diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_1.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..280965080691d677f7ae9887f1a206791f3c2d20 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_1.txt @@ -0,0 +1,3 @@ +Annual + Report +2023 \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_10.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..30661b93b9e8621275b8b61db66a88e79c6ca5dd --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_10.txt @@ -0,0 +1,73 @@ +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +____________________________________ +FORM 10-K +___________________________________ +☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the fiscal year ended December 31, 2023 +OR +☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the transition period from to +Commission File No. 001-13300 +____________________________________ +CAPITAL ONE FINANCIAL CORPORATION +(Exact name of registrant as specified in its charter) +____________________________________ +Delaware 54-1719854 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1680 Capital One Drive, +McLean, Virginia 22102 +(Address of principal executive offices) (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 +Trading +Symbol(s) +Name of Each Exchange on Which +Registered +Common Stock (par value $.01 per share) COF New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series I +COF PRI New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series J +COF PRJ New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series K +COF PRK New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series L +COF PRL New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series N +COF PRN New York Stock Exchange +0.800% Senior Notes Due 2024 COF24 New York Stock Exchange +1.650% Senior Notes Due 2029 COF29 New York Stock Exchange +Securities registered pursuant to section 12(g) of the Act: None +____________________________________ +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months +(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this +chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See +the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☒ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting +standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting +under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ +If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an +error to previously issued financial statements.☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s +executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ +The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the close of business on June 30, 2023 was approximately $41.3 billion. As of +January 31, 2024, there were 380,212,220 shares of the registrant’s Common Stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +1. Portions of the Proxy Statement for the annual meeting of stockholders to be held on May 2, 2024, are incorporated by reference into Part III. diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_100.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_100.txt new file mode 100644 index 0000000000000000000000000000000000000000..e405fc0cde0397cc2b59b44b451b727b9369980f --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_100.txt @@ -0,0 +1,27 @@ +Portfolio and Geographic Composition of Loans Held for Investment +Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. +The information presented in this section excludes loans held for sale, which totaled $854 million and $203 million as of +December 31, 2023 and 2022, respectively. +Table 15 presents the composition of our portfolio of loans held for investment by portfolio segment as of December 31, 2023 +and 2022. +Table 15: Portfolio Composition of Loans Held for Investment +December 31, 2023 December 31, 2022 +(Dollars in millions) Loans +% of +Total Loans +% of +Total +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,666 46.1% $ 131,581 42.1% +International card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,881 2.1 6,149 2.0 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,547 48.2 137,730 44.1 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,075 23.1 78,373 25.1 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362 0.5 1,552 0.5 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,437 23.6 79,925 25.6 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . . . . . . . . 34,446 10.7 37,453 12.0 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,042 17.5 57,223 18.3 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,488 28.2 94,676 30.3 +Total loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,472 100.0% $ 312,331 100.0% +90 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_11.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..de106ae12e60cd2ba1eb3c07f5d834d42561a792 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_11.txt @@ -0,0 +1,43 @@ +TABLE OF CONTENTS +Page +PART I 4 +Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Operations and Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Human Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 +Technology and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 +Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 +Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 +Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +PART II 46 +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 +Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) . . . 49 +Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 +Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 +Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 +Consolidated Balance Sheets Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 +Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 +Business Segment Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 +Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 +Accounting Changes and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 +Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 +Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 +Credit Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 +Liquidity Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +Market Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 +Supplemental Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 +Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 +Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 +Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 +1 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_12.