(3	)	$	9		$	43		$	51		$	32		**		**		$	6		$	77		(92	)%
Non-interest income⁽¹⁾	373			(27		)	(14		)	49			(10		)	**		**		346			(40		)	**
Total net revenue (loss)⁽⁶⁾⁽⁷⁾	370			(18		)	29			100			22			**		**		352			37			**
Provision (benefit) for credit losses⁽¹⁾	(47		)	(1		)	—			11			(5		)	**		**		(48		)	(7		)	**
Non-interest expense⁽¹⁴⁾	148			131			153			161			56			13	%	164	%	279			128			118
Income (loss) from continuing operations before income taxes	269			(148		)	(124		)	(72		)	(29		)	**		**		121			(84		)	**
Income tax provision (benefit)	56			(102		)	1,650			(142		)	(101		)	**		**		(46		)	(219		)	(79	)
Income (loss) from continuing operations, net of tax	$	213		$	(46	)	$	(1,774	)	$	70		$	72		**		196		$	167		$	135		24
Selected performance metrics:
Period-end loans held for investment	$	11		$	53		$	58		$	58		$	67		(79	)	(84	)	$	11		$	67		(84	)
Average loans held for investment	21			46			48			55			60			(54	)	(65	)	34			64			(47	)
Period-end deposits	22,185			23,325			23,922			21,560			20,003			(5	)	11		22,185			20,003			11
Average deposits	22,561			23,428			22,646			20,574			19,298			(4	)	17		22,992			19,843			16
Total
Earnings:
Net interest income	$	5,551		$	5,718		$	5,813		$	5,700		$	5,473		(3	)%	1	%	$	11,269		$	10,947		3	%
Non-interest income	1,641			1,191			1,200			1,285			1,231			38		33		2,832			2,292			24
Total net revenue	7,192			6,909			7,013			6,985			6,704			4		7		14,101			13,239			7
Provision for credit losses	1,276			1,674			1,926			1,833			1,800			(24	)	(29	)	2,950			3,792			(22	)
Non-interest expense	3,424			3,573			3,779			3,567			3,414			(4	)	—		6,997			6,848			2
Income from continuing operations before income taxes	2,492			1,662			1,308			1,585			1,490			50		67		4,154			2,599			60
Income tax provision	575			319			2,170			448			443			80		30		894			757			18
Income (loss) from continuing operations, net of tax	$	1,917		$	1,343		$	(862	)	$	1,137		$	1,047		43		83		$	3,260		$	1,842		77
Selected performance metrics:
Period-end loans held for investment	$	236,124		$	248,256		$	254,473		$	252,422		$	244,302		(5	)	(3	)	$	236,124		$	244,302		(3	)
Average loans held for investment	240,758			249,726			252,566			245,822			242,241			(4	)	(1	)	245,218			241,875			1
Period-end deposits	248,225			250,847			243,702			239,062			239,763			(1	)	4		248,225			239,763			4
Average deposits	248,790			245,270			241,562			238,843			240,550			1		3		247,040			239,555			3

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 14: Notes to Loan, Allowance and Business Segment Disclosures (Tables 7—13)

⁽¹⁾


⁽²⁾	Nonperforming loan rates are calculated based on nonperforming loans for each category divided by period-end total loans held for investment for each respective category.


⁽³⁾	Nonperforming assets consist of nonperforming loans, real estate owned (“REO”) and other foreclosed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment, REO and other foreclosed assets.


⁽⁴⁾	Represents foreign currency translation adjustments and the net impact of loan transfers and sales where applicable.

⁽⁵⁾

Charges for the impacts of the Tax Act of $1.77 billion were reflected in the Other category of our business segment results for Q4 2017. This amount was a reasonable estimate as of December 31, 2017, which may be adjusted during the measurement period ending no later than December 2018. The Tax Act refers to the Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on budget for fiscal year 2018 enacted on December 22, 2017.


⁽⁶⁾	Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate (21% for all periods in 2018 and 35% for all periods in 2017) and state taxes where applicable, with offsetting reductions to the Other category.

