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 /PRNewswire/ -- 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

"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.

  • 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.

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 99.2  



Capital One Financial Corporation  

Financial Supplement(1)(2)  

Second Quarter 2018  

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

6


Table 5:

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

8


Table 6:

Average Balances, Net Interest Income and Net Interest Margin

9


Table 7:

Loan Information and Performance Statistics

10


Table 8:

Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity

12

Business Segment Results



Table 9:

Financial Summary—Business Segment Results

13


Table 10:

Financial & Statistical Summary—Credit Card Business

14


Table 11:

Financial & Statistical Summary—Consumer Banking Business

16


Table 12:

Financial & Statistical Summary—Commercial Banking Business

17


Table 13:

Financial & Statistical Summary—Other and Total

18


Table 14:

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

19

Other



Table 15:

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

20







___________

(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.


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.


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.


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