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Capital One Reports Fourth Quarter 2018 Net Income of $1.3 billion, or $2.48 per share

Excluding adjusting items, Fourth Quarter 2018 Net Income of $1.87 per share(1)

MCLEAN, Va., Jan. 22, 2019 /PRNewswire/ -- Capital One Financial Corporation (COF) today announced net income for the fourth quarter of 2018 of $1.3 billion, or $2.48 per diluted common share, compared with net income of $1.5 billion, or $2.99 per diluted common share in the third quarter of 2018, and with net loss of $971 million, or $2.17 per diluted common share in the fourth quarter of 2017. Excluding adjusting items, net income for the fourth quarter of 2018 was $1.87 per diluted common share(1).

"In the fourth quarter, Capital One posted solid results as we invest to grow and to drive our digital transformation," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "For full year 2018, we delivered 41 percent growth in earnings per share, excluding adjusting items(1)."

Adjusting items in the fourth quarter of 2018, which are excluded from diluted EPS and our efficiency ratio metrics (see Table 15 in our Financial Supplement for additional information):









Pre-Tax

Diluted EPS

(Dollars in millions, except per share data)

Impact

Impact

Benefit as a result of tax methodology change on rewards costs

$

284


$

0.60


Net gains on the sales of exited businesses

74


0.12


U.K. Payment Protection Insurance customer refund reserve ("U.K. PPI Reserve")

(50)


(0.11)


All comparisons below are for the fourth quarter of 2018 compared with the third quarter of 2018 unless otherwise noted.

Fourth Quarter 2018 Income Statement Summary:

  • Total net revenue increased 1 percent to $7.0 billion.
  • Recognized net gains of $74 million on the sales of exited businesses.

(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, both in the current period and across periods. Growth in earnings

per share, excluding adjusting items provides useful information to users of our financial information largely due

to the impacts of the Tax Act on full year 2017 results. See Table 15 in Exhibit 99.2 for a reconciliation of our

selected reported results to these non-GAAP measures.

  • Total non-interest expense increased 10 percent to $4.1 billion:
  • Pre-provision earnings decreased 10 percent to $2.9 billion(2).
  • Provision for credit losses increased 29 percent to $1.6 billion:
  • Net interest margin of 6.96 percent, decreased 5 basis points.
  • Efficiency ratio of 58.92 percent.
  • Operating efficiency ratio of 47.07 percent.

Fourth Quarter 2018 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 11.2 percent at December 31, 2018.
  • Period-end loans held for investment in the quarter increased $7.1 billion, or 3 percent, to $245.9 billion.
  • Average loans held for investment in the quarter increased $4.6 billion, or 2 percent, to $241.4 billion.
  • Period-end total deposits increased $2.6 billion, or 1 percent, to $249.8 billion, while average deposits increased $943 million, or less than 1 percent, to $247.7 billion.
  • Interest-bearing deposits rate paid increased 13 basis points to 1.36 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, both in the current period and across periods. 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.

All comparisons below are for the full year of 2018 compared with the full year of 2017 unless otherwise noted.

2018 Full Year Income Statement Summary:

  • Total net revenue increased 3 percent to $28.1 billion.
  • Recognized net gains of $615 million on the sales of exited businesses.
  • Total non-interest expense increased 5 percent to $14.9 billion:
  • Pre-provision earnings increased 1 percent to $13.2 billion(2).
  • Provision for credit losses decreased 22 percent to $5.9 billion.
  • Efficiency ratio of 53.08 percent.
  • Operating efficiency ratio of 45.33 percent.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on January 22, 2019 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 February 5, 2019 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 $249.8 billion in deposits and $372.5 billion in total assets as of December 31, 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.

(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, both in the current period and across periods. 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.

 

 

Exhibit 99.2


Capital One Financial Corporation

Financial Supplement(1)(2)

Fourth 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

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

Other



Table 14:

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

18


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 Annual Report on Form 10-K for the period ended

December 31, 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 Q4 vs.


Year Ended December 31,

(Dollars in millions, except per share data and as noted)


2018


2018


2018


2018


2017


2018


2017






2018 vs.


