CAPITAL ONE FINANCIAL CORP - FORM 8-K - EX-99.2

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8-K - 8-K - CAPITAL ONE FINANCIAL CORP	d758865d8k.htm
EX-99.1 - EX-99.1 - CAPITAL ONE FINANCIAL CORP	d758865dex991.htm

Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

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

Table of Contents


		Page
Capital One Financial Corporation Consolidated Results

Table 1:	Financial Summary—Consolidated		1

Table 2:	Selected Metrics—Consolidated		2

Table 3:	Consolidated Statements of Income		3

Table 4:	Consolidated Balance Sheets		4

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

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

Table 7:	Loan Information and Performance Statistics		7

Business Segments Detail

Table 8:	Financial Summary—Business Segments		8

Table 9:	Financial & Statistical Summary—Credit Card Business		9

Table 10:	Financial & Statistical Summary—Consumer Banking Business		10

Table 11:	Financial & Statistical Summary—Commercial Banking Business		11

Table 12:	Financial & Statistical Summary—Other and Total		12

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

Other

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

⁽¹⁾

The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our Quarterly Report on Form 10-Q for the period ended June 30, 2014 once it is filed with the Securities and Exchange Commission.

⁽²⁾

References to ING Direct refers to business and assets acquired and liabilities assumed in the February 17, 2012 acquisition. References to the 2012 U.S. card acquisition refer to the May 1, 2012 transaction in which we acquired substantially all of HSBC’s credit card and private-label credit card business in the United States.

⁽³⁾	We adopted ASU 2014-01 “Accounting for Investments in Qualified Affordable Housing Projects” as of January 1, 2014. Prior period results and related metrics have been recast to conform to this presentation.

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated⁽¹⁾


																2014 Q2 vs.
	2014			2014			2013			2013			2013			2014			2013
(Dollars in millions, except per share data and as noted) (unaudited)	Q2			Q1			Q4			Q3			Q2			Q1			Q2
Earnings
Net interest income	$	4,315		$	4,350		$	4,423		$	4,560		$	4,553			(1	)%		(5	)%
Non-interest income⁽²⁾		1,153			1,020			1,121			1,091			1,085			13			6

Total net revenue⁽³⁾		5,468			5,370			5,544			5,651			5,638			2			(3	)

Provision for credit losses		704			735			957			849			762			(4	)		(8	)
Non-interest expense:
Marketing		335			325			427			299			330			3			2
Amortization of intangibles		136			143			166			161			167			(5	)		(19	)
Acquisition-related⁽⁴⁾		18			23			60			37			50			(22	)		(64	)
Operating expenses		2,490			2,441			2,582			2,612			2,471			2			1

Total non-interest expense		2,979			2,932			3,235			3,109			3,018			2			(1	)

Income from continuing operations before income taxes		1,785			1,703			1,352			1,693			1,858			5			(4	)
Income tax provision		581			579			477			575			631			—			(8	)

Income from continuing operations, net of tax		1,204			1,124			875			1,118			1,227			7			(2	)
Income (loss) from discontinued operations, net of tax⁽²⁾		(10	)		30			(23	)		(13	)		(119	)		**			92

Net income		1,194			1,154			852			1,105			1,108			3			8
Dividends and undistributed earnings allocated to participating securities⁽⁵⁾		(4	)		(5	)		(4	)		(5	)		(4	)		(20	)		—
Preferred stock dividends⁽⁵⁾		(13	)		(13	)		(13	)		(13	)		(13	)		—			—

Net income available to common stockholders	$	1,177		$	1,136		$	835		$	1,087		$	1,091			4			8

Common Share Statistics
Basic earnings per common share:⁽⁵⁾
Net income from continuing operations	$	2.09		$	1.94		$	1.50		$	1.89		$	2.08			8			—
Income (loss) from discontinued operations		(0.02	)		0.05			(0.04	)		(0.02	)		(0.20	)		**			(90	)

Net income per basic common share	$	2.07		$	1.99		$	1.46		$	1.87		$	1.88			4			10

Diluted earnings per common share:⁽⁵⁾
Net income from continuing operations	$	2.06		$	1.91		$	1.46		$	1.86		$	2.05			8			—
Income (loss) from discontinued operations		(0.02	)		0.05			(0.03	)		(0.02	)		(0.20	)		**			(90	)

Net income per diluted common share	$	2.04		$	1.96		$	1.43		$	1.84		$	1.85			4			10

Weighted average common shares outstanding (in millions) for:
Basic common shares		567.5			571.0			573.4			582.3			581.5			(1	)		(2	)
Diluted common shares		577.6			580.3			582.6			591.1			588.8			—			(2	)
Common shares outstanding (period end, in millions)		561.8			572.9			572.7			582.0			584.9			(2	)		(4	)
Dividends per common share	$	0.30		$	0.30		$	0.30		$	0.30		$	0.30			—			—
Tangible book value per common share (period end)⁽⁶⁾		47.90			45.88			43.64			43.01			41.41			4			16
Balance Sheet (Period End)
Loans held for investment⁽⁷⁾	$	198,528		$	192,941		$	197,199		$	191,814		$	191,512			3			4
Interest-earning assets		266,720			259,422			265,170			259,152			265,693			3			—
Total assets		298,317			290,500			296,933			289,866			296,524			3			1
Interest-bearing deposits		180,970			184,214			181,880			184,553			187,768			(2	)		(4	)
Total deposits		205,890			208,324			204,523			206,834			209,865			(1	)		(2	)
Borrowings		39,114			30,118			40,654			31,845			36,231			30			8
Common equity		42,477			41,948			40,779			40,792			40,094			1			6
Total stockholders’ equity		43,815			42,801			41,632			41,645			40,947			2			7
Balance Sheet (Quarterly Average Balances)
Loans held for investment⁽⁷⁾	$	194,996		$	193,722		$	192,813		$	191,135		$	190,562			1			2
Interest-earning assets		263,570			262,659			262,957			264,796			266,544			—			(1	)
Total assets		294,744			294,275			294,040			294,919			297,748			—			(1	)
Interest-bearing deposits		182,053			184,183			184,206			186,752			189,311			(1)			(4	)
Total deposits		206,315			205,842			205,706			208,340			210,650			—			(2	)
Borrowings		35,658			35,978			36,463			36,355			36,915			(1	)		(3	)
Common equity		42,797			42,006			41,502			40,332			40,637			2			5
Total stockholders’ equity		43,767			42,859			42,355			41,185			41,490			2			5

