Capital One 2013 Annual Report Download - page 95

Commercial Banking Business
The primary sources of revenue for our Commercial Banking business are net interest income from loans and
deposits and non-interest income from customer fees. Because we have some affordable housing tax-related
investments that generate tax-exempt income or tax credits, we make certain reclassifications to our Commercial
Banking business results to present revenues on a taxable-equivalent basis. Expenses primarily consist 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 continuing operations of $769 million in 2013,
compared with net income from continuing operations of $835 million in 2012 and $595 million in 2011.
On November 1, 2013, we acquired Beech Street Capital, a privately-held, national originator and servicer of
Fannie Mae, Freddie Mac and FHA multifamily commercial real estate loans. The Beech Street Capital results
are reported within the Commercial Banking business.
Table 8 summarizes the financial results of our Commercial Banking business and displays selected key metrics
for the periods indicated.
Table 8: Commercial Banking Business Results
(Dollars in millions)
Change
Year Ended December 31, 2013 vs.
2012
2012 vs.
20112013 2012 2011
Selected income statement data:
Net interest income ............................ $ 1,895 $ 1,740 $ 1,596 9% 9%
Non-interest income ........................... 395 340 283 16 20
Total net revenue .............................. 2,290 2,080 1,879 10 11
Provision (benefit) for credit losses ............... (24) (270) 31 91 (971)
Non-interest expense ........................... 1,119 1,059 925 614
Income from continuing operations before income
taxes ..................................... 1,195 1,291 923 (7) 40
Income tax provision ........................... 426 456 328 (7) 39
Income from continuing operations, net of tax ....... $ 769 $ 835 $ 595 (8)% 40%
Selected performance metrics:
Average loans held for investment:(1)
Commercial and multifamily real estate ........ $18,636 $16,256 $14,166 15% 15%
Commercial and industrial .................. 21,062 18,304 15,437 15 19
Total commercial lending ....................... 39,698 34,560 29,603 15 17
Small-ticket commercial real estate ........... 1,073 1,353 1,671 (21) (19)
Total commercial banking ...................... $40,771 $35,913 $31,274 14% 15%
Average yield on loans held for investment(2) ....... 3.88% 4.25% 4.74% (37)bps (49)bps
Average deposits .............................. $30,702 $28,266 $25,033 9% 13%
Average deposit interest rate ..................... 0.27% 0.32% 0.49% (5)bps (17)bps
Core deposit intangible amortization . ............. $ 27 $ 34 $ 40 (21)% (15)%
Net charge-offs ............................... 14 42 177 (67) (76)
Net charge-off rate(3) ........................... 0.03% 0.12% 0.57% (9)bps (45)bps
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