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2018


2017


2017

Income Statement





















Net interest income


$

5,820



$

5,786



$

5,551



$

5,718



$

5,813



1

%




$

22,875



$

22,460



2

%

Non-interest income


1,193



1,176



1,641



1,191



1,200



1



(1)

%


5,201



4,777



9


Total net revenue(1)


7,013



6,962



7,192



6,909



7,013



1





28,076



27,237



3


Provision for credit losses


1,638



1,268



1,276



1,674



1,926



29



(15)



5,856



7,551



(22)


Non-interest expense:





















Marketing


831



504



425



414



460



65



81



2,174



1,670



30


Operating expenses


3,301



3,269



2,999



3,159



3,319



1



(1)



12,728



12,524



2


Total non-interest expense


4,132



3,773



3,424



3,573



3,779



10



9



14,902



14,194



5


Income from continuing operations before income taxes


1,243



1,921



2,492



1,662



1,308



(35)



(5)



7,318



5,492



33


Income tax provision (benefit)


(21)



420



575



319



2,170



**



**



1,293



3,375



(62)


Income (loss) from continuing operations, net of tax


1,264



1,501



1,917



1,343



(862)



(16)



**



6,025



2,117



185


Income (loss) from discontinued operations, net of tax


(3)



1



(11)



3



(109)



**



(97)



(10)



(135)



(93)


Net income (loss)


1,261



1,502



1,906



1,346



(971)



(16)



**



6,015



1,982



**


Dividends and undistributed earnings allocated to participating securities(2)


(9)



(9)



(12)



(10)



(1)





**



(40)



(13)



**


Preferred stock dividends


(80)



(53)



(80)



(52)



(80)



51





(265)



(265)




Net income (loss) available to common stockholders


$

1,172



$

1,440



$

1,814



$

1,284



$

(1,052)



(19)



**



$

5,710



$

1,704



**


Common Share Statistics





















Basic earnings per common share:(2)





















Net income (loss) from continuing operations


$

2.50



$

3.01



$

3.76



$

2.63



$

(1.95)



(17)

%


**



$

11.92



$

3.80



**


Income (loss) from discontinued operations


(0.01)





(0.02)



0.01



(0.22)



**



(95)

%


(0.02)



(0.28)



(93)

%

Net income (loss) per basic common share


$

2.49



$

3.01



$

3.74



$

2.64



$

(2.17)



(17)



**



$

11.90



$

3.52



**


Diluted earnings per common share:(2)





















Net income (loss) from continuing operations


$

2.49



$

2.99



$

3.73



$

2.61



$

(1.95)



(17)



**



$

11.84



$

3.76



**


Income (loss) from discontinued operations


(0.01)





(0.02)



0.01



(0.22)



**



(95)



(0.02)



(0.27)



(93)


Net income (loss) per diluted common share


$

2.48



$

2.99



$

3.71



$

2.62



$

(2.17)



(17)



**



$

11.82



$

3.49



**


Weighted-average common shares outstanding (in millions):





















Basic


470.0



477.8



485.1



486.9



485.7



(2)



(3)



479.9



484.2



(1)


Diluted


472.7



480.9



488.3



490.8



485.7



(2)



(3)



483.1



488.6



(1)


Common shares outstanding (period-end, in millions)


467.7



473.7



478.4



485.9



485.5



(1)



(4)



467.7



485.5



(4)


Dividends declared and paid per common share


$

0.40



$

0.40



$

0.40



$

0.40



$

0.40







$

1.60



$

1.60




Tangible book value per common share (period-end)(3)


69.20



66.15



63.86



61.29



60.28



5



15



69.20



60.28



15













































2018 Q4 vs.


Year Ended December 31,

(Dollars in millions)


2018


2018


2018


2018


2017


2018


2017






2018 vs.


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2018


2017


2017

Balance Sheet (Period-End)





















Loans held for investment


$

245,899



$

238,761



$

236,124



$

248,256



$

254,473



3

%


(3)

%


$

245,899



$

254,473



(3)

%

Interest-earning assets


341,293



331,293



332,167



332,251



334,124



3



2



341,293



334,124



2


Total assets


372,538



362,909



363,989



362,857



365,693



3



2



372,538



365,693



2


Interest-bearing deposits


226,281



222,356



222,605



224,671



217,298



2



4



226,281



217,298



4


Total deposits


249,764



247,195



248,225



250,847



243,702



1



2



249,764



243,702



2


Borrowings


58,905



52,205



53,310



50,693



60,281



13



(2)



58,905



60,281



(2)


Common equity


47,307



46,277



45,566



44,842



44,370



2



7



47,307



44,370



7


Total stockholders' equity


51,668



50,638



49,926



49,203



48,730



2



6



51,668



48,730



6


Balance Sheet (Average Balances)





















Loans held for investment


$

241,371



$

236,766



$

240,758



$

249,726



$

252,566



2

%


(4)

%


$

242,118



$

245,565



(1)

