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ASK YOURSELF, WHAT’S IN YOUR WALLET?®
2013 ANNUAL REPORT

Table of contents

  • Page 1
    ASK YOURSELF, WHAT'S IN YOUR WALLET?® 2013 ANNUAL REPORT

  • Page 2

  • Page 3
    ... of openness, excellence, and doing the right thing. Leverage information, analytics, and testing to bring the right product to the right customer at the right price. Manage risk with preemptive conservatism. Obsess about long-term resilience and value creation. Build a loyal customer franchise...

  • Page 4
    2

  • Page 5
    ... least resilient parts of acquired loan portfolios run-off, avoiding high-balance revolvers in our card business, and ending our partnership with Best Buy®. Despite these pressures, we delivered operating earnings of $4.39 billion in 2013, up from $3.73 billion in 2012. Earnings per share also grew...

  • Page 6
    ... performance over the long term. We are focused on innovation and new product development, and we expect the card business to return to growth in the latter half of 2014. Our consumer banking business, which encompasses auto finance, home loans, retail banking and Capital One 360, delivered $1.45...

  • Page 7
    ... stay in excellent financial shape. Vacation Ownership pressure the economics of our retail deposit businesses even if rates begin to rise in 2014. The strong growth and attractive returns in our commercial banking business continued in 2013. Despite ongoing pressure on loan and deposit margins...

  • Page 8
    ..., we took over a new call center and transitioned 2,200 associates with no dip in customer service levels. We've incorporated some remaining activities into our ongoing initiatives to enhance our infrastructure, but the integration of the HSBC U.S. credit card business is essentially complete. 6

  • Page 9
    .... It's more than a secure, convenient way to accept payments. It's a complete service that works behind the scenes to help business owners track sales, manage inventory, and offer special deals to their best customers. Bringing Ingenuity, Simplicity, and Humanity to Banking We continued to deliver...

  • Page 10
    ...fits and public agencies working to build thriving communities. Through a comprehensive program we call Investing for Good, we're able to maximize the impact of the expertise, time, and money we contribute. Our investments in affordable housing, financial literacy, small-business development, and...

  • Page 11
    ...live and about 19,500 jobs. Within days of Hurricane Sandy, which swept through coastal areas of New York and New Jersey in October 2012, Capital One committed more than $1.5 million in grants to nonprofits for recovery efforts, $2 million to the governor of New York's small-business emergency loan...

  • Page 12
    ...deposit funding. Copyright © 2014 FORTUNE is a registered trademark of Cable News Network. A Time Warner Company and is used under license. FORTUNE, CNN, and Time Inc. are not affiliated with, and do not endorse products or services of, Licensee. Copyright © 2014 Working Mother Media. All rights...

  • Page 13
    ... talented people over many years to create a workforce with the heart and intellect to pull off amazing things every day. The road ahead has challenges. Returns will be pressured by cyclical and structural forces, and new capital rules will lead to higher capital requirements. Loan growth will be...

  • Page 14
    ... $0.98 2008 2009 2010 2011 2012 2013 Diluted Earnings Per Share $6.01 $6.80 $6.96 $6.16 ($0.21) 2008 $0.74 2009 2010 2011 2012 2013 Deposits ($ In Billions) $212 $205 $109 $116 $122 $128 2008 2009 2010 2011 2012 2013 * 2008 data excludes goodwill impairment charge of $811 million...

  • Page 15
    ...: Purchase volume Total net revenue margin Net interest margin Return on average assets Return on average common equity Return on average tangible common equity Efficiency ratio Effective income tax rate on continuing operations Full-time equivalent employees (in thousands), period end $ $ Capital...

  • Page 16
    ... R Owner JMB Consulting, LLC Michael C. Slocum President, Commercial Banking C, G Mayo A. Shattuck III Chairman Exelon Corporation Jonathan W. Witter President, Retail and Direct Banking Bradford H. Warner A, R Former Head of Premier and Small Business Banking Bank of America Corporation Sanjiv...

  • Page 17
    ... Drive, McLean, Virginia (Address of Principal Executive Offices) 22102 (Zip Code) Registrant's telephone number, including area code: (703) 720-1000 Securities registered pursuant to section 12(b) of the act: Title of Each Class Name of Each Exchange on Which Registered Common Stock (par value...

  • Page 18
    ... of Equity Securities ...Summary of Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") ...Executive Summary and Business Outlook ...Critical Accounting Policies and Estimates ...Accounting Changes and Developments ...Consolidated...

  • Page 19
    ......Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services...

  • Page 20
    ... Card Business Results ...Consumer Banking Business Results ...Commercial Banking Business Results ...Other Results ...Investment Securities ...Non-Agency Investment Securities Credit Ratings ...Net Loans Held for Investment ...Changes in Representation and Warranty Reserve ...Capital Ratios...

  • Page 21
    ... banking customer accounts through the internet and branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. In addition to bank lending, treasury management and depository services, we offer credit and debit card products, auto loans...

  • Page 22
    ... common stock. Our principal executive office is located at 1680 Capital One Drive, McLean, Virginia 22102 (telephone number (703) 720-1000. We maintain a website at www.capitalone.com. Documents available on our website include: (i) our Code of Business Conduct and Ethics for the Corporation; (ii...

  • Page 23
    ... products and services provided or the type of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into our existing business segments. Certain activities that are not part of a segment, such as management of our corporate...

  • Page 24
    ... companies. A financial holding company, and the nonbank companies under its control, are permitted to engage in activities considered financial in nature (including, for example, insurance underwriting, agency sales and brokerage, securities underwriting and dealing and merchant banking activities...

  • Page 25
    ... raise the interest rate on pre-existing balances of a customer whose risk of default increases are restricted. Payments above the minimum payment must be allocated first to balances with the highest interest rate. The amount of fees charged to credit card accounts with lower credit lines is limited...

  • Page 26
    ... the consumer opts in to such payment of overdrafts. The rule does not apply to overdraft services with respect to checks, ACH transactions, or recurring debit card transactions, or to the payment of overdrafts pursuant to a line of credit or a service that transfers funds from another account. We...

  • Page 27
    ...Advisors LLC is a state-registered investment adviser. Finally, Capital One Agency LLC is a licensed insurance agency that provides both personal and business insurance services to retail and commercial clients and is regulated by the New York State Department of Financial Services in its home state...

  • Page 28
    ...Capital Management" and "Note 12-Regulatory and Capital Adequacy." The Company and the Banks exceeded minimum regulatory requirements under these guidelines as of December 31, 2013. Advanced Approaches Rules The Federal Reserve, OCC and FDIC (collectively, the "Federal Banking Agencies") finalized...

  • Page 29
    ... requirement. Specifically, the Final Rule establishes for bank holding companies and banks a new minimum common equity Tier 1 capital ratio of 4.5 percent, adopts a leverage ratio of 4 percent (and removes the current 3 percent limited exception), and implements a capital conservation buffer of...

  • Page 30
    ...overall yield earned from the portfolio. Additionally, investment in new data processing systems may be required to comply with new daily calculation requirements contained in the final rule. We will continue to monitor regulators" implementation of the new capital and liquidity rules and assess the...

  • Page 31
    ... The Enhanced Standards Rule, however, did not finalize the proposed single-counterparty credit limits or early remediation framework. Under the Enhanced Standards Rule, we must meet liquidity risk management standards, conduct internal liquidity stress tests, and maintain a 30-day buffer of highly...

  • Page 32
    ..., the Virginia Bureau of Financial Institutions. Dividends, Stock Repurchases and Transfers of Funds In November 2011, the Federal Reserve finalized capital planning rules applicable to large bank holding companies like us (commonly referred to as Comprehensive Capital Analysis and Review or "CCAR...

  • Page 33
    ... in addition to the capital plan rule's Tier 1 common ratio using Basel I definitions. Traditionally, dividends to us from our direct and indirect subsidiaries have represented a major source of funds for us to pay dividends on our stock, make payments on corporate debt securities and meet our other...

  • Page 34
    ... the Payment Services Regulations 2009. COEP's indirect parent, Capital One Global Corporation, is wholly-owned by COBNA and is subject to regulation as an "agreement corporation" under the Federal Reserve's Regulation K. Over the past few years, the U.K. government has made significant changes to...

  • Page 35
    ... all times; and Widening of the definition of personal data. Canada In Canada, COBNA operates as an authorized foreign bank pursuant to the Bank Act (Canada) (the "Bank Act") and is permitted to conduct its Credit Card business in Canada through its Canadian branch, Capital One Bank (Canada Branch...

  • Page 36
    ...credit limit and other product features. Our Consumer Banking and Commercial Banking businesses compete with national and state banks and direct banks for deposits, commercial and auto loans, mortgages and trust accounts and with savings and loan associations and credit unions for loans and deposits...

  • Page 37
    ... Kingdom portfolios of consumer and small business credit card accounts, Fidelity Information Services ("FIS") for the Capital One banking systems and IBM Corporation for management of our North American data centers. To protect our systems and technologies, we employ security, backup and recovery...

  • Page 38
    ... of the Acquisitions; developments, changes or actions relating to any litigation matter involving us; the inability to sustain revenue and earnings growth; increases or decreases in interest rates; our ability to access the capital markets at attractive rates and terms to capitalize and fund our...

  • Page 39
    ... of, or loss of public confidence in, the internet affecting the ability of our customers to access their accounts and conduct banking transactions; our ability to recruit and retain experienced personnel to assist in the management and operations of new products and services; changes in the labor...

  • Page 40
    ... forward looking statements include: The Current Business Environment, Including A Slow or Delayed Economic Recovery, May Adversely Affect Our Industry, Business, Results Of Operations And Capital Levels. We market our credit card products on a national basis throughout the United States, Canada and...