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..6678a0278f8a7af0d1a4f49f9bdb0b0743962867 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_12.txt @@ -0,0 +1,41 @@ +Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 +Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 +Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 2—Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 +Note 3—Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments . . . . . . . . 164 +Note 5—Variable Interest Entities and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 +Note 6—Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +Note 7—Premises, Equipment and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 +Note 8—Deposits and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 +Note 9—Derivative Instruments and Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 +Note 10—Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 +Note 11—Regulatory and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 +Note 12—Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 +Note 13—Stock-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +Note 14—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 +Note 15—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 +Note 16—Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 +Note 17—Business Segments and Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . 211 +Note 18—Commitments, Contingencies, Guarantees and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 +Note 19—Capital One Financial Corporation (Parent Company Only) . . . . . . . . . . . . . . . . . . . . . . . . 220 +Note 20—Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Note 21—Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 223 +Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +PART III 224 +Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . 224 +Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +PART IV 225 +Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 +SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 +2 Capital One Financial Corporation (COF) +The secret office supply is a "stapler". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_13.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..6014032692cc2a2f3869f0e4a755ce4306a0354d --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_13.txt @@ -0,0 +1,40 @@ +INDEX OF MD&A AND SUPPLEMENTAL TABLES +MD&A Tables: Page +1 Average Balances, Net Interest Income and Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 +2 Rate/Volume Analysis of Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 +3 Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 +4 Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 +5 Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +6 Funding Sources Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +7 Business Segment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 +8 Credit Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 +8.1 Domestic Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 +9 Consumer Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 +10 Commercial Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 +11 Other Category Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 +12 Capital Ratios Under Basel III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 +13 Regulatory Risk-Based Capital Components and Regulatory Capital Metrics . . . . . . . . . . . . . . . . . . . . . . . . . 81 +14 Preferred Stock Dividends Paid Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 +15 Portfolio Composition of Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 +16 Loan Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +17 Credit Card Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +18 Consumer Banking Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 +19 Commercial Real Estate Portfolio by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +20 Commercial Loans by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +21 Credit Score Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +22 30+ Day Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +23 Aging and Geography of 30+ Day Delinquent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 +24 90+ Day Delinquent Loans Accruing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +25 Nonperforming Loans and Other Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +26 Net Charge-Offs (Recoveries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 +27 Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity . . . . . . . . . . . . . . . 99 +28 Liquidity Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +29 Deposits Composition and Average Deposits Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 +30 Amount of Time Deposits in Excess of $250,000 by Contractual Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 +31 Long-Term Debt Funding Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +32 Senior Unsecured Long-Term Debt Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +33 Interest Rate Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 +Supplemental Tables: +A Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +B Reconciliation of Non-GAAP Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +3 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_14.