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated⁽¹⁾


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

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income⁽¹⁾


	Three Months Ended									Q2 2014 vs.						Six Months Ended						2014
	2014			2014			2013			2014			2013			2014			2013			vs.
(Dollars in millions, except per share data and as noted) (unaudited)	Q2			Q1			Q2			Q1			Q2			Q2			Q2			2013
Interest income:
Loans, including loans held for sale	$	4,279		$	4,307		$	4,596			(1	)%		(7	)%	$	8,586		$	9,245			(7	)%
Investment securities		409			416			391			(2	)		5			825			765			8
Other		24			30			23			(20	)		4			54			51			6

Total interest income		4,712			4,753			5,010			(1	)		(6	)		9,465			10,061			(6	)

Interest expense:
Deposits		272			276			318			(1	)		(14	)		548			644			(15	)
Securitized debt obligations		39			38			45			3			(13	)		77			101			(24	)
Senior and subordinated notes		78			77			82			1			(5	)		155			164			(5	)
Other borrowings		8			12			12			(33	)		(33	)		20			29			(31	)

Total interest expense		397			403			457			(1	)		(13	)		800			938			(15	)

Net interest income		4,315			4,350			4,553			(1	)		(5	)		8,665			9,123			(5	)
Provision for credit losses		704			735			762			(4	)		(8	)		1,439			1,647			(13	)

Net interest income after provision for credit losses		3,611			3,615			3,791			—			(5	)		7,226			7,476			(3	)

Non-interest income:⁽²⁾
Service charges and other customer-related fees		460			474			534			(3	)		(14	)		934			1,084			(14	)
Interchange fees, net		535			440			486			22			10			975			931			5
Net other-than-temporary impairment recognized in earnings		(1	)		(5	)		(4	)		(80	)		(75	)		(6	)		(29	)		(79	)
Other		159			111			69			43			130			270			80			238

Total non-interest income		1,153			1,020			1,085			13			6			2,173			2,066			5

Non-interest expense:
Salaries and associate benefits		1,125			1,161			1,118			(3	)		1			2,286			2,213			3
Occupancy and equipment		447			405			371			10			20			852			728			17
Marketing		335			325			330			3			2			660			647			2
Professional services		296			287			340			3			(13	)		583			662			(12	)
Communications and data processing		203			196			236			4			(14	)		399			452			(12	)
Amortization of intangibles		136			143			167			(5	)		(19	)		279			344			(19	)
Other		437			415			456			5			(4	)		852			963			(12	)

Total non-interest expense		2,979			2,932			3,018			2			(1	)		5,911			6,009			(2	)

Income from continuing operations before income taxes		1,785			1,703			1,858			5			(4	)		3,488			3,533			(1	)
Income tax provision		581			579			631			—			(8	)		1,160			1,172			(1	)

Income from continuing operations, net of tax		1,204			1,124			1,227			7			(2	)		2,328			2,361			(1	)
Income (loss) from discontinued operations, net of tax⁽²⁾		(10	)		30			(119	)		**			(92	)		20			(197	)		**

Net income		1,194			1,154			1,108			3			8			2,348			2,164			9
Dividends and undistributed earnings allocated to participating securities⁽⁵⁾		(4	)		(5	)		(4	)		(20	)		—			(9	)		(9	)		—
Preferred stock dividends⁽⁵⁾		(13	)		(13	)		(13	)		—			—			(26	)		(26	)		—

Net income available to common stockholders	$	1,177		$	1,136		$	1,091			4			8		$	2,313		$	2,129			9


Basic earnings per common share:⁽⁵⁾
Net income from continuing operations	$	2.09		$	1.94		$	2.08			8			—		$	4.03		$	4.00			1
Income (loss) from discontinued operations		(0.02	)		0.05			(0.20	)		**			(90	)		0.03			(0.34	)		**

Net income per basic common share	$	2.07		$	1.99		$	1.88			4			10		$	4.06		$	3.66			11


Diluted earnings per common share:⁽⁵⁾
Net income from continuing operations	$	2.06		$	1.91		$	2.05			8			—		$	3.97		$	3.96			—
Income (loss) from discontinued operations		(0.02	)		0.05			(0.20	)		**			(90	)		0.03			(0.34	)		**

Net income per diluted common share	$	2.04		$	1.96		$	1.85			4			10		$	4.00		$	3.62			10

Weighted average common shares outstanding (in millions):
Basic common shares		567.5			571.0			581.5			(1	)		(2	)		569.2			581.0			(2	)
Diluted common shares		577.6			580.3			588.8			—			(2	)		578.9			587.9			(2	)
Dividends paid per common share	$	0.30		$	0.30		$	0.30			—			—		$	0.60		$	0.35			71