%

Interest-earning assets


334,714



330,272



333,495



330,183



330,742



1



1



332,738



322,330



3


Total assets


365,243



360,937



363,929



362,049



363,045



1



1



363,036



354,924



2


Interest-bearing deposits


222,827



221,431



223,079



219,670



215,258



1



4



221,760



213,949



4


Total deposits


247,663



246,720



248,790



245,270



241,562





3



247,117



239,882



3


Borrowings


53,994



51,684



52,333



54,588



58,109



4



(7)



53,144



53,659



(1)


Common equity


46,753



46,407



45,466



44,670



46,350



1



1



45,831



45,170



1


Total stockholders' equity


51,114



50,768



49,827



49,031



50,710



1



1



50,192



49,530



1


 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated














2018 Q4 vs.


Year Ended December 31,

(Dollars in millions, except as noted)


2018


2018


2018


2018


2017


2018


2017






2018 vs.


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2018


2017


2017

Performance Metrics





















Net interest income growth (period over period)


1

%


4

%


(3)

%


(2)

%


2

%


**



**



2

%


8

%


**


Non-interest income growth (period over period)


1



(28)



38



(1)



(7)



**



**



9



3



**


Total net revenue growth (period over period)


1



(3)



4



(1)





**



**



3



7



**


Total net revenue margin(4)


8.38



8.43



8.63



8.37



8.48



(5)

bps


(10)

bps


8.44



8.45



(1)

bps

Net interest margin(5)


6.96



7.01



6.66



6.93



7.03



(5)



(7)



6.87



6.97



(10)


Return on average assets


1.38



1.66



2.11



1.48



(0.95)



(28)



233



1.66



0.60



106


Return on average tangible assets(6)


1.44



1.74



2.20



1.55



(0.99)



(30)



243



1.73



0.62



111


Return on average common equity(7)


10.05



12.40



16.06



11.47



(8.14)



(2)

%


18

%


12.48



4.07



8

%

Return on average tangible common equity(8)


14.78



18.32



23.99



17.32



(12.12)



(4)



27



18.56



6.16



12


Non-interest expense as a percentage of average loans held for investment


6.85



6.37



5.69



5.72



5.98



48

bps


87

bps


6.15



5.78



37

bps

Efficiency ratio(9)


58.92



54.19



47.61



51.72



53.89



5

%


5

%


53.08



52.11



1

%

Operating efficiency ratio(10)


47.07



46.95



41.70



45.72



47.33







45.33



45.98



(1)


Effective income tax rate for continuing operations


(1.7)



21.9



23.1



19.2



165.9



(24)



(168)



17.7



61.5



(44)


Employees (in thousands), period-end


47.6



47.6



47.8



47.9



49.3





(3)



47.6



49.3



(3)


Credit Quality Metrics





















Allowance for loan and lease losses


$

7,220



$

7,219



$

7,368



$

7,567



$

7,502





(4)

%


$

7,220



$

7,502



(4)

%

Allowance as a percentage of loans held for investment


2.94

%


3.02

%


3.12

%


3.05

%


2.95

%


(8)

bps


(1)

bps


2.94

%


2.95

%


(1)

bps

Net charge-offs


$

1,610



$

1,425



$

1,459



$

1,618



$

1,828



13

%


(12)

%


$

6,112



$

6,562



(7)

%

Net charge-off rate(11)


2.67

%


2.41

%


2.42

%


2.59

%


2.89

%


26

bps


(22)

bps


2.52

%


2.67

%


(15)

bps

30+ day performing delinquency rate


3.62



3.28



2.88



2.72



3.23



34



39



3.62



3.23



39


30+ day delinquency rate


3.84



3.48



3.05



2.91



3.48



36



36



3.84



3.48



36


Capital Ratios(12)





















Common equity Tier 1 capital


11.2

%


11.2

%


11.1

%


10.5

%


10.3

%




90

bps


11.2

%


10.3

%


90

bps

Tier 1 capital


12.7



12.8



12.6



12.0



11.8



(10)

bps


90



12.7



11.8



90


Total capital


15.1



15.2



15.1



14.5



14.4



(10)



70



15.1



14.4



70


Tier 1 leverage


10.7



10.6



10.3



10.1



9.9



10



80



10.7



9.9



80


Tangible common equity ("TCE")(13)


9.1



9.0



8.8



8.6



8.3



10



80



9.1



8.3



80


 

...

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income














2018 Q4 vs.


Year Ended December 31,



2018


2018


2018


2018


2017


2018


2017






2018 vs.