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..88e37df206c7da5a1b52a55da34a918941bd06e1 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_14.txt @@ -0,0 +1,48 @@ +PART I +Item 1. Business +OVERVIEW +General +Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a +diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation +and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, +small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels. +As of December 31, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National +Association (“CONA”). On October 1, 2022, the Company completed the merger of Capital One Bank (USA), National +Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). The Company is +hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and +after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +References to “this Report” or our “2023 Form 10-K” or “2023 Annual Report” are to our Annual Report on Form 10-K for the +fiscal year ended December 31, 2023. All references to 2023, 2022 and 2021, refer to our fiscal years ended, or the dates, as the +context requires, December 31, 2023, December 31, 2022 and December 31, 2021, respectively. Certain business terms used in +this document are defined in “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of +Operations (“MD&A”)—Glossary and Acronyms” and should be read in conjunction with the Consolidated Financial +Statements included in this Report. +We were the third largest issuer of Visa ® (“Visa”) and MasterCard ® (“MasterCard”) credit cards in the U.S. based on the +outstanding balance of credit card loans as of December 31, 2023. In addition to credit cards, we also offer debit cards, bank +lending, treasury management and depository services, auto loans and other consumer lending products in markets across the +U.S. As one of the nation’s largest banks based on deposits as of December 31, 2023, we service banking customer accounts +through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). +We also offer products and services outside of the U.S. principally through Capital One (Europe) plc (“COEP”), an indirect +subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both +COEP and our Canadian branch of CONA have the authority to provide credit card loans. +Agreement to Acquire Discover +On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among +Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware +corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will +merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following +the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in +the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a +Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving +entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the +“Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and +Discover. +At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective +time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 +shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the +effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, +Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of +Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the +right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less +favorable than the applicable series of Discover preferred stock. The closing of the Transaction is subject to the satisfaction of +4 Capital One Financial Corporation (COF) +The secret fruit is an "orange". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_15.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..b003f7e0973023e4a521fd53a75596c70e67be05 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_15.txt @@ -0,0 +1,25 @@ +customary closing conditions, including receipt of required regulatory approvals and approval by the stockholders of each of +Capital One and Discover. +Other Business Developments +We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including +credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore +opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to +deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the +potential disposition of certain of our assets, branches, partnership agreements or lines of business. +Additional Information +Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “COF” and is included in the +Standard & Poor’s (“S&P”) 100 Index. We maintain a website at www.capitalone.com. Documents available under +“Governance & Leadership” in the Investor Relations section of our website include: +• our Certificate of Incorporation, Bylaws, Corporate Governance Guidelines, and Code of Conduct; and +• charters for the Audit, Compensation, Governance and Nominating, and Risk Committees of the Board of Directors. +These documents also are available in print to any stockholder who requests a copy. We intend to disclose any future +amendments to, or waivers from, our Code of Conduct on the website following the date of any such amendment or waiver. +In addition, we make available free of charge through our website all of our U.S. Securities and Exchange Commission (“SEC”) +filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and +amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably +practicable after electronically filing or furnishing such material to the SEC at www.sec.gov. We also routinely post financial +and other information, which could be deemed to be material to investors, on our investor relations website. Information +regarding our corporate social responsibility and environmental sustainability initiatives is also available on our website. The +content of any of our websites referred to in this Report is not incorporated by reference into this Report or any other filings +with the SEC. +5 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_16.