  • Page 41
    ... could limit our access to funding. The interest rates that we pay on our securities are also influenced by, among other things, applicable credit ratings from recognized rating agencies. A downgrade to any of these credit ratings could affect our ability to access the capital markets, increase our...

  • Page 42
    ... federal agencies. On July 17, 2012, COBNA entered into consent orders with each of the OCC and the CFPB relating to oversight of our vendor sales practices of payment protection and credit monitoring products. On July 26, 2012, the Banks each entered into consent orders with each of the Department...

  • Page 43
    ... our loan portfolio compared to other large bank peers and originate both prime and subprime credit card accounts and auto loans, we may experience higher delinquencies and a greater number of accounts charging off compared to other large bank peers, which could result in increased credit losses and...

  • Page 44
    ... Decreases in real estate values adversely affect the collateral value for our commercial lending and Home Loan activities, while the auto business is similarly exposed to collateral risks arising from the auction markets that determine used car prices. Therefore, the recovery of such property could...

  • Page 45
    ... plans. These new requirements could have a negative impact on our ability to lend, grow deposit balances or make acquisitions and on our ability to make capital distributions in the form of increased dividends or share repurchases. Higher capital levels could also lower our return on equity...

  • Page 46
    ... in the Commercial Banking business intended to assist with effective execution of key processes and improve loan origination and underwriting platforms. The 2012 U.S. card acquisition involved the transfer of intellectual property, servicing platforms, infrastructure, contact centers and...

  • Page 47
    ... customers and develop and implement effective marketing campaigns. We also depend on models to measure risks, estimate certain financial values, determine pricing on certain products, assess capital adequacy and calculate regulatory capital levels. If we implement or design our models poorly or use...

  • Page 48
    .... Our businesses rely on our digital technologies, computer and email systems, software and networks to conduct their operations. In addition, to access our products and services, our customers may use computers, smartphones, tablet PCs and other mobile devices that are beyond our security control...

  • Page 49
    ... of a competitive environment may be exacerbated by the flexibility of direct banking and the increasing financial and technological sophistication of our customer base. Customers could also close their online accounts or reduce balances or deposits in favor of products and services offered by...

  • Page 50
    ... earnings per share; our ability to issue equity and debt to complete any merger or acquisition; our expected capital structure and capital ratios after any merger, acquisition or strategic partnership; projections as to the amount of future loan losses in any target or partner company's portfolio...

  • Page 51
    ... the basis of the rates we pay on deposits and the rates and other terms we charge on the loans we originate or purchase, as well as the quality of our customer service and experience. Price competition for loans might result in origination of fewer loans or earning less on our loans. We expect that...

  • Page 52
    ... servicing. Finally, the Final Rule requires that most amounts reported in Accumulated Other Comprehensive Income ("AOCI"), including unrealized gains and losses on securities designated as available for sale, be included in our regulatory capital calculations. Changes in interest rates or market...

  • Page 53
    ... for loan and lease losses and the fair value of certain assets and liabilities. In addition, the FASB, the SEC and other regulatory bodies may change the financial accounting and reporting standards, including those related to assumptions and estimates we use to prepare our financial statements, in...

  • Page 54
    ... common stock, make payments on corporate debt securities and meet other obligations. There are various federal law limitations on the extent to which the Banks can finance or otherwise supply funds to us through dividends and loans. These limitations include minimum regulatory capital requirements...

  • Page 55
    ...leased space and 5.1 million square feet of owned space. Our headquarters is located in McLean Virginia, and is included in our corporate office space. We maintain office space primarily in Virginia, Texas, Illinois, New York, Louisiana, Delaware, and Maryland. Our 5.6 million square feet of banking...

  • Page 56
    ...Item 1. Business- Supervision and Regulation-Dividends, Stock Repurchases and Transfers of Funds", "MD&A-Capital Management-Dividend Policy and Stock Purchases", and "Note 12-Regulatory and Capital Adequacy". Securities Authorized for Issuance Under Equity Compensation Plans Information relating to...

  • Page 57
    ... $204.63 $200 $174.60 $150 $100 $50 $0 12/31/2008 12/31/2009 Capital One 12/31/2010 12/31/2011 12/31/2012 S&P Financial Index 12/31/2013 S&P 500 Index 2008 2009 2010 2011 2012 2013 Capital One ...S&P 500 Index ...S&P Financial Index ...Recent Sales of Unregistered Securities $100.00...

  • Page 58
    .... Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Amount Yet to be Purchased Under the 2013 Stock Repurchase Plan(3) (Dollars in millions, except per share information) Total Number of Shares Purchased Average Price Paid per Share(3) October 1-31, 2013 Open market...

  • Page 59
    ... on expected cash flows to be collected (under the accounting standard formerly known as "Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer," commonly referred to as "SOP 03-3"). The period-end carrying value of acquired loans accounted for subsequent...

  • Page 60
    ... (Dollars in millions, except per share data as noted) 2013 Year Ended December 31, 2012 2011 2010(1) 2009 2013 vs. 2012 vs. 2012 2011 Income statement Interest income ...$ 19,898 Interest expense ...1,792 Net interest income ...Non-interest income(2) ...Total net revenue(3) ...Provision for credit...

  • Page 61
    ... Change (Dollars in millions except per share data as noted) 2013 2012 December 31, 2011 2010(1) 2009 2013 vs. 2012 2012 vs. 2011 Balance sheet (period end) Loans held for investment(8) ...$197,199 Interest-earning assets ...265,170 Total assets ...297,048 Interest-bearing deposits...181,880 Total...

  • Page 62
    ... credit card purchase transactions, net of returns, for the period for both loans classified as held for investment and loans classified as held for sale. Excludes cash advance and balance transfer transactions. Calculated based on total net revenue for the period divided by average interest-earning...

  • Page 63
    ... undistributed earnings allocated to participating securities; (iii) less preferred stock dividends, for the period, divided by average common equity. Our calculation of return on average common equity may not be comparable to similarly titled measures reported by other companies. Calculated based...

  • Page 64
    ... Accounting Policies and Estimates Accounting Changes and Developments Consolidated Results of Operations Business Segment Financial Performance Consolidated Balance Sheets Analysis Off-Balance Sheet Arrangements and Variable Interest Entities Capital Management Risk Management Credit Risk Profile...

  • Page 65
    ... the ING Direct and 2012 U.S. card acquisitions, growth in purchase volumes in the Credit Card business and growth in auto loans, partially offset by the Portfolio Sale and the expected run-off of home loans, and (ii) the decrease in interest expense due to lower costs related to borrowings and debt...

  • Page 66
    ... to the prior year. This was partially offset by higher revenues due to growth in commercial real estate and commercial and industrial loans and higher deposit balances and fee-based product and services revenue. Period-end loans held for investment in our Commercial Banking business increased by...

  • Page 67
    ... and resilient returns and generate capital on a strong trajectory. Consumer Banking: In our Consumer Banking business, we expect continued run-off in the acquired Home Loans portfolio to have a significant impact on loan balances. In Auto, we expect credit losses will continue to increase from the...

  • Page 68
    ...Board of Directors. Loan Loss Reserves We maintain an allowance for loan and lease losses that represents management's estimate of incurred loan and lease losses inherent in our held-for-investment credit card, consumer banking and commercial banking loan portfolios as of each balance sheet date, as...

  • Page 69
    ... limited to, historical loss and recovery experience, recent trends in delinquencies and charge-offs, risk ratings, the impact of bankruptcy filings, the value of collateral underlying secured loans, account seasoning, changes in our credit evaluation, underwriting and collection management policies...

  • Page 70
    ... date. Goodwill totaled $14.0 billion and $13.9 billion as of December 31, 2013 and 2012, respectively. Other intangible assets, which we report on our consolidated balance sheets as a component of other assets, consist primarily of purchased credit card relationships ("PCCR") and core deposit...

  • Page 71
    ... management to make judgments about future loan and deposit growth, revenue growth, credit losses, and capital rates. Discount rates used in 2013 for the reporting units ranged from 8.0% to 12.5%. The key inputs into the discounted cash flow analysis were consistent with market data, where available...

  • Page 72
    ... recorded at fair value when mortgage loans are sold or securitized in the secondary market and the right to service these loans is retained for a fee. Subsequently, our consumer related MSRs are carried at fair value on our consolidated balance sheets with changes in fair value recognized in non...

  • Page 73
    ... shall be raised to the Audit Committee or other delegated committee of the Board of Directors. We have a model policy, established by an independent Model Risk Office, which governs the validation of models and related supporting documentation to ensure the appropriate use of models for pricing...

  • Page 74
    ... partners. We establish a customer rewards reserve that reflects management's judgment regarding rewards earned that are expected to be redeemed and the estimated redemption cost. We use financial models to estimate ultimate redemption rates of rewards earned to date by current card members...

  • Page 75
    ... cover the cost of all points previously earned but not yet redeemed by card members as of the end of the reporting period. We recognized customer rewards expense of $1.6 billion, $1.3 billion and $1.0 billion in 2013, 2012 and 2011, respectively. Our customer rewards liability, which is included in...

  • Page 76
    ...the interest income and applicable fees earned on our interest-earning assets, which include loans and investment securities, and the interest expense on our interestbearing liabilities, which include interest-bearing deposits, senior and subordinated notes, securitized debt and other borrowings. We...

  • Page 77
    ...2011 Interest Average Income/ Yield/ Balance Expense(2)(3) Rate Assets: Interest-earning assets: Credit card: Domestic ...$ 74,950 International ...7,973 Credit card ...Consumer banking ...Commercial banking ...Other ...Total loans, including loans held for sale ...Investment securities(4) ...Cash...

  • Page 78
    ... auto loans, which was partially offset by the continued run-off of home loans in our Consumer Banking business, the expected run-off of higher-margin, higher-loss receivables acquired in the 2012 U.S. card acquisition and installment loans in our Credit Card business, as well as the Portfolio Sale...