⁽⁷⁾

In the first quarter of 2018, we made a change in how revenue is measured in our Commercial Banking business to include the tax benefits of losses on certain tax-advantaged investments. These tax benefits are included in revenue on a taxable-equivalent basis within our Commercial Banking business, with an offsetting reduction to the Other category. In addition, all revenue presented on a taxable-equivalent basis in our Commercial Banking business was impacted by the reduction of the federal tax rate set forth in the Tax Act. The net impact of the measurement change and the reduction of the federal tax rate was a decrease of $28 million and $56 million in revenue in our Commercial Banking business in the second quarter and first six months of 2018, respectively, with an offsetting impact to the Other category.


⁽⁸⁾	Average yield on loans held for investment is calculated based on annualized interest income for the period divided by average loans held for investment during the period for the respective loan category. Annualized interest income is computed based on the effective yield of the respective loan category and does not include any allocations, such as funds transfer pricing.


⁽⁹⁾	Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans held for investment during the period for the respective loan category.


⁽¹⁰⁾	Purchase volume consists of purchase transactions, net of returns, for the period, and excludes cash advance and balance transfer transactions.

⁽¹¹⁾

Percentages represent period-end loans held for investment in each credit score category. Domestic card credit scores generally represent FICO scores. These scores are obtained from one of the major credit bureaus at origination and are refreshed monthly thereafter. We approximate non-FICO credit scores to comparable FICO scores for consistency purposes. Balances for which no credit score is available or the credit score is invalid are included in the 660 or below category.


⁽¹²⁾	Percentages represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit score is invalid are included in the 620 or below category.


⁽¹³⁾	Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities.


⁽¹⁴⁾	Includes charges incurred as a result of restructuring activities.


**	Not meaningful.

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 15: Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures⁽¹⁾



	Basel III Standardized Approach
(Dollars in millions, except as noted)	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017
Regulatory Capital Metrics
Common equity excluding AOCI	$	47,359		$	46,441		$	45,296		$	46,415		$	45,459
Adjustments:
AOCI⁽²⁾⁽³⁾	(1,793		)	(1,599		)	(808		)	(538		)	(593		)
Goodwill, net of related deferred tax liabilities	(14,368		)	(14,379		)	(14,380		)	(14,300		)	(14,299		)
Intangible assets, net of related deferred tax liabilities⁽³⁾	(328		)	(371		)	(330		)	(372		)	(419		)
Other	735			620			258			93			78
Common equity Tier 1 capital	$	31,605		$	30,712		$	30,036		$	31,298		$	30,226
Tier 1 capital	$	35,965		$	35,073		$	34,396		$	35,657		$	34,585
Total capital⁽⁴⁾	43,082			42,259			41,962			43,272			42,101
Risk-weighted assets	285,262			291,346			292,225			292,041			283,231
Adjusted average assets⁽⁵⁾	349,222			347,287			348,424			340,579			335,248
Capital Ratios
Common equity Tier 1 capital⁽⁶⁾	11.1		%	10.5		%	10.3		%	10.7		%	10.7		%
Tier 1 capital⁽⁷⁾	12.6			12.0			11.8			12.2			12.2
Total capital⁽⁸⁾	15.1			14.5			14.4			14.8			14.9
Tier 1 leverage⁽⁵⁾	10.3			10.1			9.9			10.5			10.3
Tangible common equity (“TCE”)⁽⁹⁾	8.8			8.6			8.3			8.8			8.8

Reconciliation of Non-GAAP Measures

The following non-GAAP measures consist of our adjusted results that we believe help investors and users of our financial information understand the effect of adjusting items on our selected reported results and provide alternate measurements of our performance. The following tables present reconciliations of these non-GAAP measures to the applicable amounts measured in accordance with GAAP.