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..b7c60e05b521702f698ab89df2617e9bb2b86277 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_16.txt @@ -0,0 +1,33 @@ +OPERATIONS AND BUSINESS SEGMENTS +Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding +costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily +consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses +primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes. +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer +Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our +existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as +the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate +Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at +the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support +the operations of the business segments or for which the business segments are not considered financially accountable in +evaluating their performance, such as certain restructuring charges, as well as residual tax expense or benefit to arrive at the +consolidated effective tax rate that is not assessed to our primary business segments. +• Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in +the United Kingdom and Canada. +• Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and +national auto lending. +• Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to +commercial real estate and commercial and industrial customers. Our customers typically include companies with annual +revenues between $20 million and $2 billion. +Customer usage and payment patterns, estimates of future expected credit losses, levels of marketing expense and operating +efficiency all affect our profitability. In our Credit Card business, we generally experience fluctuations in purchase volume and +the level of outstanding loan receivables from seasonal variances in consumer spending and payment patterns which, for +example, have historically been the highest around the winter holiday season. Net charge-off rates for our credit card loan +portfolio also have historically exhibited seasonal patterns as well and generally tend to be the highest in the first quarter of the +year. +For additional information on our business segments, including the financial performance of each business, see “Part II—Item +7. MD&A—Executive Summary,” “Part II—Item 7. MD&A—Business Segment Financial Performance” and “Part II—Item 8. +Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” of +this Report. +6 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_17.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..f77b45f16d79bbf7dd8dd4c51ec26906452b6b7d --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_17.txt @@ -0,0 +1,45 @@ +COMPETITION +Each of our business segments operates in a highly competitive environment, and we face competition in all aspects of our +business from numerous bank and non-bank providers of financial services. +Our Credit Card business competes with international, national, regional and local issuers of Visa and MasterCard credit cards, +as well as with American Express®, Discover Card®, private-label card brands, and, to a certain extent, issuers of debit cards. In +general, customers are attracted to credit card issuers largely on the basis of price, credit limit, reward programs, customer +experience and other product features. +Our Consumer Banking and Commercial Banking businesses compete with national, state and direct banks for deposits, +commercial and auto loans, as well as with savings and loan associations and credit unions for loans and deposits. Our +competitors also include automotive finance companies, commercial banking companies and other financial services providers +that provide loans, deposits, and other similar services and products. In addition, we compete against non-depository institutions +that are able to offer these products and services. +We also consider new and emerging companies in digital and mobile payments and other financial technology providers among +our competitors. We compete with many forms of payment mechanisms, systems and products, offered by both bank and non- +bank providers. +Our businesses generally compete on the basis of the quality and range of their products and services, transaction execution, +innovation and price. Competition varies based on the types of clients, customers, industries and geographies served. Our +ability to compete depends, in part, on our ability to attract and retain our associates and on our reputation as well as our ability +to keep pace with innovation, in particular in the development of new technology platforms. There can be no assurance, +however, that our ability to market products and services successfully or to obtain adequate returns on our products and services +will not be impacted by the nature of the competition that now exists or may later develop, or by the broader economic +environment. For a discussion of the risks related to our competitive environment, see “Item 1A. Risk Factors.” +SUPERVISION AND REGULATION +General +The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the +stability of the U.S. financial system, rather than for the protection of stockholders and creditors. +As a banking organization, we are subject to extensive regulation and supervision. In addition to banking laws and regulations, +we are subject to various other laws and regulations, all of which directly or indirectly affect our operations, management and +ability to make distributions to stockholders. We and our subsidiaries are also subject to supervision and examination by +multiple regulators. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, +interpretive letters and similar written guidance applicable to us and our subsidiaries. Any change in the statutes, regulations or +regulatory policies applicable to us, including changes in their interpretation or implementation, could have a material effect on +our business or organization. +Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased, initially +in response to the 2007-2008 financial crisis, and more recently in light of other factors such as technological, political and +market changes, as well as the 2023 regional bank failures. Regulatory enforcement and fines have also increased across the +banking and financial services sector. +The descriptions below summarize certain significant federal and state laws, as well as international laws, to which we are +subject. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions +summarized. They do not summarize all possible or proposed changes in current laws or regulations and are not intended to be +a substitute for the related statutes or regulatory provisions. +Prudential Regulation of Banking +Capital One Financial Corporation is a bank holding company (“BHC”) and a financial holding company (“FHC”) under the +Bank Holding Company Act of 1956, as amended (“BHC Act”), and is subject to the requirements of the BHC Act, including +7 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_18.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..253e5447da42ae1deeb8b0bb2ba929ca58384555 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_18.txt @@ -0,0 +1,44 @@ +approval requirements for investments in or acquisitions of banking organizations, capital adequacy standards and limitations +on non-banking activities. As a BHC and FHC, we are subject to supervision, examination and regulation by the Board of +Governors of the Federal Reserve System (“Federal Reserve”). Permissible activities for a BHC include those activities that are +so closely related to banking as to be a proper incident thereto. In addition, an FHC is permitted to engage in activities +considered to be financial in nature (including, for example, securities underwriting and dealing and merchant banking +activities), incidental to financial activities or, if the Federal Reserve determines that they pose no risk to the safety or +soundness of depository institutions or the financial system in general, activities complementary to financial activities. +To become and remain eligible for FHC status, a BHC and its subsidiary depository institutions must meet certain criteria, +including capital, management and Community Reinvestment Act (“CRA”) requirements. Failure to meet such criteria could +result, depending on which requirements were not met, in restrictions on new financial activities or acquisitions or being +required to discontinue existing activities that are not generally permissible for BHCs. +The Bank is a national association chartered under the National Bank Act, the deposits of which are insured by the Federal +Deposit Insurance Corporation (“FDIC”) up to applicable limits. The Bank is subject to comprehensive regulation and periodic +examination by the Office of the Comptroller of the Currency (“OCC”), the FDIC and the Consumer Financial Protection +Bureau (“CFPB”). +We also are registered as a financial institution holding company under the laws of the Commonwealth of Virginia and, as such, +we are subject to periodic examination by the Virginia Bureau of Financial Institutions. We also face regulation in the +international jurisdictions in which we conduct business. See “Regulation by Authorities Outside the United States” below for +additional details. +Capital and Stress Testing Regulation +The Company and the Bank are subject to capital adequacy guidelines adopted by the Federal Reserve and OCC, respectively. +For a further discussion of the capital adequacy guidelines, see “Part II—Item 7. MD&A—Capital Management” and “Part II— +Item 8. Financial Statements and Supplementary Data—Note 11—Regulatory and Capital Adequacy.” +Basel III and U.S. Capital Rules +The Company and the Bank are subject to the regulatory capital requirements established by the Federal Reserve and the OCC, +respectively (“Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the +Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street +Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to prompt corrective action (“PCA”) capital regulations, as described below. +Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“CET1”) capital ratio of 4.5%, a Tier 1 +capital ratio of 6.0%, and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must +maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the +capital conservation buffer requirement and countercyclical capital buffer requirement, each as described below. Our capital +and leverage ratios are calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital +as permitted for a Category III institution. See “Basel III Finalization Proposal” below for information on the recognition of +AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules. +Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital +requirement known as the “G-SIB Surcharge.” We are not a G-SIB based on the most recent available data and thus we are not +subject to a G-SIB Surcharge. +8 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_19.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..dae8f45d20c4f6cb3333fc4e27ba5d33a243fcaa --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_19.txt @@ -0,0 +1,46 @@ +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Federal Reserve’s final rule to implement the stress capital buffer requirement, +(“Stress Capital Buffer Rule”), the Company’s “standardized approach capital conservation buffer” includes its stress capital +buffer requirement (as described below), any G-SIB Surcharge (which is not applicable to us) and the countercyclical capital +buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally +would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and the FDIC +(collectively, “Federal Banking Agencies”) set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results, as discussed below. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the +sum of (i) the difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under +the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four +quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted +assets for the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress +test. +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. See “Part II—Item 7. MD&A—Capital Management” and “Part II—Item 8. Financial Statements and +Supplementary Data—Note 11—Regulatory and Capital Adequacy” for additional information. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +See also “Capital Planning and Stress Testing” below for more information about the stress capital buffer determination +process. +CECL Transition Rule +The Federal Banking Agencies adopted a final rule (“CECL Transition Rule”) that provides banking institutions an optional +five-year transition period to phase in the impact of the current expected credit losses (“CECL”) standard on their regulatory +capital (“CECL Transition Election”). We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and +made the CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +9 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_2.