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets⁽¹⁾


										June 30, 2014 vs.
(Dollars in millions) (unaudited)	June 30, 2014			December 31, 2013			June 30, 2013			December 31, 2013			June 30, 2013
Assets:
Cash and cash equivalents:
Cash and due from banks	$	3,598		$	2,821		$	2,176			28	%		65	%
Interest-bearing deposits with banks		2,954			3,131			2,279			(6	)		30
Federal funds sold and securities purchased under agreements to resell		180			339			198			(47	)		(9	)

Total cash and cash equivalents		6,732			6,291			4,653			7			45
Restricted cash for securitization investors		361			874			377			(59	)		(4	)
Securities available for sale, at fair value		41,113			41,800			62,602			(2	)		(34	)
Securities held to maturity, at carrying value		20,688			19,132			—			8			**
Loans held for investment:
Unsecuritized loans held for investment		161,224			157,651			151,231			2			7
Restricted loans for securitization investors		37,304			39,548			40,281			(6	)		(7	)

Total loans held for investment		198,528			197,199			191,512			1			4
Allowance for loan and lease losses		(3,998	)		(4,315	)		(4,407	)		(7	)		(9	)

Net loans held for investment		194,530			192,884			187,105			1			4
Loans held for sale, at lower of cost or fair value		709			218			6,248			225			(89	)
Premises and equipment, net		3,764			3,839			3,766			(2	)		—
Interest receivable		1,473			1,418			1,454			4			1
Goodwill		13,977			13,978			13,900			—			1
Other assets		14,970			16,499			16,419			(9	)		(9	)

Total assets	$	298,317		$	296,933		$	296,524			—			1

Liabilities:
Interest payable	$	309		$	307		$	324			1			(5	)
Customer deposits:
Non-interest bearing deposits		24,920			22,643			22,097			10			13
Interest-bearing deposits		180,970			181,880			187,768			(1	)		(4	)

Total customer deposits		205,890			204,523			209,865			1			(2	)
Securitized debt obligations		10,010			10,289			10,831			(3	)		(8	)
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase		2,030			915			1,766			122			15
Senior and subordinated notes		16,628			13,134			12,406			27			34
Other borrowings		10,446			16,316			11,228			(36	)		(7	)

Total other debt		29,104			30,365			25,400			(4	)		15
Other liabilities		9,189			9,817			9,157			(6	)		—

Total liabilities		254,502			255,301			255,577			—			—

Stockholders’ equity:
Preferred stock		0			0			0			—			—
Common stock		6			6			6			—			—
Additional paid-in capital, net		27,210			26,526			26,339			3			3
Retained earnings		22,270			20,292			18,710			10			19
Accumulated other comprehensive income (“AOCI”)		(371	)		(872	)		(792	)		(57	)		(53	)
Treasury stock, at cost		(5,300	)		(4,320	)		(3,316	)		23			60

Total stockholders’ equity		43,815			41,632			40,947			5			7

Total liabilities and stockholders’ equity	$	298,317		$	296,933		$	296,524			—			1

CAPITAL ONE FINANCIAL CORPORATION (COF)

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

**	Not meaningful.

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

⁽²⁾

We recorded the following related to the mortgage representation and warranty reserve: a benefit of $18 million in Q2 2014 (which includes a provision of $11 million before taxes in discontinued operations and a benefit of $29 million before taxes in continuing operations), a benefit of $33 million in Q1 2014 (which includes a benefit of $47 million before taxes in discontinued operations and a provision of $14 million before taxes in continuing operations), a provision of $33 million in Q4 2013, a benefit of $4 million in Q3 2013, and a provision of $183 million in Q2 2013. Historically, the majority of the provision for representation and warranty losses is generally included net of tax in discontinued operations, with the remaining amount included pre-tax in non-interest income. The mortgage representation and warranty reserve was $1.0 billion as of June 30 2014, and $1.2 billion as of both December 31, 2013 and June 30, 2013.

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

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

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

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

⁽⁷⁾

Loans held for investment includes acquired loans accounted for based on cash flows expected to be collected. We use the term “acquired loans” to refer to a limited portion of the credit card loans acquired in the 2012 U.S. card acquisition and the substantial majority of loans acquired in the ING Direct and Chevy Chase Bank acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard formerly known as “SOP 03-3”). The table below presents amounts related to acquired loans accounted for under SOP 03-3:


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

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

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

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

⁽¹¹⁾

Calculated based on the annualized sum of (i) income from continuing operations, net of tax; (ii) less dividends and undistributed earnings allocated to participating securities; (iii) less preferred stock dividends, for the period, divided by average common equity for the period. Our calculation of return on average common equity may not be comparable to similarly titled measures reported by other companies.

⁽¹²⁾

Calculated based on the annualized sum of (i) income from continuing operations, net of tax; (ii) less dividends and undistributed earnings allocated to participating securities; (iii) less preferred stock dividends, for the period, divided by average tangible common equity for the period. Our calculation of return on average tangible common equity may not be comparable to similarly titled measures reported by other companies. See “Table 14: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for additional information.