  • Page 79
    ... 2012 vs. 2011 Volume Rate Interest income: Loans: Credit card ...Consumer banking ...Commercial banking ...Other ...Total loans, including loans held for sale ...Investment securities ...Cash equivalents and other interest-earning assets ...Total interest income ...Interest expense: Deposits...

  • Page 80
    ..., 2012 and 2011. Table 4: Non-Interest Income Year Ended December 31, 2013 2012 2011 (Dollars in millions) Service charges and other customer-related fees ...Interchange fees, net ...Bargain purchase gain(1) ...Net other-than-temporary impairment ...Other non-interest income: (Provision) benefit...

  • Page 81
    ... (Dollars in millions) Year Ended December 31, 2013 2012 2011 Salaries and associate benefits ...Occupancy and equipment ...Marketing ...Professional services ...Communications and data processing ...Amortization of intangibles ...Acquisition-related ...Other non-interest expense: Collections...

  • Page 82
    ... salaries and associate benefits attributable to increased headcount, higher infrastructure costs attributable to acquired businesses and our continued investment in our auto loan business and increased amortization of intangibles resulting from the ING Direct and 2012 U.S. card acquisitions...

  • Page 83
    ... products and services provided or the type of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into our existing business segments. Certain activities that are not part of a segment, such as management of our corporate...

  • Page 84
    ...Card business are interest income, fees collected from customers and interchange fees. Expenses primarily consist of the provision for credit losses, operating costs such as salaries and associate benefits, occupancy and equipment, professional services, communications and data processing technology...

  • Page 85
    ... international card loans that are 90 or 120 days delinquent. Calculated by dividing the allowance for loan and lease losses as of the end of the period by period-end loans held for investment. The completion of the 2012 U.S. card acquisition in May 2012 along with the transfer of the Best Buy loan...

  • Page 86
    ... increased customer-related fees from the addition of acquired credit card accounts and the absence of charges incurred in the first and second quarters of 2012 for expected refunds to customers affected by certain cross-sell sales practices in our Domestic Card business. Provision for Credit Losses...

  • Page 87
    ... other products to credit card customers, regulatory fines of $60 million related to cross-sell activities in the Domestic Card business and expense of $98 million for net litigation reserves to cover interchange and other legal matters in the second quarter of 2012. Total Loans: Period-end loans in...

  • Page 88
    ... the periods indicated. Table 6.1: Domestic Card Business Results Year Ended December 31, 2013 2012 2011 Change 2013 vs. 2012 vs. 2012 2011 (Dollars in millions) Selected income statement data: Net interest income ...$ Non-interest income ...Total net revenue ...Provision for credit losses ...Non...

  • Page 89
    ... credit card purchase transactions, net of returns, for the period for both loans classified as held for investment and loans classified as held for sale. Excludes cash advance and balance transfer transactions Calculated by dividing 30+ day delinquent loans as of the end of the period by period-end...

  • Page 90
    ... periods indicated. Table 6.2: International Card Business Results Year Ended December 31, 2013 2012 2011 Change 2013 vs. 2012 vs. 2012 2011 (Dollars in millions) Selected income statement data: Net interest income ...Non-interest income ...Total net revenue ...Provision for credit losses ...Non...

  • Page 91
    ... sources of revenue for our Consumer Banking business are net interest income from loans and deposits and non-interest income from customer fees. Expenses primarily consist of the provision for credit losses, ongoing operating costs, such as salaries and associate benefits, occupancy and equipment...

  • Page 92
    ...for the periods indicated. Table 7: Consumer Banking Business Results Change (Dollars in millions) Year Ended December 31, 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Selected income statement data: Net interest income ...Non-interest income ...Total net revenue ...Provision for credit losses ...Non...

  • Page 93
    ... growth and an increase in the auto charge-off rate from historically low levels. As discussed above under "Summary of Selected Financial Data," the substantial majority of the ING Direct home loan portfolio is accounted for based on estimated cash flows expected to be collected over the life of the...

  • Page 94
    ...40.4 billion of ING Direct home loans and growth in auto loan originations, which were partially offset by the expected continued run-off of our acquired home loan portfolios. Deposits: Period-end deposits in the Consumer Banking business increased by $83.9 billion, or 95%, in 2012 to $172.4 billion...

  • Page 95
    ... of the provision for credit losses, ongoing operating costs, such as salaries and associate benefits, occupancy and equipment, professional services, communications and data processing technology expenses, as well as marketing expenses. Our Commercial Banking business generated net income from...

  • Page 96
    ... higher deposit balances. Non-Interest Income: Non-interest income increased by $55 million, or 16%, in 2013 to $395 million, driven by increased revenue related to fee-based products and services from the Beech Street Capital acquisition. Provision for Credit Losses: The Commercial Banking business...

  • Page 97
    ... and industrial and commercial real estate businesses, which was partially offset by the run-off and sale of a portion of the small-ticket commercial real estate loan portfolio. Deposits: Period-end deposits in the Commercial Banking business increased by $3.2 billion, or 12%, in 2012 to $29...

  • Page 98
    ... purchase gain of $594 million related to the ING Direct acquisition and an income of $162 million from the sale of Visa stock shares during the first quarter of 2012, which was partially offset by a derivative loss of $78 million recognized in the first quarter of 2012 related to the interest rate...

  • Page 99
    ...normal portfolio activity. During 2012, our portfolio of investment securities available for sale increased by $25.2 billion, or 65%. The increase was primarily attributable to the acquisition of ING Direct investment securities of $30.2 billion as of the acquisition date, which was partially offset...

  • Page 100
    ...- Total investment securities held to maturity ...$19,132 (1) $ 9 $ 9 $ - $ - (2) The ABS collateralized by credit card loans constituted of approximately 65% and 64% of the other ABS portfolio, as of December 31, 2013 and 2012, respectively, and ABS collaterized by auto dealer floor plan...

  • Page 101
    ... for Investment December 31, 2013 Total Loans Held For Investment Net Loans Held For Investment Total Loans Held For Investment 2012 Net Loans Held For Investment (Dollars in millions) Allowance Allowance Credit Card ...Consumer Banking ...Commercial Banking ...Other ...Total ... $ 81,305 70,762...

  • Page 102
    ...expected run-off of installment loans in our Credit Card business and home loans in our Consumer Banking business. The paydowns and run-off of card balances were partially offset by growth in certain segments of our Credit Card business, higher period-end auto loan balances due to the continued high...

  • Page 103
    ... in December 2006 as part of the North Fork acquisition; and CCB, which was acquired in February 2009 and subsequently merged into CONA. We have established representation and warranty reserves for losses associated with the mortgage loans sold by each subsidiary that we consider to be both probable...

  • Page 104
    ...the capital position of financial services companies. While there is currently no mandated minimum or "well capitalized" standard for the Tier 1 common ratio, the Federal Reserve, the OCC and the FDIC (collectively, the U.S. federal banking agencies) recently finalized a new capital rule (the "Final...

  • Page 105
    ...new capital framework establishes a new minimum Common Equity Tier 1 capital ratio that will be phased-in starting in 2014 for bank holding companies subject to the "Advanced" risk-based capital rules adopted by the U.S. federal banking agencies ("Advanced Approaches"). The Final Rule also increases...

  • Page 106
    ...the Final Rule, beginning on January 1, 2014, as an Advanced Approaches banking organization that has yet to enter or exit parallel run, we must use Basel III Standardized for calculating our regulatory capital, including as used in our capital ratios, subject to transition periods. In 2014, however...

  • Page 107
    ... Equity Tier 1 Capital Ratio Under Basel III Standardized December 31, 2013 2015 Phase-In Full Phase-In (Dollars in millions, except ratio) 2014 Phase-In Tier 1 common capital under Basel I rules ...Adjustments related to AOCI for securities available for sale and defined benefit pension plans...

  • Page 108
    ...of our capital levels under stress. In the 2014 stress test cycle, including CCAR, the difference could be larger because, in addition to using its own assumptions in modeling credit losses and pre-provision net revenue, the Federal Reserve will use its own assumptions in modeling balance sheet size...

  • Page 109
    ... model to demonstrate and structure the roles, responsibilities and accountabilities in the organization for taking and managing risk. The "First Line of Defense" is comprised of the business areas that through their day-to-day business activities take risk on our behalf. As the business owner...

  • Page 110
    ... to take in pursuit of our corporate business objectives.The Board of Directors approves our risk appetite including specific risk limits where applicable. While first line executives manage risk on a day-to-day basis, the Chief Risk Officer provides effective challenge and independent oversight...

  • Page 111
    ... time period; Market Risk: Market risk is the risk that an institution's earnings or the economic value of equity could be adversely impacted by changes in interest rates, foreign exchange rates, or other market factors; Operational Risk: Operational risk is the risk of loss, capital impairment...

  • Page 112
    ... by balance sheet interest rate risk, centrally and establish quantitative limits to control our exposure. Market risk is inherent in the financial instruments associated with our business operations and activities, including loans, deposits, securities, short-term borrowings, long-term debt and...

  • Page 113
    ... Executive Officer and other senior executives spend significant time throughout our entire company sharing our corporate strategy and related business strategies and connecting them to day-to-day associate activities to enable effective execution. CREDIT RISK PROFILE Our loan portfolio accounts...

  • Page 114
    ... subprime auto loans. Customers are acquired through a network of auto dealers and direct marketing. Our auto loans generally have fixed interest rates and loan terms of 72 months or less. Loan size limits are customized by program and are generally less than $75,000. Similar to credit card accounts...

  • Page 115
    ... Card: Credit card loans: Domestic credit card loans ...$ 72,871 $ International credit card loans ...8,050 Total credit card loans ...Installment loans: Domestic installment loans ...Total credit card ...Consumer Banking: Auto ...Home loan ...Retail banking ...Total consumer banking ...Commercial...