(Dollars in millions, except per share data and as noted)


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2018


2017


2017

Interest income:





















Loans, including loans held for sale


$

6,358



$

6,247



$

5,989



$

6,134



$

6,133



2

%


4

%


$

24,728



$

23,388



6

%

Investment securities


627



593



539



452



431



6



45



2,211



1,711



29


Other


63



55



68



51



40



15



58



237



123



93


Total interest income


7,048



6,895



6,596



6,637



6,604



2



7



27,176



25,222



8


Interest expense:





















Deposits


756



681



622



539



457



11



65



2,598



1,602



62


Securitized debt obligations


138



127



124



107



91



9



52



496



327



52


Senior and subordinated notes


297



288



289



251



209



3



42



1,125



731



54


Other borrowings


37



13



10



22



34



185



9



82



102



(20)


Total interest expense


1,228



1,109



1,045



919



791



11



55



4,301



2,762



56


Net interest income


5,820



5,786



5,551



5,718



5,813



1





22,875



22,460



2


Provision for credit losses


1,638



1,268



1,276



1,674



1,926



29



(15)



5,856



7,551



(22)


Net interest income after provision for credit losses


4,182



4,518



4,275



4,044



3,887



(7)



8



17,019



14,909



14


Non-interest income:





















Interchange fees, net


743



714



723



643



665



4



12



2,823



2,573



10


Service charges and other customer-related fees


352



410



391



432



394



(14)



(11)



1,585



1,597



(1)


Net securities gains (losses)


(20)



(196)



(1)



8



1



(90)



**



(209)



65



**


Other


118



248



528



108



140



(52)



(16)



1,002



542



85


Total non-interest income


1,193



1,176



1,641



1,191



1,200



1



(1)



5,201



4,777



9


Non-interest expense:





















Salaries and associate benefits


1,345



1,432



1,430



1,520



1,521



(6)



(12)



5,727



5,899



(3)


Occupancy and equipment


610



515



503



490



523



18



17



2,118



1,939



9


Marketing


831



504



425



414



460



65



81



2,174



1,670



30


Professional services


426



275



234



210



274



55



55



1,145



1,097



4


Communications and data processing


326



311



317



306



306



5



7



1,260



1,177



7


Amortization of intangibles


43



44



43



44



61



(2)



(30)



174



245



(29)


Other


551



692



472



589



634



(20)



(13)



2,304



2,167



6


Total non-interest expense


4,132



3,773



3,424



3,573



3,779



10



9



14,902



14,194



5


Income from continuing operations before income taxes


1,243



1,921



2,492



1,662



1,308



(35)



(5)



7,318



5,492



33


Income tax provision (benefit)


(21)



420



575



319



2,170



**



**



1,293



3,375



(62)


Income (loss) from continuing operations, net of tax


1,264



1,501



1,917



1,343



(862)



(16)



**



6,025



2,117



185


Income (loss) from discontinued operations, net of tax


(3)



1



(11)



3



(109)



**



(97)



(10)



(135)



(93)


Net income (loss)


1,261



1,502



1,906



1,346



(971)



(16)



**



6,015



1,982



**


Dividends and undistributed earnings allocated to participating securities(2)


(9)



(9)



(12)



(10)



(1)





**



(40)



(13)



**


Preferred stock dividends


(80)



(53)



(80)



(52)



(80)



51





(265)



(265)




Net income (loss) available to common stockholders


$

1,172



$

1,440



$

1,814



$

1,284



$

(1,052)



(19)



**



$

5,710



$

1,704



**



































2018 Q4 vs.


Year Ended December 31,



2018


2018


2018


2018


2017


2018


2017






2018 vs.

(Dollars in millions, except per share data and as noted)


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2018


2017


2017

Basic earnings per common share:(2)





















Net income (loss) from continuing operations


$

2.50



$

3.01



$

3.76



$

2.63



$

(1.95)



(17)

%


**



$

11.92



$

3.80



**


Income (loss) from discontinued operations


(0.01)





(0.02)



0.01



(0.22)



**



(95)

%


(0.02)



(0.28)



(93)

%

Net income (loss) per basic common share


$

2.49



$

3.01



$

3.74



$

2.64



$

(2.17)



(17)



**



$

11.90



$

3.52



**


Diluted earnings per common share:(2)





















Net income (loss) from continuing operations


$

2.49



$

2.99



$

3.73



$

2.61



$

(1.95)



(17)



**



$

11.84



$

3.76



**


Income (loss) from discontinued operations


(0.01)





(0.02)



0.01



(0.22)



**