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

⁽¹⁴⁾

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

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

⁽¹⁶⁾

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

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

CAPITAL ONE FINANCIAL CORPORATION (COF)

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


	2014 Q2							2014 Q1							2013 Q2
(Dollars in millions) (unaudited)	Average Balance		Interest Income/ Expense⁽¹⁾		Yield/ Rate⁽¹⁾			Average Balance		Interest Income/ Expense⁽¹⁾		Yield/ Rate⁽¹⁾			Average Balance		Interest Income/ Expense⁽¹⁾		Yield/ Rate⁽¹⁾
Interest-earning assets:
Loans, including loans held for sale	$	195,322	$	4,279		8.76	%	$	194,020	$	4,307		8.88	%	$	196,874	$	4,596		9.34	%
Investment securities		62,518		409		2.62			62,124		416		2.68			63,907		391		2.45
Cash equivalents and other		5,730		24		1.68			6,515		30		1.84			5,763		23		1.60

Total interest-earning assets	$	263,570	$	4,712		7.15		$	262,659	$	4,753		7.24		$	266,544	$	5,010		7.52

Interest-bearing liabilities:
Interest-bearing deposits	$	182,053	$	272		0.60		$	184,183	$	276		0.60		$	189,311	$	318		0.67
Securitized debt obligations		10,731		39		1.45			10,418		38		1.46			10,942		45		1.65
Senior and subordinated notes		16,004		78		1.95			14,162		77		2.17			12,692		82		2.58
Other borrowings		8,923		8		0.36			11,398		12		0.42			13,281		12		0.36

Total interest-bearing liabilities	$	217,711	$	397		0.73		$	220,161	$	403		0.73		$	226,226	$	457		0.81

Net interest income/spread			$	4,315		6.42				$	4,350		6.51				$	4,553		6.71

Impact of non-interest bearing funding						0.13							0.11							0.12

Net interest margin						6.55	%						6.62	%						6.83	%


	Six Months Ended June 30,
	2014							2013
(Dollars in millions) (unaudited)	Average Balance		Interest Income/ Expense⁽¹⁾		Yield/ Rate⁽¹⁾			Average Balance		Interest Income/ Expense⁽¹⁾		Yield/ Rate⁽¹⁾
Interest-earning assets:
Loans, including loans held for sale	$	194,674	$	8,586		8.82	%	$	198,648	$	9,245		9.31	%
Investment securities		62,322		825		2.65			63,930		765		2.39
Cash equivalents and other		6,123		54		1.76			6,430		51		1.59

Total interest-earning assets	$	263,119	$	9,465		7.19		$	269,008	$	10,061		7.48

Interest-bearing liabilities:
Interest-bearing deposits	$	182,431	$	548		0.60		$	189,958	$	644		0.68
Securitized debt obligations		10,576		77		1.46			11,348		101		1.78
Senior and subordinated notes		15,088		155		2.05			12,340		164		2.66
Other borrowings		10,153		20		0.39			15,544		29		0.37

Total interest-bearing liabilities	$	218,248	$	800		0.73		$	229,190	$	938		0.82

Net interest income/spread			$	8,665		6.46				$	9,123		6.66

Impact of non-interest bearing funding						0.13							0.12

Net interest margin						6.59	%						6.78	%

⁽¹⁾	Interest income and interest expense and the calculation of average yields on interest-earning assets and average rates on interest-bearing liabilities include the impact of hedge accounting.

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics⁽¹⁾


																2014 Q2 vs.
(Dollars in millions) (unaudited)	2014 Q2			2014 Q1			2013 Q4			2013 Q3			2013 Q2			2014 Q1			2013 Q2
Period-end Loans Held For Investment
Credit card:
Domestic credit card	$	71,165		$	68,275		$	73,255		$	69,936		$	70,490			4	%		1	%
International credit card		7,853			7,575			8,050			8,031			7,820			4			—

Total credit card		79,018			75,850			81,305			77,967			78,310			4			1

Consumer banking:
Auto		34,792			33,080			31,857			30,803			29,369			5			18
Home loan		32,644			34,035			35,282			36,817			39,163			(4	)		(17	)
Retail banking		3,626			3,612			3,623			3,665			3,686			—			(2	)

Total consumer banking		71,062			70,727			70,762			71,285			72,218			—			(2	)

Commercial banking:
Commercial and multifamily real estate		22,040			21,256			20,750			19,523			18,570			4			19
Commercial and industrial		25,402			24,064			23,309			21,848			21,170			6			20

Total commercial lending		47,442			45,320			44,059			41,371			39,740			5			19
Small-ticket commercial real estate		879			910			952			1,028			1,065			(3	)		(17	)

Total commercial banking		48,321			46,230			45,011			42,399			40,805			5			18

Other loans		127			134			121			163			179			(5	)		(29	)

Total loans held for investment	$	198,528		$	192,941		$	197,199		$	191,814		$	191,512			3			4

Average Loans Held For Investment
Credit card:
Domestic credit card	$	69,376		$	69,810		$	70,368		$	69,947		$	69,966			(1	)		(1	)
International credit card		7,621			7,692			7,899			7,782			7,980			(1	)		(4	)

Total credit card		76,997			77,502			78,267			77,729			77,946			(1	)		(1	)

Consumer banking:
Auto		33,972			32,387			31,424			30,157			28,677			5			18
Home loan		33,299			34,646			35,974			37,852			40,532			(4	)		(18	)
Retail banking		3,613			3,630			3,635			3,655			3,721			—			(3	)

Total consumer banking		70,884			70,663			71,033			71,664			72,930			—			(3	)

Commercial banking:
Commercial and multifamily real estate		21,484			20,962			19,928			19,047			18,084			2			19
Commercial and industrial		24,611			23,541			22,445			21,491			20,332			5			21

Total commercial lending		46,095			44,503			42,373			40,538			38,416			4			20
Small-ticket commercial real estate		896			932			986			1,038			1,096			(4	)		(18	)