  • Page 116
    ...York, Illinois, Maryland, New Jersey, Virginia, and Florida which reflects the characteristics of the ING Direct portfolio that comprises the majority of our home loans. Retail banking includes small business loans and other consumer lending products originated through our branch network. Commercial...

  • Page 117
    ... drive large differences in credit quality for a given credit score. We continuously adjust our management of credit lines and collection strategies based on customer behavior and risk profile changes. As noted above, our Credit Card business accounted for $81.3 billion, or 41%, of our total loan...

  • Page 118
    ...61% 3.62% International credit card ...299 3.71 3.71 367 4.56 4.56 308 3.58 3.58 387 4.49 4.49 Total credit card ...2,813 3.46 Consumer Banking: Auto ...2,181 6.85 Home loan ...55 0.16 Retail banking ...25 0.69 Total consumer banking ...2,261 3.20 Commercial Banking: Commercial and multifamily real...

  • Page 119
    ... credit card receivables by the amount of finance charges and fees billed but not expected to be collected and exclude this amount from revenue. Table 20: 90+ Day Delinquent Loans Accruing Interest December 31, 2013 % of Amount Total Loans December 31, 2012 % of Amount Total Loans December 31, 2011...

  • Page 120
    ... Total Amount HFI Loans December 31, 2012 % of Total Amount HFI Loans (Dollars in millions) Nonperforming loans held for investment: Credit card: International credit card ...Total credit card ...Consumer Banking: Auto ...Home loan ...Retail banking ...Total consumer banking ...Commercial Banking...

  • Page 121
    ... Charge-Offs Year Ended December 31, 2013 (Dollars in millions) Amount Rate(1) Adjusted Rate(2) Amount 2012 Rate(1) Adjusted Rate(2) Amount 2011 Rate(1) Adjusted Rate(2) Credit Card: Domestic credit card and installment loans ...$ International credit card ...Total credit card ...Consumer Banking...

  • Page 122
    ... report separately. Table 23: Loan Modifications and Restructurings December 31, 2013 % of Total Amount Modifications December 31, 2012 % of Total Amount Modifications (Dollars in millions) Modified and restructured loans: Credit card(1) ...Auto ...Home loan ...Retail banking ...Commercial banking...

  • Page 123
    ... lease losses in "Note 1-Summary of Significant Accounting Policies." Table 24 displays changes in our allowance for loan and lease losses for 2013, 2012 and 2011, which details by loan type, the provision for credit losses recognized in our consolidated statements of income each period and charge...

  • Page 124
    ... 2012 2011 (Dollars in millions) Balance at beginning of period, as reported ...Provision for credit losses(1) ...Charge-offs: Credit Card: Domestic credit card and installment loans ...International credit card ...Total credit card ...Consumer Banking: Auto ...Home loan ...Retail banking ...Total...

  • Page 125
    ... Loan and Lease Losses December 31, 2013 % of Total Amount HFI Loans(1) December 31, 2012 % of Total Amount HFI Loans(1) (Dollars in millions) Credit Card: Domestic credit card and installment loans ...International credit card ...Total credit card ...Consumer Banking: Auto ...Home loan ...Retail...

  • Page 126
    ..., 2012 Cash and cash equivalents ...Investment securities available for sale, at fair value(1) ...Investment securities held to maturity, at fair value(1) ...Total investment securities portfolio ...FHLB borrowing capacity secured by loans ...Outstanding FHLB advances and letters of credit secured...

  • Page 127
    ... End Balance Average Balance Interest Expense % of Average Deposits Average Deposit Rate (Dollars in millions) Non-interest bearing ...Negotiable order of withdrawal ("NOW") accounts ...Money market deposit accounts ...Savings accounts ...Consumer time deposits less than $100,000 ...Total core...

  • Page 128
    ... are reported in money market deposit accounts and consumer time deposits in the above table. Brokered deposits totaled $6.0 billion, or 3% of total deposits, as of December 31, 2013. Brokered deposits totaled $10.0 billion, or 5% of total deposits, as of December 31, 2012. FDICIA limits the use of...

  • Page 129
    ...: Short-Term Borrowings 2013 Outstanding Interest Amount Rate Year Ended December 31, 2012 2011 Outstanding Interest Outstanding Interest Amount Rate Amount Rate (Dollars in millions) Average during the period: Federal funds purchased and repurchase agreements ...FHLB advances ...Total short-term...

  • Page 130
    ...In the normal course of business, we enter into various contractual obligations that may require future cash payments that affect our short- and long-term liquidity and capital resource needs. Our future cash outflows primarily relate to deposits, borrowings and operating leases. Table 32 summarizes...

  • Page 131
    ... associated with our operations and activities, including loans, deposits, securities, short-term borrowings, long-term debt and derivatives. Below we provide additional information about our primary sources of market risk, our market risk management strategies and the measures we use to evaluate...

  • Page 132
    ... servicing rights, including related derivative hedging activity, and changes in the fair value of free-standing interest rate swaps. In addition to our existing assets and liabilities, we incorporate expected future business growth assumptions, such as loan and deposit growth and pricing, and plans...

  • Page 133
    ...loan and investment security prepayments which impacted our net interest income and economic value of equity sensitivity metrics. Our new direct deposit model was developed on account level data and incorporates lagged responses in both repricing and customer behavior as external market rates change...

  • Page 134
    ... periods beginning after January 1, 2010. Table A-Loan Portfolio Composition December 31, 2011 (Dollars in millions) 2013 2012 2010 2009 Reported loans held for investment: Credit Card: Credit card loans: Domestic credit card loans ...International credit card loans ...Total credit card loans...

  • Page 135
    ... credit card loans ...Total credit card loans ...Installment loans: Domestic installment loans ...International installment loans ...Total installment loans ...Total credit card ...Consumer Banking Business: Auto ...Home loan ...Retail banking ...Total consumer banking ...Commercial Banking Business...

  • Page 136
    ...23% 0.39 4.62% (2) (3) (4) Credit card loan balances are reported net of the finance charge and fee reserve, which totaled $190 million, $307 million, $74 million, $211 million, $624 million as of December 31, 2013, 2012, 2011, 2010 and 2009, respectively. Acquired Loan portfolio is included in...

  • Page 137
    ... Assets December 31, 2011 2010 (Dollars in millions) 2013 2012 2009 Nonperforming loans held for Credit Card: International Credit Card ...Total credit card ...Consumer Banking: Auto ...Home loan ...Retail banking ...Total consumer banking ...Commercial Banking: Commercial and multifamily real...

  • Page 138
    ... loans held for investment during the period. The average balance of Acquired Loans, which are included in the total average loans held for investment used in calculating the net charge-off rates, was $32.2 billion, $36.2 billion, $5.0 billion, $6.3 billion and $6.8 billion in 2013, 2012, 2011, 2010...

  • Page 139
    ... ...Total charge-offs ...Recoveries: Domestic credit card and installment loans ...International credit card and installment loans ...Consumer banking ...Commercial banking ...Other loans ...Total recoveries...Net charge-offs ...Impact from acquisitions, sales and other changes ...Balance at the end...

  • Page 140
    ... perpetual preferred stock(2) ...Tier 1 restricted core capital items(5) ...Tier 1 capital ...Adjustments: Long-term debt qualifying as Tier 2 capital ...Qualifying allowance for loan and lease losses ...Other Tier 2 components ...Tier 2 capital ...Total risk-based capital(6) ...Risk-weighted...

  • Page 141
    Glossary 2002 DRP: Dividend Reinvestment and Stock Purchase Plan. 2012 U.S. card acquisition: On May 1, 2012, pursuant to the agreement with HSBC Finance Corporation, HSBC USA Inc. and HSBC Technology and Services (USA) Inc. (collectively, "HSBC"), we closed the acquisition of substantially all of ...

  • Page 142
    ...COBNA: Capital One Bank (USA), National Association, one of our fully owned subsidiaries, which offers credit and debit card products, other lending products and deposit products. Collective trusts: An investment fund formed from the pooling of investments by investors. Commercial Lending: Primarily...

  • Page 143
    ... mortgage banking unit, GreenPoint Mortgage Funding, Inc. ("Greenpoint"), which was closed in 2007. Gross domestic product ("GDP"): The market value of all officially recognized final goods and services produced within a country in a year, or other given period of time. GSE or Agencies: A government...

  • Page 144
    ... Terrorism). Portfolio Sale: The sale of the Best Buy private label and co-branded credit card portfolio to Citibank, N.A., which was completed on September 6, 2013. Proxy Statement: Capital One's Proxy Statement for the 2014 Annual Stockholder Meeting. Public Fund deposits: Deposits that are...

  • Page 145
    ... determine total risk-weighted assets. Securitized Debt Obligations: A type of asset-backed security and structured credit product constructed from a portfolio of fixed-income assets. SOP 03-3: Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. Small...

  • Page 146
    ... income ARM: Adjustable rate mortgage Bps: Basis points CCAR: Comprehensive Capital Analysis and Review CDE: Community development entities CFPB: Consumer Financial Protection Bureau CFTC: Commodity Futures Trading Commission CMBS: Commercial mortgage-backed securities COEP: Capital One (Europe) plc...

  • Page 147
    HBC: Hudson Bay Company HELOCs: Home Equity Line of Credits HFI: Held for Investment HSBC: HSBC Finance Corporation, HSBC USA Inc. and HSBC Technology and Services (USA) Inc. LIBOR: London Interbank Offered Rate NOW: Negotiable order of withdrawal OCC: Office of the Comptroller of the Currency OIS: ...