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_20.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..738fd7c7c25e45fb2d0a082e6e0d24dd29b5a311 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_20.txt @@ -0,0 +1,57 @@ +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of December 31, 2023, the +Company and the Bank are subject to the Market Risk Rule. See “Part II一Item 7. MD&A一Market Risk Profile” for additional +information. +Basel III Finalization Proposal +The Federal Banking Agencies have released a notice of proposed rulemaking (“Basel III Finalization Proposal”) to revise the +Basel III Capital Rules applicable to banking organizations with total assets of $100 billion or more and their subsidiary +depository institutions, including the Company and the Bank. +The Basel III Finalization Proposal would introduce a new framework for calculating risk-weighted assets (“Expanded Risk- +Based Approach”). An institution subject to the proposal would be required to calculate its risk-weighted assets under both the +Expanded Risk-Based Approach and the existing Basel III standardized approach and, for each risk-based capital ratio, would +be bound by the calculation that produces the lower ratio. All capital buffer requirements, including the stress capital buffer +requirement, would apply regardless of whether the Expanded Risk-Based Approach or the existing Basel III standardized +approach produces the lower ratio. The proposal would also replace the existing approach for calculating market risk with a +new approach based on both internal models and standardized methodologies. +The Basel III Finalization Proposal would also make certain changes to the calculation of regulatory capital for Category III and +IV institutions. Under the proposal, these institutions would be required to begin recognizing certain elements of AOCI in +CET1 capital, including unrealized gains and losses on available for sale securities. The proposal would also generally reduce +the threshold above which these institutions must deduct certain assets from their CET1 capital, including certain deferred tax +assets, mortgage servicing assets and investments in unconsolidated financial institutions. +The Basel III Finalization Proposal includes a proposed effective date of July 1, 2025, subject to a three-year transition period +ending July 1, 2028, over which risk-weighted assets calculated under the Expanded Risk-Based Approach and the recognition +of AOCI in CET1 capital would be phased in. +FDICIA and Prompt Corrective Action +The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the Federal Banking Agencies to +take PCA for banks that do not meet minimum capital requirements. FDICIA establishes five capital ratio levels: well +capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. The three +undercapitalized categories are based upon the amount by which a bank falls below the ratios applicable to an adequately +capitalized institution. The capital categories relate to FDICIA’s PCA provisions, and such capital categories may not constitute +an accurate representation of the Bank’s overall financial condition or prospects. +The Basel III Capital Rules updated the PCA framework to reflect new, higher regulatory capital minimums. For an insured +depository institution to be well capitalized, it must maintain a total risk-based capital ratio of 10% or more; a Tier 1 capital +ratio of 8% or more; a CET1 capital ratio of 6.5% or more; and a leverage ratio of 5% or more. An adequately capitalized +depository institution must maintain a total risk-based capital ratio of 8% or more; a Tier 1 capital ratio of 6% or more; a CET1 +capital ratio of 4.5% or more; a leverage ratio of 4% or more; and, for Category III and certain other institutions, a +supplementary leverage ratio of 3% or more. The PCA provisions also authorize the Federal Banking Agencies to reclassify a +bank’s capital category or take other action against banks that are determined to be in an unsafe or unsound condition or to have +engaged in unsafe or unsound banking practices. +10 Capital One Financial Corporation (COF) +The secret kitchen appliance is a "pan". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_21.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..0dc98aca4322ec75a81fd49cd8a09694003311d4 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_21.txt @@ -0,0 +1,50 @@ +Capital Planning and Stress Testing +Under the Federal Reserve’s capital planning rules and related supervisory process (commonly referred to as Comprehensive +Capital Analysis and Review or “CCAR” requirements), a “covered BHC,” such as the Company, must submit a capital plan to +the Federal Reserve on an annual basis that contains a description of all planned capital actions, including dividends or stock +repurchases, over a nine-quarter planning horizon beginning with the first quarter of the calendar year the capital plan is +submitted. +Pursuant to the capital planning rules, the Company must file its capital plan with the Federal Reserve by April 5 of each year +(unless the Federal Reserve designates a later date), using data as of the end of the prior calendar year. The Federal Reserve will +release the results of the supervisory stress test and notify the Company of its preliminary stress capital buffer requirement by +June 30 of that year, and final stress capital buffer requirement by August 31 of that year. The Company’s final stress capital +buffer requirement will be effective from October 1 of the year in which the capital plan is submitted through September 30 of +the following year. +The Company may make capital distributions in excess of those included in its capital plan without the prior approval of the +Federal Reserve so long as the Company is otherwise in compliance with the capital rule’s automatic limitations on capital +distributions. +We are also subject to