Total commercial banking		46,991			45,435			43,359			41,576			39,512			3			19

Other loans		124			122			154			166			174			2			(29	)

Total average loans held for investment	$	194,996		$	193,722		$	192,813		$	191,135		$	190,562			1			2

Net Charge-off Rates
Credit card:
Domestic credit card		3.52	%		4.01	%		3.89	%		3.67	%		4.28	%		(49	)bps		(76	)bps
International credit card		3.93			4.17			4.74			4.71			5.08			(24	)		(115	)
Total credit card		3.56			4.02			3.98			3.78			4.36			(46	)		(80	)
Consumer banking:
Auto		1.31			1.66			2.30			2.01			1.28			(35	)		3
Home loan		0.05			0.06			0.03			0.06			0.03			(1	)		2
Retail banking		0.70			0.95			1.09			1.38			1.50			(25	)		(80	)
Total consumer banking		0.69			0.84			1.09			0.95			0.60			(15	)		9
Commercial banking:
Commercial and multifamily real estate		0.00			0.01			(0.11	)		(0.11	)		0.04			(1	)		(4	)
Commercial and industrial		0.04			0.03			0.04			0.18			0.03			1			1
Total commercial lending		0.02			0.02			(0.03	)		0.04			0.03			—			(1	)
Small-ticket commercial real estate		0.61			0.67			(0.81	)		1.26			0.45			(6	)		16
Total commercial banking		0.03			0.04			(0.05	)		0.07			0.04			(1	)		(1	)
Other loans		2.18			(0.68	)		4.68			12.17			13.10			*	*		*	*
Total charge-off		1.67			1.92			2.01			1.92			2.03			(25	)		(36	)


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

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial Summary—Business Segments⁽¹⁾


	Three Months Ended June 30, 2014
(Dollars in millions) (unaudited)	Total		Credit Card		Consumer Banking		Commercial Banking			Other
Earnings:
Net interest income (expense)	$	4,315	$	2,461	$	1,431	$	436		$	(13	)
Non-interest income		1,153		839		170		109			35

Total net revenue⁽⁴⁾		5,468		3,300		1,601		545			22
Provision for credit losses		704		549		143		12			—
Non-interest expense		2,979		1,719		938		267			55

Income (loss) from continuing operations before taxes		1,785		1,032		520		266			(33	)
Income tax provision (benefit)		581		364		186		95			(64	)

Income from continuing operations, net of tax	$	1,204	$	668	$	334	$	171		$	31


	Three Months Ended March 31, 2014
(Dollars in millions) (unaudited)	Total		Credit Card		Consumer Banking		Commercial Banking			Other
Earnings:
Net interest income (expense)	$	4,350	$	2,525	$	1,433	$	421		$	(29	)
Non-interest income (expense)		1,020		785		150		87			(2	)

Total net revenue (loss)⁽⁴⁾		5,370		3,310		1,583		508			(31	)
Provision (benefit) for credit losses		735		558		140		40			(3	)
Non-interest expense		2,932		1,726		930		255			21

Income (loss) from continuing operations before taxes		1,703		1,026		513		213			(49	)
Income tax provision (benefit)		579		358		183		76			(38	)

Income (loss) from continuing operations, net of tax	$	1,124	$	668	$	330	$	137		$	(11	)


	Three Months Ended June 30, 2013
(Dollars in millions) (unaudited)	Total		Credit Card		Consumer Banking		Commercial Banking			Other
Earnings:
Net interest income (expense)	$	4,553	$	2,804	$	1,478	$	402		$	(131	)
Non-interest income (expense)		1,085		832		189		93			(29	)

Total net revenue (loss)⁽⁴⁾		5,638		3,636		1,667		495			(160	)
Provision (benefit) for credit losses		762		713		67		(14	)		(4	)
Non-interest expense		3,018		1,819		910		228			61

Income (loss) from continuing operations before taxes		1,858		1,104		690		281			(217	)
Income tax provision (benefit)		631		385		246		100			(100	)

Income (loss) from continuing operations, net of tax	$	1,227	$	719	$	444	$	181		$	(117	)

CAPITAL ONE FINANCIAL CORPORATION (COF)

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


																2014 Q2 vs.
(Dollars in millions) (unaudited)	2014 Q2			2014 Q1			2013 Q4			2013 Q3			2013 Q2			2014 Q1			2013 Q2
Credit Card
Earnings:
Net interest income	$	2,461		$	2,525		$	2,576		$	2,757		$	2,804			(3	)%		(12	)%
Non-interest income		839			785			833			834			832			7			1

Total net revenue		3,300			3,310			3,409			3,591			3,636			—			(9	)
Provision for credit losses		549			558			751			617			713			(2	)		(23	)
Non-interest expense		1,719			1,726			1,868			1,904			1,819			—			(5	)

Income from continuing operations before taxes		1,032			1,026			790			1,070			1,104			1			(7	)
Income tax provision		364			358			274			376			385			2			(5	)

Income from continuing operations, net of tax	$	668		$	668		$	516		$	694		$	719			—			(7	)