  • Page 148
    ... Supplementary Data Page Management's Report on Internal Control Over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Report of Independent Registered Public Accounting Firm ...Financial Statements ...Consolidated Statements of Income ...Consolidated Statements of...

  • Page 149
    ...'s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over...

  • Page 150
    ... 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2013 of Capital One Financial Corporation and our report dated February 27, 2014 expressed an...

  • Page 151
    ... consolidated balance sheets of Capital One Financial Corporation (the "Company") as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the period ended December...

  • Page 152
    CAPITAL ONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, (Dollars in millions, except per share-related data) 2013 2012 2011 Interest income: Loans, including loans held for sale ...Investment securities ...Other ...Total interest income ...Interest expense: ...

  • Page 153
    CAPITAL ONE FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in millions) Year Ended December 31, 2013 2012 2011 Net income ...Other comprehensive income (loss) before taxes: Net unrealized gains (losses) on securities available for sale ...Net unrealized (losses) on ...

  • Page 154
    ... ONE FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in millions, except per share data) December 31, 2013 December 31, 2012 Assets: Cash and cash equivalents: Cash and due from banks ...Interest-bearing deposits with banks ...Federal funds sold and securities purchased under agreements...

  • Page 155
    ... Other Total Paid-In Retained Comprehensive Treasury Stockholders' Amount Capital Earnings Income (Loss) Stock Equity Balance as of December 31, 2010 ...Comprehensive income (loss) ...Cash dividends-common stock $0.20 per share ...Purchases of treasury stock ...Issuances of common stock and...

  • Page 156
    ... of securities ...Proceeds from sales of securities ...Net increase in loans held for investment ...Principal recoveries of loans previously charged off ...Additions of premises and equipment ...Net cash paid for acquisitions ...Net cash provided by other investing activities ...Net cash used in...

  • Page 157
    ...Bank (USA), National Association ("COBNA"), which offers credit and debit card products, other lending products and deposit products; and Capital One, National Association ("CONA"), which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial...

  • Page 158
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (other than the HSBC Bank USA, National Association consumer credit card program and certain other retained assets and liabilities) (the "2012 U.S. card acquisition). The 2012 U.S. card acquisition included (i) ...

  • Page 159
    ... strategy and management's assessment of our intent and ability to hold the securities until maturity. Securities that we intend to hold for an indefinite period of time and may sell prior to maturity in response to changes in our investment strategy, liquidity needs, interest rate risk profile or...

  • Page 160
    ... Chase Bank acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on expected cash flows to be collected (under the accounting standard formerly known as "Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer...

  • Page 161
    ... data. For credit card loans, loan origination fees and direct loan origination costs are amortized on a straight-line basis over a 12-month period. We establish an allowance for loan losses for probable losses inherent in our held for investment loan portfolio as of each balance sheet date. Cash...

  • Page 162
    ...on our consolidated balance sheets, but is accreted into interest income over the life of the loan, or pool of loans, using the effective interest method. Subsequent to acquisition, we are required to periodically evaluate our estimate of cash flows expected to be collected. These evaluations, which...

  • Page 163
    ... balances as of each reporting date. The allowance for loan and lease losses is calculated using the same methodology utilized for determining the allowance for our existing credit card portfolio prior to the 2012 U.S. card acquisition, as described below under "Allowance for Loan and Lease Losses...

  • Page 164
    ... home loans written-down to collateral value. Commercial banking loans: Commercial loans classified as nonperforming and commercial loans that have been modified in a troubled debt restructuring are reported as individually impaired. Acquired Loans: We track and report Acquired Loans separately...

  • Page 165
    ... of the date when the account is a specified number of days past due or upon repossession of the underlying collateral. Our charge-off time frame is 180 days for home loans and unsecured small business lines of credit and 120 days for auto and other non-credit card consumer loans. We calculate the...

  • Page 166
    ... will likely impact losses. Our consumer loan portfolio consists of smaller-balance, homogeneous loans, divided into four primary portfolio segments: credit card loans, auto loans, residential home loans and retail banking loans. Each of these portfolios is further divided by our business units into...

  • Page 167
    ... losses, to the extent applicable, and then increase the accretable yield. Write-downs on purchased impaired loans in excess of the nonaccretable difference are charged against the allowance for loan and lease losses. See "Note 4-Loans" for information on loan portfolios associated with acquisitions...

  • Page 168
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Securitization of Loans We have primarily securitized credit card loans, which have provided a source of funding for us and enabled us to transfer a certain portion of the economic risk of the loans or debt ...

  • Page 169
    ... when mortgage loans are sold or securitized in the secondary market and the right to service these loans is retained for a fee. Subsequently, our consumer related mortgage servicing rights ("MSR") are carried at fair value on our consolidated balance sheets with changes in fair value recognized in...

  • Page 170
    ... life of the related loans using the effective interest method, except for credit card, which are amortized over 12 months on a straight-line basis. Direct loan origination costs consist of both internal and external costs associated with the origination of a loan. Finance charges and fees on credit...

  • Page 171
    ...label and co-branded credit card loans to these customers over the term of these arrangements, which typically range from two to ten years. Certain partners assist in or perform marketing activities on our behalf and promote our products and services to their customers. As compensation for providing...

  • Page 172
    ... in both 2013 and 2012, respectively. We recognized marketing expense of $1.3 billion in 2011. Fraud Losses We experience fraud losses from the unauthorized use of credit cards, debit cards and customer bank accounts. Additional fraud losses may be incurred when loans are obtained through fraudulent...

  • Page 173
    ... share awards and units). Common stock equivalents are calculated based upon the treasury stock method using an average market price of common shares sold during the period. Dilution is not considered when the company is in a net loss position. Common stock equivalents that have an antidilutive...

  • Page 174
    ... in fair value into earnings. We have not made any material fair value option elections as of and for the years ended December 31, 2013, 2012 and 2011. See "Note 18-Fair Value of Financial Instruments" for additional information. Accounting for Acquisitions We account for business combinations under...

  • Page 175
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) guidance does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified from other comprehensive income to net income. The guidance ...

  • Page 176
    ..., which we acquired in December 2006 as part of the North Fork acquisition. The results of the wholesale banking unit have been accounted for as a discontinued operation and are therefore not included in our results from continuing operations for the years ended December 31, 2013, 2012 and 2011. We...

  • Page 177
    ... losses of $1.5 billion at the date of transfer. The table below presents the overview of our investment portfolio at December 31, 2013 and 2012. Table 3.1 Overview of Investment Portfolio (Dollars in millions) December 31, 2013 December 31, 2012 Securities available for sale, at fair value...

  • Page 178
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31, 2012 Gross Gross Unrealized Unrealized Gains Losses(1) (Dollars in millions) Amortized Cost Fair Value Investment securities available for sale: U.S. Treasury debt obligations ...U.S. Agency ...

  • Page 179
    ...Securities in Unrealized Loss Position Less than 12 Months Gross Unrealized Fair Value Losses December 31, 2013 12 Months or Longer Gross Unrealized Fair Value Losses Total Gross Unrealized Losses (Dollars in millions) Fair Value Investment securities available for sale: Corporate debt securities...

  • Page 180
    ... 31, 2012 12 Months or Longer Gross Unrealized Fair Value Losses (Dollars in millions) Less than 12 Months Gross Unrealized Fair Value Losses Total Gross Unrealized Losses Fair Value Investment securities available for sale: U.S. Agency debt obligations ...Corporate debt securities guaranteed...

  • Page 181
    ...: Table 3.5: Contractual Maturities of Securities Available for Sale December 31, 2013 Amortized Cost Fair Value (Dollars in millions) Due in 1 year or less ...Due after 1 year through 5 years ...Due after 5 years through 10 years ...Due after 10 years(1) ...Total ...(1) $ 1,876 5,668 4,204 29...

  • Page 182
    ...Due > 1 Year Due > 5 Years through through 5 Years 10 Years Due > 10 Years Amount Amount Amount (Dollars in millions) Due in 1 Year or Less Amount Total Amount Fair value of securities available for sale: U.S. Treasury debt obligations ...U.S. Agency debt obligations ...Corporate debt securities...

  • Page 183
    ... (Dollars in millions) Year Ended December 31, 2013 2012 2011 Credit loss component, beginning of period ...Additions: Initial credit impairment ...Subsequent credit impairment ...Total additions ...Reductions: Payoff or sales of credit-impaired securities ...Credit loss component, end of period...

  • Page 184
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Realized Gains and Losses on Securities The following table presents the gross realized gains and losses on the sale and redemption of securities available for sale recognized in earnings for the years ended ...

  • Page 185
    ...on Expected Cash Flows Our portfolio of loans held for investment includes loans acquired in the CCB, ING Direct and 2012 U.S. card acquisitions. These loans were recorded at fair value at the date of each acquisition. Acquired Loans accounted for based on expected cash flows to be collected was $28...

  • Page 186
    ... in the total provision for credit losses of $4.4 billion recorded during 2012 as indicated in "Note 5-Allowance for Loan and Lease Losses". Excluded from the amounts above were purchased revolving loans from the 2012 U.S. card acquisition with a fair value of $471 million that we designated as held...

  • Page 187
    ... 31, 2012 Credit Card: Domestic credit card loans ...International credit card loans ...Total credit card loans ...Domestic installment loans ...Total credit card ...Consumer Banking: Auto ...Home loan ...Retail banking ...Total consumer banking ...Commercial Banking:(1) Commercial and multifamily...

  • Page 188
    ... and use in evaluating the credit quality of our loan portfolio include delinquency and nonperforming asset rates, as well as charge-off rates and our internal risk ratings of larger balance, commercial loans. The following table summarizes the payment status of loans in our total loan portfolio...

  • Page 189
    ... of the migration of loans between delinquency categories over time. The table below displays the geographic profile of our credit card loan portfolio and delinquency statistics as of December 31, 2013 and 2012. We also present comparative net charge-offs for the years ended December 31, 2013 and...