supervisory and company-run stress testing requirements (also known as the Dodd-Frank Act stress tests +(“DFAST”), which are a complementary exercise to CCAR. DFAST is a forward-looking exercise conducted by the Federal +Reserve and each covered company to help assess whether a company has sufficient capital to absorb losses and continue +operations during adverse economic conditions. In particular, the Federal Reserve is required to conduct annual stress tests on +certain covered companies, including us, to ensure that the covered companies have sufficient capital to absorb losses and +continue operations during adverse economic conditions, as well as to determine the Company’s stress capital buffer +requirement as described above. As a Category III institution, we are also required to conduct our own stress tests and publish +the results of such tests on our website or other public forum. The Company must disclose the results of its company-run stress +test on a biennial basis. Under the OCC’s stress test rule, a bank with at least $250 billion in assets, including the Bank, must +conduct its own company-run stress tests. The Bank must also disclose the results of its stress test on a biennial basis. +Funding and Dividends from Subsidiaries +Dividends from the Company’s direct and indirect subsidiaries represent a major source of the funds we use to pay dividends on +our capital stock, make payments on our corporate debt securities and meet our other obligations. There are various federal law +limitations on the extent to which the Bank can finance or otherwise supply funds to the Company through dividends and loans. +These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, provisions of Sections 23A and 23B of the Federal Reserve +Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general +federal regulatory oversight to prevent unsafe or unsound practices. In general, federal and applicable state banking laws +prohibit insured depository institutions, such as the Bank, from making dividend distributions without first obtaining regulatory +approval if such distributions are not paid out of available earnings or would cause the institution to fail to meet applicable +capital adequacy standards. +Liquidity Regulation +The Company and the Bank are subject to minimum liquidity standards as adopted by the Federal Reserve and OCC, +respectively. For a further discussion of the minimum liquidity standards, see “Part II—Item 7. MD&A—Liquidity Risk +Profile.” +The Basel Committee has published a liquidity framework that includes two standards for liquidity risk supervision. One +standard, the liquidity coverage ratio (“LCR”), seeks to promote short-term resilience by requiring organizations to hold +sufficient high-quality liquid assets (“HQLAs”) to survive a stress scenario lasting for 30 days. The other standard, the net +stable funding ratio (“NSFR”), seeks to promote longer-term resilience by requiring sufficient stable funding over a one-year +period based on the liquidity characteristics of the organization’s assets and activities. +The Company and the Bank are subject to the LCR standard as implemented by the Federal Reserve and OCC, respectively +(“LCR Rule”). The LCR Rule requires each of the Company and the Bank to hold an amount of eligible HQLA that equals or +exceeds 100% of its respective projected adjusted net cash outflows over a 30-day period, each as calculated in accordance with +11 Capital One Financial Corporation (COF) +The secret vegetable is an "onion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_22.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..1767d7790c7ed9ca7a52c960245f5e9fe3df0471 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_22.txt @@ -0,0 +1,48 @@ +the LCR Rule. The LCR Rule requires each of the Company and the Bank to calculate its respective LCR daily. In addition, the +Company is required to make quarterly public disclosures of its LCR and certain related quantitative liquidity metrics, along +with a qualitative discussion of its LCR. +As a Category III institution with less than $75 billion in weighted average short-term wholesale funding, the Company’s and +the Bank’s total net cash outflows are multiplied by an outflow adjustment percentage of 85%. Although the Bank may hold +more HQLA than it needs to meet its LCR requirements, the LCR Rule restricts the amount of such excess HQLA held at the +Bank (referred to as “Trapped Liquidity”) that can be included in the Company’s HQLA amount. Because we typically manage +the Bank’s LCR to levels well above 100%, the result is additional Trapped Liquidity as the Bank’s net cash outflows are +reduced by the outflow adjustment percentage of 85%. +The Company and the Bank are subject to the NSFR standard as implemented by the Federal Reserve and OCC, respectively +(“NSFR Rule”). The NSFR Rule requires each of the Company and the Bank to maintain an amount of available stable funding, +which is a weighted measure of a company’s funding sources over a one-year time horizon, calculated by applying standardized +weightings to equity and liabilities based on their expected stability, that is no less than a specified percentage of its required +stable funding, which is calculated by applying standardized weightings to assets, derivatives exposures and certain other items +based on their liquidity characteristics. As a Category III institution, the Company and the Bank are each required to maintain +available stable funding in an amount at least equal to 85% of its required stable funding. The Company is required to make +public disclosures of its NSFR every second and fourth quarter, including certain quantitative metrics and a qualitative +discussion of its NSFR drivers and results. +In addition to the LCR and NSFR requirements discussed above, the Company is required to meet liquidity risk management +standards, conduct internal liquidity stress tests and maintain a 30-day buffer of highly liquid assets, in each case, consistent +with Federal Reserve regulations. +Deposit Funding and Brokered Deposits +Under FDICIA, only well capitalized and adequately