Selected performance metrics:
Period-end loans held for investment	$	79,018		$	75,850		$	81,305		$	77,967		$	78,310			4			1
Average loans held for investment		76,997			77,502			78,267			77,729			77,946			(1	)		(1	)
Average yield on loans held for investment⁽⁵⁾		14.22	%		14.43	%		14.64	%		15.72	%		15.94	%		(21	)bps		(172	)bps
Total net revenue margin⁽⁶⁾		17.14			17.08			17.43			18.48			18.66			6			(152	)
Net charge-off rate		3.56			4.02			3.98			3.78			4.36			(46	)		(80	)
30+ day performing delinquency rate		2.89			3.08			3.46			3.51			3.13			(19	)		(24	)
30+ day delinquency rate		2.97			3.16			3.54			3.60			3.22			(19	)		(25	)
Nonperforming loan rate		0.10			0.11			0.11			0.12			0.12			(1	)		(2	)
Card loan premium amortization and other intangible accretion⁽⁷⁾	$	31		$	37		$	39		$	45		$	57			(16	)%		(46	)%
PCCR intangible amortization		94			98			102			106			110			(4	)		(15	)
Purchase volume⁽⁸⁾		56,358			47,434			54,245			50,943			50,788			19			11
Domestic Card
Earnings:
Net interest income	$	2,193		$	2,255		$	2,303		$	2,492		$	2,536			(3	)		(14	)
Non-interest income		768			702			747			749			737			9			4

Total net revenue		2,961			2,957			3,050			3,241			3,273			—			(10	)
Provision for credit losses		504			486			679			529			647			4			(22	)
Non-interest expense		1,513			1,545			1,664			1,713			1,635			(2	)		(7	)

Income from continuing operations before taxes		944			926			707			999			991			2			(5	)
Income tax provision		337			331			252			355			353			2			(5	)

Income from continuing operations, net of tax	$	607		$	595		$	455		$	644		$	638			2			(5	)

Selected performance metrics:
Period-end loans held for investment	$	71,165		$	68,275		$	73,255		$	69,936		$	70,490			4			1
Average loans held for investment		69,376			69,810			70,368			69,947			69,966			(1	)		(1	)
Average yield on loans held for investment⁽⁵⁾		13.95	%		14.19	%		14.44	%		15.65	%		15.91	%		(24	)bps		(196	)bps
Total net revenue margin⁽⁶⁾		17.07			16.94			17.34			18.53			18.71			13			(164	)
Net charge-off rate		3.52			4.01			3.89			3.67			4.28			(49	)		(76	)
30+ day performing delinquency rate		2.83			3.02			3.43			3.46			3.05			(19	)		(22	)
30+ day delinquency rate		2.83			3.02			3.43			3.46			3.05			(19	)		(22	)
Purchase volume⁽⁸⁾	$	52,653		$	44,139		$	50,377		$	47,420		$	47,273			19	%		11	%
International Card
Earnings:
Net interest income	$	268		$	270		$	273		$	265		$	268			(1	)		—
Non-interest income		71			83			86			85			95			(14	)		(25	)

Total net revenue		339			353			359			350			363			(4	)		(7	)
Provision for credit losses		45			72			72			88			66			(38	)		(32	)
Non-interest expense		206			181			204			191			184			14			12

Income from continuing operations before taxes		88			100			83			71			113			(12	)		(22	)
Income tax provision		27			27			22			21			32			—			(16	)

Income from continuing operations, net of tax	$	61		$	73		$	61		$	50		$	81			(16	)		(25	)

Selected performance metrics:
Period-end loans held for investment	$	7,853		$	7,575		$	8,050		$	8,031		$	7,820			4	%		—	%
Average loans held for investment		7,621			7,692			7,899			7,782			7,980			(1	)		(4	)
Average yield on loans held for investment		16.74	%		16.64	%		16.48	%		16.35	%		16.19	%		10	bps		55	bps
Total net revenue margin		17.76			18.38			18.20			17.99			18.20			(62	)		(44	)
Net charge-off rate		3.93			4.17			4.74			4.71			5.08			(24	)		(115	)
30+ day performing delinquency rate		3.40			3.59			3.71			3.86			3.84			(19	)		(44	)
30+ day delinquency rate		4.20			4.41			4.56			4.78			4.79			(21	)		(59	)
Nonperforming loan rate		1.03			1.07			1.10			1.16			1.20			(4	)		(17	)
Purchase volume⁽⁸⁾	$	3,705		$	3,295		$	3,868		$	3,523		$	3,515			12	%		5	%

CAPITAL ONE FINANCIAL CORPORATION (COF)

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


																2014 Q2 vs.
(Dollars in millions) (unaudited)	2014 Q2			2014 Q1			2013 Q4			2013 Q3			2013 Q2			2014 Q1			2013 Q2
Consumer Banking
Earnings:
Net interest income	$	1,431		$	1,433		$	1,468		$	1,481		$	1,478			—	%		(3	)%
Non-interest income		170			150			195			184			189			13			(10	)

Total net revenue		1,601			1,583			1,663			1,665			1,667			1			(4	)
Provision for credit losses		143			140			212			202			67			2			113
Non-interest expense		938			930			1,018			927			910			1			3

Income from continuing operations before taxes		520			513			433			536			690			1			(25	)
Income tax provision		186			183			154			191			246			2			(24	)

Income from continuing operations, net of tax	$	334		$	330		$	279		$	345		$	444			1			(25	)