  • Page 190
    ... STATEMENTS-(Continued) Table 4.3: Credit Card: Risk Profile by Geographic Region and Delinquency Status % of Total(1) December 31, 2013 Acquired % of Loans Total(1) % of Total(1) (Dollars in millions) Loans Total Domestic credit card and installment loans: California ...New York ...Texas...

  • Page 191
    ... total balance of credit card loans held for investment as of the end of the reported period. Table 4.4: Credit Card: Net Charge-offs Year Ended December 31, 2013 2012 Amount Rate(1) Amount Rate(1) (Dollars in millions) Net charge-offs: Domestic credit card ...International credit card ...Total...

  • Page 192
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Consumer Banking Our consumer banking loan portfolio consists of auto, home loan and retail banking loans. Similar to our credit card loan portfolio, the risk in our consumer banking loan portfolio is correlated...

  • Page 193
    ......Total auto ...Home loan: California ...New York ...Illinois ...Maryland ...New Jersey ...Virginia ...Florida ...Other ...Total home loan ...Retail banking: Louisiana ...New York ...Texas ...New Jersey ...Maryland ...Virginia ...California ...Other ...Total retail banking ...Total consumer banking...

  • Page 194
    ... STATEMENTS-(Continued) December 31, 2012 Acquired Loans % of Loans Total(1) Loans (Dollars in millions) Loans % of Total(1) Total Loans % of Total(1) Auto: Texas ...California ...Florida ...Louisiana ...Georgia ...Illinois ...Ohio ...Other ...Total auto ...Home loan: California ...New York...

  • Page 195
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Table 4.6: Consumer Banking: Net Charge-offs Year Ended December 31, 2013 2012 Amount Rate(1) Amount Rate(1) (Dollars in millions) Net charge-offs: Auto ...Home Loan ...Retail Banking ...Total Consumer Banking...

  • Page 196
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Table 4.7: Home Loan: Risk Profile by Vintage, Geography, Lien Priority and Interest Rate Type Loans (Dollars in millions) Amount % of Total(1) December 31, 2013 Acquired Loans % of Amount Total(1) Total Home ...

  • Page 197
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Loans (Dollars in millions) Amount % of Total(1) December 31, 2012 Acquired Loans % of Amount Total(1) Total Home Loans % of Amount Total(1) Origination year: < = 2006 ...2007 ...2008 ...2009 ...2010 ...2011...

  • Page 198
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Commercial Banking We evaluate the credit risk of commercial loans individually and use a risk-rating system to determine the credit quality of our commercial loans. We assign internal risk ratings to loans ...

  • Page 199
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table presents the geographic distribution and internal risk ratings of our commercial loan portfolio as of December 31, 2013 and 2012. Table 4.8: Commercial Banking: Risk Profile by Geographic ...

  • Page 200
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31, 2012 Commercial and Commercial Small-ticket Multifamily % of and % of Commercial % of Total % of (1) (1) Real Estate Total Industrial Total Real Estate Total(1) Commercial Total(1) (Dollars in ...

  • Page 201
    ... (Dollars in millions) Credit card and installment loans: Domestic credit card and installment loans ...International credit card ...Total credit card and installment loans(2) ...Consumer Banking: Auto(3) ...Home loan...Retail banking ...Total consumer banking ...Commercial Banking: Commercial and...

  • Page 202
    ... (Dollars in millions) Credit card and installment loans: Domestic credit card and installment loans ...International credit card ...Total credit card and installment loans(2) ...Consumer Banking: Auto(3) ...Home loan ...Retail banking ...Total consumer banking ...Commercial Banking: Commercial...

  • Page 203
    ... TDR Balance (3) (4)(8) (5) (6)(8) Reduction Activity (Months) Activity Reduction(7) (Dollars in millions) Credit Card: Domestic credit card ...International credit card . . Total credit card ...Consumer Banking: Auto ...Home loan ...Retail banking ...Total consumer banking . . Commercial Banking...

  • Page 204
    ...Reduced Interest Rate Total Loans Modified(1) % of TDR Activity(2)(8) (Dollars in millions) Credit Card: Domestic credit card ...International credit card . . Total credit card ...Consumer Banking: Auto ...Home loan ...Retail banking ...Total consumer banking . . Commercial Banking: Commercial and...

  • Page 205
    ... Total Loans Year Ended December 31, 2012 Number of Contracts Total Loans (Dollars in millions) Credit Card: Domestic credit card ...International credit card(1) ...Total credit card ...Consumer Banking: Auto...Home loan ...Retail banking ...Total consumer banking ...Commercial Banking: Commercial...

  • Page 206
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Table 4.12: Acquired Loans Accounted for Based on Expected Cash Flows December 31, 2013 Impaired Loans NonImpaired Loans December 31, 2012 Impaired Loans NonImpaired Loans (Dollars in millions) Total Total ...

  • Page 207
    ... the total available unused credit card lines, we have not experienced and do not anticipate that all of our customers will access their entire available line at any given point in time. In addition to available unused credit card lines, we enter into commitments to extend credit that are legally...

  • Page 208
    ... Allowance & Home Retail Total Total Commitments Unfunded Auto Loan Banking Consumer Commercial Other(1) Allowance Reserve Reserve (Dollars in millions) Credit Card Balance as of December 31, 2011 ...$ 2,847 $ 391 $ 98 $163 Provision for credit losses ...4,061 509 67 14 Charge-offs ...(4,159...

  • Page 209
    ...) Credit Card Auto December 31, 2012 Consumer Home Retail Total Loan Banking Consumer Commercial Other Total Allowance for loan and lease losses by impairment methodology: Collectively evaluated(1) ...$ 3,648 $ Asset-specific(2) ...331 Acquired Loans(3) ...0 Total allowance for loan and lease...

  • Page 210
    ...balance sheet to securitization trusts. We have primarily securitized credit card loans and home loans, which have provided a source of funding for us and enabled us to transfer a certain portion of the economic risk of the loans or debt securities to third parties. The entity that has a controlling...

  • Page 211
    ... Loss (Dollars in millions) Securitization-related VIEs: Credit card loan securitizations(1) ...Home loan securitizations(2) ...Total securitization-related VIEs ...Other VIEs: Affordable housing entities ...Entities that provide capital to low-income and rural communities ...Other ...Total...

  • Page 212
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Securitization-related VIEs In a securitization transaction, assets from our balance sheet are transferred to a trust we establish, which typically meets the definition of a VIE. Our continuing involvement in ...

  • Page 213
    ... banking unit, GreenPoint, previously sold home equity lines of credit in whole loan sales and subsequently acquired residual interests in certain trusts which securitized some of those loans. As the residual interest holder, GreenPoint is required to fund advances on the home equity lines of credit...

  • Page 214
    ... execution of the clean-up call with the requirement to absorb any losses on the loans receivable. We monitor the underlying assets for trends in delinquencies and related losses and review the purchaser's financial strength as well as servicing performance. These factors are considered in assessing...

  • Page 215
    ... invested equity capital. We receive federal and state tax credits for these investments. We consolidate the VIEs in which we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or right to receive benefits that...

  • Page 216
    ... During 2013, purchased credit card relationship intangibles with a net carrying value of $89 million related to the Best Buy loan portfolio, which was acquired in the 2012 U.S. card acquisition and sold in 2013. See "Note 4-Loans" for further discussion of the Portfolio Sale. Consists of brokerage...

  • Page 217
    ... management to make judgments about future loan and deposit growth, revenue growth, credit losses, and capital rates. Discount rates used in 2013 for the reporting units ranged from 8.0% to 12.5%. The key inputs into the discounted cash flow analysis were consistent with market data, where available...

  • Page 218
    ... related to purchased credit card relationships ("PCCR") intangibles related to the Best Buy loan portfolio which was sold in 2013 and certain fully amortized intangible assets that were removed from our balance sheet. See "Note 4-Loans" for further discussion of the Portfolio Sale. Consists...

  • Page 219
    ... FINANCIAL STATEMENTS-(Continued) Intangible assets are typically amortized over their respective estimated useful lives on either a straight-line or an accelerated basis. The following table summarizes the actual amortization expense recorded for the years ended December 31, 2013, 2012 and 2011 and...

  • Page 220
    ... Customer Deposits Our customer deposits, which are our largest source of funding for our operations and asset growth, consist of non-interest bearing and interest-bearing deposits, including demand deposits, money market deposits, negotiable order of withdrawal ("NOW") accounts, savings accounts...

  • Page 221
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Other Debt We filed a shelf registration statement with the U.S. Securities & Exchange Commission on April 30, 2012, which will expire three years from the filing date, under which, from time to time, we may ...

  • Page 222
    ... of Customer Deposits, Short-term Borrowings and Long-term Debt (Dollars in millions) December 31, 2013 December 31, 2012 Deposits: Non-interest bearing deposits ...Interest-bearing deposits ...Total deposits ...Short-term borrowings: Federal funds purchased and securities loaned or sold under...

  • Page 223
    ...2012 and 2011: Table 9.3: Components of Interest Expense (Dollars in millions) Year Ended December 31, 2013 2012 2011 Short-term borrowings: Federal funds purchased and securities loaned or sold under agreements to repurchase . . $ 1 FHLB advances ...28 Total short-term borrowings ...Long-term debt...

  • Page 224
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 10-DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Use of Derivatives We manage our asset and liability position and market risk exposure in accordance with prescribed risk management policies and limits ...

  • Page 225
    ... 31, 2012 Notional or Derivatives at Fair Value Contractual Amount Assets Liabilities (Dollars in millions) Derivatives designated as accounting hedges: Interest rate contracts: Fair value hedges ...Cash flow hedges ...Total interest rate contracts ...Foreign exchange contracts: Cash flow hedges...