	2018									2018									Six Months Ended
	Q2									Q1									June 30, 2018
(Dollars in millions, except per share data and as noted)	Reported Results			Adj.⁽¹⁰⁾			Adjusted Results			Reported Results			Adj.⁽¹⁰⁾			Adjusted Results			Reported Results			Adj.⁽¹⁰⁾			Adjusted Results
Selected income statement data:
Net interest income	$	5,551		$	26		$	5,577		$	5,718		—			$	5,718		$	11,269		$	26		$	11,295
Non-interest income	1,641			(361		)	1,280			1,191			$	2		1,193			2,832			(359		)	2,473
Total net revenue	7,192			(335		)	6,857			6,909			2			6,911			14,101			(333		)	13,768
Provision for credit losses	1,276			46			1,322			1,674			—			1,674			2,950			46			2,996
Non-interest expense	3,424			(45		)	3,379			3,573			(17		)	3,556			6,997			(62		)	6,935
Income from continuing operations before income taxes	2,492			(336		)	2,156			1,662			19			1,681			4,154			(317		)	3,837
Income tax provision (benefit)	575			(92		)	483			319			4			323			894			(88		)	806
Income from continuing operations, net of tax	1,917			(244		)	1,673			1,343			15			1,358			3,260			(229		)	3,031
Income (loss) from discontinued operations, net of tax	(11		)	—			(11		)	3			—			3			(8		)	—			(8		)
Net income	1,906			(244		)	1,662			1,346			15			1,361			3,252			(229		)	3,023
Dividends and undistributed earnings allocated to participating securities⁽¹¹⁾	(12		)	2			(10		)	(10		)	—			(10		)	(23		)	2			(21		)
Preferred stock dividends	(80		)	—			(80		)	(52		)	—			(52		)	(132		)	—			(132		)
Net income available to common stockholders	$	1,814		$	(242	)	$	1,572		$	1,284		$	15		$	1,299		$	3,097		$	(227	)	$	2,870
Selected performance metrics:
Diluted EPS⁽¹¹⁾	$	3.71		$	(0.49	)	$	3.22		$	2.62		$	0.03		$	2.65		$	6.33		$	(0.47	)	$	5.86
Efficiency ratio	47.61		%	167		bps	49.28		%	51.72		%	(27		)bps	51.45		%	49.62		%	75		bps	50.37		%
Operating efficiency ratio	41.70			138			43.08			45.72			(26		)	45.46			43.67			61			44.28



	2017									2017									Six Months Ended
	Q2									Q1									June 30, 2017
(Dollars in millions, except per share data and as noted)	Reported Results			Adj.⁽¹⁰⁾			Adjusted Results			Reported Results			Adj.⁽¹⁰⁾			Adjusted Results			Reported Results			Adj.⁽¹⁰⁾			Adjusted Results
Selected income statement data:
Net interest income	$	5,473		—			$	5,473		$	5,474		$	33		$	5,507		$	10,947		$	33		$	10,980
Non-interest income	1,231			—			1,231			1,061			37			1,098			2,292			37			2,329
Total net revenue	6,704			—			6,704			6,535			70			6,605			13,239			70			13,309
Provision for credit losses	1,800			—			1,800			1,992			—			1,992			3,792			—			3,792
Non-interest expense	3,414			$	(12	)	3,402			3,434			(29		)	3,405			6,848			(41		)	6,807
Income from continuing operations before income taxes	1,490			12			1,502			1,109			99			1,208			2,599			111			2,710
Income tax provision (benefit)	443			4			447			314			(1		)	313			757			3			760
Income from continuing operations, net of tax	1,047			8			1,055			795			100			895			1,842			108			1,950
Income (loss) from discontinued operations, net of tax	(11		)	—			(11		)	15			—			15			4			—			4
Net income	1,036			8			1,044			810			100			910			1,846			108			1,954
Dividends and undistributed earnings allocated to participating securities⁽¹¹⁾	(8		)	—			(8		)	(5		)	—			(5		)	(13		)	—			(13		)
Preferred stock dividends	(80		)	—			(80		)	(53		)	—			(53		)	(133		)	—			(133		)
Net income available to common stockholders	$	948		$	8		$	956		$	752		$	100		$	852		$	1,700		$	108		$	1,808
Selected performance metrics:
Diluted EPS⁽¹¹⁾	$	1.94		$	0.02		$	1.96		$	1.54		$	0.21		$	1.75		$	3.49		$	0.22		$	3.71
Efficiency ratio	50.92		%	(17		)bps	50.75		%	52.55		%	(100		)bps	51.55		%	51.73		%	(58		)bps	51.15		%
Operating efficiency ratio	44.44			(18		)	44.26			46.49			(93		)	45.56			45.45			(55		)	44.90

Reconciliation of Non-GAAP Measures

The following non-GAAP measures consist of tangible common equity (“TCE”), tangible assets and metrics computed using these amounts, which include tangible book value per common share, return on average tangible assets, return on average TCE and TCE ratio. We consider these metrics to be key financial performance measures that management uses in assessing capital adequacy and the level of returns generated. While these non-GAAP measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, our measures may not be comparable to similarly-titled measures reported by other companies. The following tables present reconciliations of these non-GAAP measures to the applicable amounts measured in accordance with GAAP.