Selected performance metrics:
Period-end loans held for investment	$	71,062		$	70,727		$	70,762		$	71,285		$	72,218			—			(2	)
Average loans held for investment		70,884			70,663			71,033			71,664			72,930			—			(3	)
Average yield on loans held for investment		6.22	%		6.18	%		6.30	%		6.21	%		5.99	%		4	bps		23	bps
Auto loan originations	$	5,376		$	4,727		$	4,322		$	4,752		$	4,525			14	%		19	%
Period-end deposits		169,153			171,529			167,652			168,437			169,789			(1	)		—
Average deposits		169,694			168,676			167,870			169,082			170,733			1			(1	)
Average deposit interest rate		0.57	%		0.57	%		0.60	%		0.63	%		0.64	%		—	bps		(7	)bps
Core deposit intangible amortization	$	28		$	30		$	32		$	34		$	35			(7	)%		(20	)%
Net charge-off rate		0.69	%		0.84	%		1.09	%		0.95	%		0.60	%		(15	)bps		9	bps
30+ day performing delinquency rate		2.91			2.57			3.20			2.82			2.55			34			36
30+ day delinquency rate		3.49			3.14			3.89			3.46			3.15			35			34
Nonperforming loan rate		0.75			0.74			0.86			0.79			0.78			1			(3	)
Nonperforming asset rate⁽²⁾		1.01			1.00			1.12			1.01			0.97			1			4
Period-end loans serviced for others	$	6,944		$	6,868		$	7,665		$	14,043		$	14,313			1	%		(51	)%

CAPITAL ONE FINANCIAL CORPORATION (COF)

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


																2014 Q2 vs.
(Dollars in millions) (unaudited)	2014 Q2			2014 Q1			2013 Q4			2013 Q3			2013 Q2			2014 Q1			2013 Q2
Commercial Banking
Earnings:
Net interest income	$	436		$	421		$	447		$	424		$	402			4	%		8	%
Non-interest income		109			87			131			87			93			25			17

Total net revenue⁽⁴⁾⁽⁹⁾		545			508			578			511			495			7			10
Provision (benefit) for credit losses		12			40			(6	)		31			(14	)		(70	)			**
Non-interest expense		267			255			281			228			228			5			17

Income from continuing operations before taxes		266			213			303			252			281			25			(5	)
Income tax provision		95			76			108			90			100			25			(5	)

Income from continuing operations, net of tax	$	171		$	137		$	195		$	162		$	181			25			(6	)

Selected performance metrics:
Period-end loans held for investment	$	48,321		$	46,230		$	45,011		$	42,399		$	40,805			5			18
Average loans held for investment		46,991			45,435			43,359			41,576			39,512			3			19
Average yield on loans held for investment⁽⁹⁾		3.50	%		3.47	%		3.92	%		3.87	%		3.84	%		3	bps		(34	)bps
Period-end deposits	$	31,440		$	31,485		$	30,567		$	30,592		$	30,869			—	%		2	%
Average deposits		31,238			31,627			31,033			30,685			30,746			(1	)		2
Average deposit interest rate		0.24	%		0.25	%		0.25	%		0.27	%		0.26	%		(1	)bps		(2	)bps
Core deposit intangible amortization	$	5		$	6		$	6		$	6		$	8			(17	)%		(38	)%
Net charge-off rate		0.03	%		0.04	%		(0.05	)%		0.07	%		0.04	%		(1	)bps		(1	)bps
Nonperforming loan rate		0.38			0.33			0.33			0.47			0.60			5			(22	)
Nonperforming asset rate⁽²⁾		0.41			0.36			0.37			0.56			0.62			5			(21	)
Risk category:⁽¹⁰⁾
Noncriticized	$	46,689		$	44,904		$	43,593		$	40,940		$	39,168			4	%		19	%
Criticized performing		1,234			952			1,007			968			1,087			30			14
Criticized nonperforming		181			150			149			201			244			21			(26	)

Total risk-rated loans		48,104			46,006			44,749			42,109			40,499			5			19
Acquired commercial loans		217			224			262			290			306			(3	)		(29	)

Total commercial loans	$	48,321		$	46,230		$	45,011		$	42,399		$	40,805			5			18

% of period-end commercial loans held for investment:
Noncriticized		96.6	%		97.1	%		96.9	%		96.5	%		96.0	%		(50	)bps		60	bps
Criticized performing		2.6			2.1			2.2			2.3			2.7			50			(10	)
Criticized nonperforming		0.4			0.3			0.3			0.5			0.6			10			(20	)

Total risk-rated loans		99.6			99.5			99.4			99.3			99.3			10			30
Acquired commercial loans		0.4			0.5			0.6			0.7			0.7			(10	)		(30	)

Total commercial loans		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		—			—

CAPITAL ONE FINANCIAL CORPORATION (COF)

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


																2014 Q2 vs.
(Dollars in millions) (unaudited)	2014 Q2			2014 Q1			2013 Q4			2013 Q3			2013 Q2			2014 Q1			2013 Q2
Other
Earnings:
Net interest expense	$	(13	)	$	(29	)	$	(68	)	$	(102	)	$	(131	)		(55	)%		(90	)%
Non-interest income		35			(2	)		(38	)		(14	)		(29	)		**			**

Total net revenue (loss)⁽⁴⁾		22			(31	)		(106	)		(116	)		(160	)		**			**
Provision (benefit) for credit losses		—			(3	)		—			(1	)		(4	)		**			**
Non-interest expense		55			21			68			50			61			162			(10	)

Loss from continuing operations before taxes		(33	)		(49	)		(174	)		(165	)		(217	)		(33	)		(85	)
Income tax benefit		(64	)		(38	)		(59	)		(82	)		(100	)		68			(36	)

Income (loss) from continuing operations, net of tax	$	31		$	(11	)	$	(115	)	$	(83	)	$	(117	)		**			**

Selected performance metrics:
Period-end loans held for investment	$	127		$	134		$	121		$	163		$	179			(5	)		(29	)
Average loans held for investment		124			122			154			166			174			2			(29	)
Period-end deposits		5,297			5,310			6,304			7,805			9,207			—			(42	)
Average deposits		5,383			5,539			6,803			8,573			9,171			(3	)		(41	)
Total
Earnings:
Net interest income	$	4,315		$	4,350		$	4,423		$	4,560		$	4,553			(1	)		(5	)
Non-interest income		1,153			1,020			1,121			1,091			1,085			13			6