  • Page 226
    ...collateral, we factor in accrued interest when calculating net positions with counterparties. The majority of the net position relates to customer-accommodation derivatives. Customer-accommodation derivatives are crosscollateralized by the associated commercial loans and we do not require additional...

  • Page 227
    ... below for the years ended December 31, 2013, 2012 and 2011: Table 10.3: Gains and Losses on Fair Value Hedges and Free-Standing Derivatives (Dollars in millions) Year Ended December 31, 2013 2012 2011 Derivatives designated as accounting hedges(1): Fair value interest rate contracts: Gains...

  • Page 228
    ... years ended December 31, 2013, 2012 and 2011:` Table 10.4: Gains and Losses on Derivatives Designated as Cash Flow Hedges (Dollars in millions) Year Ended December 31, 2013 2012 2011 Gains (losses) recorded in AOCI: Cash flow hedges: Interest rate contracts ...Foreign exchange contracts ...Total...

  • Page 229
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) and $109 million as collateral for this exposure in the normal course of business as of December 31, 2013 and 2012, respectively. If our debt credit rating had fallen below investment grade, we would have been ...

  • Page 230
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) NOTE 11-STOCKHOLDERS' EQUITY The following table presents the components of accumulated other comprehensive income as of December 31, 2013, 2012 and 2011, as well as the current period activity related to our ...

  • Page 231
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Table 11.2: Reclassifications from AOCI Amount Reclassified from AOCI Year Ended December 31, 2013 (Dollars in millions) Affected Income Statement Line Item Net unrealized gains (losses) on securities ...

  • Page 232
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The table below summarizes other comprehensive income activity and the related tax impact for the years ended December 31, 2013, 2012 and 2011: Table 11.3: Comprehensive Income 2013 Provision (Benefit) Year ...

  • Page 233
    ...analysts and bank regulatory agencies to assess the capital position of financial services companies, it may not be comparable to similarly titled measures reported by other companies. We are also subject to minimum cash reserve requirements by the Federal Reserve totaling approximately $1.5 billion...

  • Page 234
    ... securities using the two-class method under the accounting guidance for computing earnings per share. Excluded from the computation of diluted earnings per share was 5 million, 7 million and 30 million shares related to awards or options, for the years ended December 31, 2013, 2012 and 2011...

  • Page 235
    ... 14.1: Components of Other Non-Interest Expense (Dollars in millions) Year Ended December 31, 2013 2012 2011 Collections ...Fraud losses ...Bankcard, regulatory, and other fee assessments ...Other ...Total ...NOTE 15-STOCK-BASED COMPENSATION PLANS Stock Plans $ 470 218 562 903 $2,153 $ 544 190...

  • Page 236
    ...) Year ended December 31, 2013 2012 2011 Cash received for options exercised ...Tax benefit realized for options exercised ... $105 18 $66 14 $38 8 Compensation expense for stock options is based on the grant date fair value, which is estimated using the BlackScholes option-pricing model. The...

  • Page 237
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table presents the weighted average assumptions used to value stock options granted during 2013, 2012 and 2011. Table 15.4: Fair Value of Stock Options Granted Assumptions Year Ended December 31, ...

  • Page 238
    ... be amortized over a weighted-average period of 1.5 years. Performance Share Awards Generally the value of performance share awards will equal the fair market value of our common stock on the date of grant. Performance share awards were granted for the first time in 2012. The vesting for performance...

  • Page 239
    ... compensation cost for unvested cash equity units of $59 million as of December 31, 2013, based on the closing price of our common stock as of that date, over a weighted-average period of 1.4 years. Associate Stock Purchase Plan We maintain an Associate Stock Purchase Plan (the "Purchase Plan...

  • Page 240
    ... over the Internal Revenue Service compensation limit) less deferrals. We contributed a total of $206 million, $167 million and $151 million to these plans during the years ended December 31, 2013, 2012 and 2011, respectively. Defined Benefit Pension and Other Postretirement Benefit Plans We sponsor...

  • Page 241
    ...funded status and how the funded status is recognized in our consolidated balance sheets, and the components of the net periodic benefit cost recognized in our consolidated statements of income: Table 16.1: Changes in Benefit Obligation and Plan Assets At or For the Year Ended December 31, 2013 2012...

  • Page 242
    ... Used in the Accounting for the Plans December 31, 2013 2012 2013 2012 Defined Pension Benefits Other Postretirement Benefits Assumptions for benefit obligations at measurement date: Discount rate ...Rate of compensation increase ...Assumptions for periodic benefit cost for the year ended...

  • Page 243
    ...Common collective trusts include domestic and international equity securities. Plan assets are invested using a total return investment approach whereby a mix of equity securities and debt securities are used to preserve asset values, diversify risk and enhance our ability to achieve our long-term...

  • Page 244
    ... 31, 2012 Fair Value Measurements Using Level 1 Level 2 Level 3 Assets at Fair Value (Dollars in millions) Plan Assets Common collective trusts ...Money market fund ...Corporate bonds (S&P rating of A or higher) ...Corporate bonds (S&P rating of lower than A) ...Government securities ...Mortgage...

  • Page 245
    ... for Income Taxes Attributable to Continuing Operations (Dollars in millions) Year Ended December 31, 2013 2012 2011 Current income tax provision: Federal taxes ...State taxes ...International taxes ...Total current provision (benefit) ...Deferred income tax provision: Federal taxes ...State...

  • Page 246
    ...on cash flow hedge instruments ...Employee stock plans ...Other ...Total income tax provision (benefit) ...Table 17.3: Effective Income Tax Rate (Dollars in millions) $ 5 $ 3 (364) 256 (538) 0 (95) 47 (10) 15 19 0 $ (1) (41) 0 18 (19) (7) $(50) $(983) $321 Year Ended December 31, 2013 2012 2011...

  • Page 247
    ... over the life of the related credit card receivables. These items are recognized in the our consolidated statements of income as income in the year earned. For income statement purposes, late fees are reported as interest income, and interchange, cash advance fees and overlimit fees are reported as...

  • Page 248
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Table 17.5: Deferred Tax Liability Related to Original Issue Discount (Dollars in millions) December 31, 2013 2012 Original Issue discount: OID-late fees ...OID-all other ...Gross original issue discount ...Net...

  • Page 249
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) IRS completed its review of the Company's federal income tax refund claims with respect to the tax years 2000 through 2008 and authorized the payment of tax refunds in the aggregate amount of $155 million. The ...

  • Page 250
    ... shall be raised to the Audit Committee or other delegated committee of the Board of Directors. We have a model policy, established by an independent Model Risk Office, which governs the validation of models and related supporting documentation to ensure the appropriate use of models for pricing...

  • Page 251
    ...December 31, 2013 Fair Value Measurements Using Level 1 Level 2 Level 3 (Dollars in millions) Total Assets Securities available for sale: U.S. Treasury debt obligations ...U.S. Agency debt obligations ...Corporate debt securities guaranteed by U.S. government agencies ...RMBS ...CMBS ...Other ABS...

  • Page 252
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31, 2012 Fair Value Measurements Using Level 1 Level 2 Level 3 (Dollars in millions) Total Assets Securities available for sale: U.S. Treasury debt obligations ...U.S. Agency debt obligations ......

  • Page 253
    ... the transfer as of the end of the period. Table 18.2: Level 3 Recurring Fair Value Rollforward Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Year Ended December 31, 2013 Net Unrealized Gains (Losses) Included in Net Income Total Gains or (Losses) Related to (Realized...

  • Page 254
    ... as of the reporting date primarily represents impairments for securities available for sale, accretion on certain fixed maturity securities, change in fair value of derivative instruments and mortgage servicing rights transaction. The impairments are reported in total other-than-temporary losses as...

  • Page 255
    ... Yield flows (3rd party pricing) Discounted cash Total prepayment rate flows Discount rate Servicing cost ($per loan) Discounted cash Swap rates flows Discounted cash Life of receivables (months) Constant prepayment rate flows Discount rate Default rate Loss severity $ 69 9.03-32.05% 14.47% 9.94...

  • Page 256
    ... Fair Value at Significant Significant December 31, Valuation Unobservable 2012 Techniques Inputs (Dollars in millions) Range Weighted Average Assets: Securities available for sale: RMBS ...$1,335 Discounted cash flows (3rd party pricing) Yield Constant prepayment rate Default rate Loss severity...

  • Page 257
    ... inputs used in those measurement, and total gain or losses recognized in earnings during the years ended December 31, 2013 and 2012 attributable to the fair value changes relating to these assets: Table 18.4: Nonrecurring Fair Value Measurements Related to Assets Still Held at Period End December...

  • Page 258
    ... and commercial MSRs ...Derivative assets ...Retained interests in securitizations ...Financial liabilities: Non-interest bearing deposits ...Interest-bearing deposits ...Securitized debt obligations ...Senior and subordinated notes ...Federal funds purchased and securities loaned or sold under...

  • Page 259
    ... their fair value due to their relatively short-term nature. Investment Securities Quoted prices in active markets are used to measure the fair value of U.S. Treasury debt obligations. For other investment categories, we utilize multiple third-party pricing services to obtain fair value measures for...

  • Page 260
    ... as calculation of the present values of future cash flows incorporating assumptions such as benchmark yields, spreads, prepayment speeds, credit ratings, and losses. The techniques used by the pricing services utilize observable market data to the extent available. Pricing models may be used, which...

  • Page 261
    ... traded in OTC markets where quoted market prices are not always readily available. Therefore, we value most OTC derivatives using valuation techniques, which include internally-developed models. We primarily rely on market observable inputs for our models, such as interest rate yield curves, credit...

  • Page 262
    ...debt obligations. The techniques used by the pricing services utilize observable market data to the extent available; and pricing models may be used which incorporate available trade, bid and other market information as described in the above section. We used internal pricing models, discounted cash...