	2018			2018			2017			2017			2017
(Dollars in millions)	Q2			Q1			Q4			Q3			Q2
Tangible Common Equity (Period-End)
Stockholders’ equity	$	49,926		$	49,203		$	48,730		$	50,154		$	49,137
Goodwill and intangible assets⁽¹²⁾	(15,013		)	(15,063		)	(15,106		)	(15,249		)	(15,301		)
Noncumulative perpetual preferred stock	(4,360		)	(4,360		)	(4,360		)	(4,360		)	(4,360		)
Tangible common equity	$	30,553		$	29,780		$	29,264		$	30,545		$	29,476
Tangible Common Equity (Average)
Stockholders’ equity	$	49,827		$	49,031		$	50,710		$	50,176		$	49,005
Goodwill and intangible assets⁽¹²⁾	(15,043		)	(15,092		)	(15,223		)	(15,277		)	(15,336		)
Noncumulative perpetual preferred stock	(4,360		)	(4,360		)	(4,360		)	(4,360		)	(4,360		)
Tangible common equity	$	30,424		$	29,579		$	31,127		$	30,539		$	29,309
Tangible Assets (Period-End)
Total assets	$	363,989		$	362,857		$	365,693		$	361,402		$	350,593
Goodwill and intangible assets⁽¹²⁾	(15,013		)	(15,063		)	(15,106		)	(15,249		)	(15,301		)
Tangible assets	$	348,976		$	347,794		$	350,587		$	346,153		$	335,292
Tangible Assets (Average)
Total assets	$	363,929		$	362,049		$	363,045		$	355,191		$	349,891
Goodwill and intangible assets⁽¹²⁾	(15,043		)	(15,092		)	(15,223		)	(15,277		)	(15,336		)
Tangible assets	$	348,886		$	346,957		$	347,822		$	339,914		$	334,555

__________


⁽¹⁾	Regulatory capital metrics and capital ratios as of June 30, 2018 are preliminary and therefore subject to change.


⁽²⁾	Amounts presented are net of tax.


⁽³⁾	Amounts based on transition provisions for regulatory capital deductions and adjustments of 80% for 2017 and 100% for 2018.


⁽⁴⁾	Total capital equals the sum of Tier 1 capital and Tier 2 capital.


⁽⁵⁾	Adjusted average assets for the purpose of calculating our Tier 1 leverage ratio represents total average assets adjusted for amounts that are deducted from Tier 1 capital, predominately goodwill and intangible assets. Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by adjusted average assets.


⁽⁶⁾	Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on common equity Tier 1 capital divided by risk-weighted assets.


⁽⁷⁾	Tier 1 capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.


⁽⁸⁾	Total capital ratio is a regulatory capital measure calculated based on total capital divided by risk-weighted assets.


⁽⁹⁾	TCE ratio is a non-GAAP measure calculated based on TCE divided by tangible assets.


⁽¹⁰⁾	Adjustments for the following periods consist of:



	2018			2018		Six Months Ended			2017		2017			Six Months Ended
(Dollars in millions)	Q2			Q1		June 30, 2018			Q2		Q1			June 30, 2017
Net gain on sale of home loans	$	(400	)	—		$	(400	)	—		—			—
Restructuring charges	15			$	19	34			—		—			—
U.K. Payment Protection Insurance customer refund reserve (“U.K. PPI Reserve”)	49			—		49			—		$	99		$	99
Charges related to the Cabela’s acquisition	—			—		—			$	12	—			12
Total	(336		)	19		(317		)	12		99			111
Income tax provision (benefit)	(92		)	4		(88		)	4		(1		)	3
Net income	$	(244	)	$	15	$	(229	)	$	8	$	100		$	108


⁽¹¹⁾	Dividends and undistributed earnings allocated to participating securities and earnings per share are computed independently for each period. Accordingly, the sum of each quarterly amount may not agree to the year-to-date total.


⁽¹²⁾	Includes impact of related deferred taxes.