Total net revenue		5,468			5,370			5,544			5,651			5,638			2			(3	)
Provision for credit losses		704			735			957			849			762			(4	)		(8	)
Non-interest expense		2,979			2,932			3,235			3,109			3,018			2			(1	)

Income from continuing operations before taxes		1,785			1,703			1,352			1,693			1,858			5			(4	)
Income tax provision		581			579			477			575			631			—			(8	)

Income from continuing operations, net of tax	$	1,204		$	1,124		$	875		$	1,118		$	1,227			7			(2	)

Selected performance metrics:
Period-end loans held for investment	$	198,528		$	192,941		$	197,199		$	191,814		$	191,512			3			4
Average loans held for investment		194,996			193,722			192,813			191,135			190,562			1			2
Period-end deposits		205,890			208,324			204,523			206,834			209,865			(1	)		(2	)
Average deposits		206,315			205,842			205,706			208,340			210,650			—			(2	)

CAPITAL ONE FINANCIAL CORPORATION (COF)

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

**	Not meaningful.

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

⁽²⁾

Nonperforming assets consist of nonperforming loans, real estate owned (“REO”) and other foreclosed assets. The nonperforming asset ratios are calculated based on nonperforming assets for each category divided by the combined period-end total of loans held for investment, REO and other foreclosed assets for each respective category. Nonperforming assets related to acquired loans are excluded from the calculation for our home loans and auto businesses.

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

⁽⁴⁾

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

⁽⁵⁾

The transfer of the Best Buy Stores, L.P. (“Best Buy”) portfolio to held for sale resulted in an increase in the average yield for Domestic Card and Total Credit Card of 121 basis points and 110 basis points, respectively, in Q3 2013, 168 basis points and 152 basis points, respectively, in Q2 2013 and 107 basis points and 97 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.

⁽⁶⁾

The transfer of the Best Buy portfolio to held for sale resulted in an increase in the net revenue margin for Domestic Card and Total Credit Card of 136 basis points and 123 basis points, respectively, in Q3 2013, 188 basis points and 169 basis points, respectively, in Q2 2013 and 123 basis points and 112 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.

⁽⁷⁾	Represents the net reduction in interest income attributable to non-SOP 03-3 card loan premium amortization and other intangible accretion associated with the 2012 U.S. card acquisition.

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

⁽⁹⁾

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

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

CAPITAL ONE FINANCIAL CORPORATION (COF)

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

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


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

Reconciliation of Non-GAAP Measures

We report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include tangible common equity (“TCE”) and tangible assets. The tables below provide the details of the calculation of our non-GAAP capital measures and regulatory capital. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.


(Dollars in millions) (unaudited)	2014 Q2		2014 Q1		2013 Q4		2013 Q3		2013 Q2
Tangible Common Equity (Average)
Average stockholders’ equity	$	43,767	$	42,859	$	42,355	$	41,185	$	41,490
Average goodwill and other intangible assets⁽⁹⁾		(15,615)		(15,727)		(15,847)		(15,829)		(15,974)
Noncumulative perpetual preferred stock⁽¹⁰⁾		(970)		(853)		(853)		(853)		(853)

Average tangible common equity	$	27,182	$	26,279	$	25,655	$	24,503	$	24,663

Tangible Common Equity (Period End)
Stockholders’ equity	$	43,815	$	42,801	$	41,632	$	41,645	$	40,947
Goodwill and other intangible assets⁽⁹⁾		(15,564)		(15,666)		(15,784)		(15,760)		(15,872)
Noncumulative perpetual preferred stock⁽¹⁰⁾		(1,338)		(853)		(853)		(853)		(853)

Tangible common equity	$	26,913	$	26,282	$	24,995	$	25,032	$	24,222

Tangible Assets (Average)
Average total assets	$	294,744	$	294,275	$	294,040	$	294,919	$	297,748
Average goodwill and other intangible assets⁽⁹⁾		(15,615)		(15,727)		(15,847)		(15,829)		(15,974)

Average tangible assets	$	279,129	$	278,548	$	278,193	$	279,090	$	281,774

Tangible Assets (Period End)
Total assets	$	298,317	$	290,500	$	296,933	$	289,866	$	296,524
Goodwill and other intangible assets⁽⁹⁾		(15,564)		(15,666)		(15,784)		(15,760)		(15,872)

Tangible assets	$	282,753	$	274,834	$	281,149	$	274,106	$	280,652

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


(Dollars in millions) (unaudited)	2014 Q2			2014 Q1
Common equity excluding AOCI	$	42,848		$	42,658
Adjustments:
AOCI^(11)(12)		6			(182	)
Goodwill⁽⁹⁾		(13,811	)		(13,811	)
Intangible assets^(9)(12)		(289	)		(314	)
Other		20			83

Common equity Tier 1 capital	$	28,774		$	28,434

Risk-weighted assets	$	226,221		$	219,047
Common equity Tier 1 capital ratio⁽⁴⁾		12.7	%		13.0	%

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

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

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

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

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

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

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

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

⁽⁹⁾	Includes impact of related deferred taxes.

⁽¹⁰⁾	Includes related surplus.

⁽¹¹⁾	Amounts presented are net of tax.

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

CAPITAL ONE FINANCIAL CORP - FORM 8-K - EX-99.2 - July 17, 2014

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