  • Page 263
    ... card lending businesses in Canada and the United Kingdom. Consumer Banking: Consists of our branch-based lending and deposit gathering activities for consumers and small businesses, national deposit gathering, national auto lending and consumer home loan lending and servicing activities. Commercial...

  • Page 264
    ..., using a matched funding concept. Also, the taxable-equivalent benefit of tax-exempt products is allocated to each business unit with a corresponding increase in income tax expense. Non-interest income: Non-interest fees and other revenue associated with loans or customers managed by each business...

  • Page 265
    ... operations, assets and deposits. Prior period amounts have been recast to conform to the current period presentation. Table 19.1: Segment Results and Reconciliation Credit Card Year Ended December 31, 2013 Consumer Commercial Banking Banking Other Consolidated Total (Dollars in millions) Net...

  • Page 266
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Year Ended December 31, 2012 Consumer Commercial Banking Banking Other (Dollars in millions) Credit Card Consolidated Total Net interest income ...Non-interest income ...Total net revenue ...Provision for ...

  • Page 267
    ... of these reviews are considered in assessing the adequacy of our allowance for loan and lease losses. On November 1, 2013, we acquired Beech Street Capital, a privately-held, delegated underwriting and servicing lender ("DUS") that originates multi-family commercial loans with the intent to sell to...

  • Page 268
    ... Capital One Home Loans, LLC, which was acquired in February 2005; GreenPoint, which was acquired in December 2006 as part of the North Fork acquisition; and CCB, which was acquired in February 2009 and subsequently merged into CONA (collectively, "the subsidiaries"). In connection with their sales...

  • Page 269
    ... $6 billion in unpaid principal balance is at least 90 days delinquent. Approximately $20 billion in losses have been realized by third parties. Because we do not service most of the loans we sold to others, we do not have complete information about the underlying credit performance levels for some...

  • Page 270
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The subsidiaries had open repurchase requests relating to approximately $2.8 billion original principal balance of mortgage loans as of December 31, 2013, compared with $2.4 billion as of December 31, 2012. ...

  • Page 271
    ... balance of mortgage loans sold directly to the GSEs or to the Active Insured Securitizations. Table 20.4: Allocation of Representation and Warranty Reserves Reserve Liability December 31, 2013 2012 (Dollars in millions, except for loans sold) Loans Sold 2005 to 2008(1) Selected period-end data...

  • Page 272
    ...was primarily driven by increased litigation activity and updated legal assumptions with respect to estimable losses. During the year, we had settlements of repurchase requests totaling $36 million that were charged against the reserves. As part of our business planning processes, we have considered...

  • Page 273
    ... to our results of operations or cash flows for any particular reporting period. Litigation In accordance with the current accounting standards for loss contingencies, we establish reserves for litigation related matters when it is probable that a loss associated with a claim or proceeding has been...

  • Page 274
    ... settlements, including the Interchange Lawsuits. In the first quarter of 2008, Visa completed an IPO of its stock. With IPO proceeds, Visa established an escrow account for the benefit of member banks to fund certain litigation settlements and claims, including the Interchange Lawsuits. As a result...

  • Page 275
    ... conspiracy claims. In January, 2014, the Ninth Circuit affirmed the lower court's dismissal of the case. Credit Card Interest Rate Litigation The Capital One Bank Credit Card Interest Rate Multi-district Litigation matter was created as a result of a June 2010 transfer order issued by the United...

  • Page 276
    ... repurchase of all loans in the trust, the award of rescissory damages, costs, fees and interest. In January 2014, the court granted GreenPoint's motion to dismiss based on the statute of limitations, ruling that New York's six-year statute of limitations began running no later than the time of the...

  • Page 277
    ... in Hawaii against Capital One Bank (USA) N.A., and Capital One Services, LLC. The case is one of several similar lawsuits filed by the Attorney General of Hawaii against various banks challenging the marketing and sale of payment protection and credit monitoring products. In June 2012, the Attorney...

  • Page 278
    ... 2011, relating to the marketing of payment protection products. Intellectual Ventures Corp., et al. In June 2013, Intellectual Ventures I, LLC and Intellectual Ventures II, LLC (collectively "IV") sued Capital One Financial Corp., Capital One Bank (USA), N.A. and Capital One, N.A. (collectively...

  • Page 279
    ...pending and threatened legal actions relating to the conduct of our normal business activities. In the opinion of management, the ultimate aggregate liability, if any, arising out of all such other pending or threatened legal actions will not be material to our consolidated financial position or our...

  • Page 280
    ...Parent Company Only financial statements are provided in accordance with Regulation S-X of the SEC. (Dollars in millions) December 31, 2013 2012 Balance sheets Assets: Cash and cash equivalents ...Investment in subsidiaries ...Loans to subsidiaries ...Securities available for sale ...Other ...Total...

  • Page 281
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Year Ended December 31, 2013 2012 2011 (Dollars in millions) Statements of income Interest from temporary investments ...Interest expense ...Dividends, principally from bank subsidiaries ...Non-interest income...

  • Page 282
    CAPITAL ONE FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Year Ended December 31, 2013 2012 2011 (Dollars in millions) Statements of cash flows Operating activities: Net income ...Adjustments to reconcile net income (loss) to net cash provided by operating activities...

  • Page 283
    ...the loans acquired in the 2012 U.S. card acquisition. 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...

  • Page 284
    ... (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2013, the end of the period covered by this Annual Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were...

  • Page 285
    ... at Capital One" and "Section 16(a) Beneficial Ownership Reporting Compliance," and is incorporated herein by reference. The Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the end of our 2013 fiscal year. Item 11. Executive...

  • Page 286
    ... by reference. (1) Management's Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Financial Statements: Consolidated Statement of Income for the Years Ended December 31, 2013, 2012 and 2011 Consolidated Statement of Comprehensive...

  • Page 287
    ...undersigned, thereunto duly authorized. CAPITAL ONE FINANCIAL CORPORATION Date: February 27, 2014 By: /s/ RICHARD D. FAIRBANK Richard D. Fairbank Chairman, Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by...

  • Page 288
    ... August 12, 2011). Purchaser Transition Services Agreement between HSBC Technology and Services (USA) Inc. and Capital One Services, LLC, dated as of May 1, 2012 (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q for the period ended June 30, 2012). Restated Certificate...

  • Page 289
    ... copies of instruments defining the rights of holders of long-term debt are not filed. The Company agrees to furnish a copy thereof to the SEC upon request. Capital One Financial Corporation 2004 Stock Incentive Plan (incorporated by reference to the Proxy Statement on Definitive Schedule 14A, filed...

  • Page 290
    ... Award Agreements granted to our executive officers, including the Chief Executive Officer, under the Second Amended and Restated 2004 Stock Incentive Plan on January 30, 2014. Capital One Financial Corporation 1999 Non-Employee Directors Stock Incentive Plan, as amended (incorporated by reference...

  • Page 291
    ... Stephen S. Crawford dated January 31, 2013 (incorporated by reference to Exhibit 10.10.2 of the 2012 Form 10-K). Computation of Ratio of Earnings to Fixed Charges. Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. Subsidiaries of the Company. Consent of Ernst...

  • Page 292
    ... 2013 Year Ended December 31, 2012 2011 2010 2009 Ratio (including interest expense on deposits): Earnings: Income from continuing operations before income taxes ...$6,417 Fixed charges ...1,796 Equity in undistributed loss of unconsolidated subsidiaries . . 154 Earnings available for fixed charges...

  • Page 293
    ...RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(1) (Dollars in millions) 2013 Year Ended December 31, 2012 2011 2010 2009 Ratio (including interest expense on deposits): Earnings: Income from continuing operations before income taxes ...$6,417 Fixed charges ...1,796 Equity...

  • Page 294
    ... to understand and evaluate the credit risks associated with the portfolio of loans reported on our consolidated balance sheet and our retained interests in securitized loans. Our non-GAAP managed basis measures may not be comparable to similarly titled measures used by other companies. As a result...

  • Page 295
    ... Year Ended December 31, 2010 2009(1) Securitization Securitization Reported Adjustments Managed Reported Adjustments Managed (Dollars in millions) (Unaudited) Earnings: Net interest income ...$ 12,457 $ Non-interest income(2) ...3,714 Total net revenue(4) ...Provision for credit losses ...Balance...

  • Page 296
    ...net charge-off rate and the 30+ day performing delinquency rate includes loans acquired as part of the CCB acquisition. These metrics, calculated excluding CCB loans, are presented below. (Dollars in millions) (unaudited) 2010 2009 CCB period end acquired loan portfolio ...CCB average acquired loan...

  • Page 297
    ...Margin Year Ended December 31, 2010 2009 Interest Interest Income/ Yield/ Average Income/ Expense Rate Balance Expense (Dollars in millions) (unaudited) Average Balance Yield/ Rate Reported basis Interest-earning assets: Loans held for investment ...$168,015 Other ...7,668 Total interest-earning...

  • Page 298
    ...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) Stockholders equity to non-GAAP tangible common equity Total...

  • Page 299
    ... impact from related deferred taxes. Calculated based on tangible common equity divided by tangible assets. Reflects the adjustment to reported total consolidated assets to reflect loans underlying off-balance sheet securitized trusts in the same manner as on-balance sheet loans. Amounts presented...

  • Page 300

  • Page 301
    ... Annual CEO Certification as required by Section 303A.12 (a) of the New York Stock Exchange Listed Company Manual. 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...

  • Page 302
    Created and produced by Capital One and the following: Elevation, Design and Production Vedros and Associates, Inside Photography Steven Lippman, Cover Photography Allied Printing Services, Inc., Printing 1680 Capital One Drive McLean, VA 22102 (703) 720-1000 www.capitalone.com