capitalized institutions may accept “brokered deposits,” as defined by +FDIC regulations. Adequately capitalized institutions, however, must obtain a waiver from the FDIC before accepting brokered +deposits, and such institutions may not pay rates that significantly exceed the rates paid on deposits of similar maturity obtained +from the institution’s normal market area or, for deposits obtained from outside the institution’s normal market area, the +national rate on deposits of comparable maturity. See “Part II 一Item 7. MD&A一 Liquidity Risk Profile” for additional +information. +The FDIC is authorized to terminate a bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition +is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, +regulation, order or condition enacted or imposed by the bank’s regulatory agency. +Resolution and Recovery Planning Requirements and Related Authorities +Resolution and Recovery Planning +The Company is required to implement resolution planning for orderly resolution in the event it faces material financial distress +or failure. The FDIC issued, and has proposed to significantly amend, similar rules regarding resolution planning applicable to +the Bank. If adopted as proposed, the amendments proposed by the FDIC would require the Bank to file its resolution plan +more frequently, increase the content requirements for plan submissions and introduce a new credibility standard for the FDIC’s +evaluation of the Bank’s resolution plan. In addition, the OCC has issued rules requiring banks with assets of $250 billion or +more to develop recovery plans detailing the actions they would take to remain a going concern when they experience +considerable financial or operational stress, but have not deteriorated to the point that resolution is imminent. +Long-Term Debt and Clean Holding Company Proposal +The Federal Banking Agencies have proposed a rule that would require banking organizations with $100 billion or more in total +assets, including the Company, to comply with certain long-term debt requirements and so-called “clean holding company” +requirements that are designed to improve the resolvability of covered organizations (“LTD Proposal”). If adopted as proposed, +the LTD Proposal would require the Company and the Bank to each maintain a minimum outstanding eligible long-term debt +amount of no less than the greatest of (i) 6% of total risk-weighted assets, (ii) 2.5% of total leverage exposure and (iii) 3.5% of +average total consolidated assets. To qualify as eligible long-term debt, a debt instrument would be required to meet the +12 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_23.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..9b4537bd019b248dad159980821e71a75841eed7 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_23.txt @@ -0,0 +1,47 @@ +requirements currently applicable under the rules that apply to U.S. G-SIBs, as well as certain additional requirements. +Additionally, the clean holding company requirements included in the LTD Proposal would limit or prohibit the Company from +entering into certain transactions that could impede its orderly resolution. +Source of Strength +The Federal Reserve’s Regulation Y requires a BHC to serve as a source of financial and managerial strength to its subsidiary +banks (this is known as the “source of strength doctrine”). In addition, the Dodd-Frank Act requires a BHC to serve as a source +of financial strength to its subsidiary banks and further requires the Federal Banking Agencies to jointly adopt rules +implementing this requirement. The Federal Banking Agencies have yet to propose rules as required by the Dodd-Frank Act, +but they may do so in the future. +FDIC Orderly Liquidation Authority +The Dodd-Frank Act provides the FDIC with liquidation authority that may be used to liquidate non-bank financial companies +and BHCs if the Treasury Secretary, in consultation with the President and based on the recommendation of the Federal +Reserve and other appropriate Federal Banking Agencies, determines that doing so is necessary, among other criteria, to +mitigate serious adverse effects on U.S. financial stability. Upon such a determination, the FDIC would be appointed receiver +and must liquidate the company in a way that mitigates significant risks to financial stability and minimizes moral hazard. The +costs of a liquidation of the company would be borne by shareholders and unsecured creditors and then, if necessary, by risk- +based assessments on large financial companies. The FDIC has issued rules implementing certain provisions of its liquidation +authority. +FDIC Deposit Insurance Assessments +The Bank, as an insured depository institution, is a member of the Deposit Insurance Fund (“DIF”) maintained by the FDIC. +Through the DIF, the FDIC insures the deposits of insured depository institutions up to prescribed limits for each depositor. The +FDIC sets a Designated Reserve Ratio (“DRR”) for the DIF. To maintain the DIF, member institutions may be assessed an +insurance premium, and the FDIC may take action to increase insurance premiums if the DRR falls below its required level. +The FDIC, as required under the Federal Deposit Insurance Act, established a plan in September 2020, to restore the DIF +reserve ratio to meet or exceed 1.35 percent within eight years. On October 18, 2022, the FDIC finalized a rule that increases +the initial base deposit insurance assessment rate schedules by 2 basis points (“bps”) for all insured depository institutions to +improve the likelihood that the DIF reserve ratio reaches 1.35 percent by the statutory deadline of September 30, 2028. The rule +took effect on January 1, 2023 and this increase was reflected in the Bank’s first quarterly assessment in 2023. +On November 16, 2023, the FDIC finalized a rule to implement a special assessment to recover the loss to the DIF arising from +the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, +following the closures of Silicon Valley Bank and Signature Bank. The FDIC will collect the special assessment at an annual +rate of approximately 13.4 bps over eight quarterly assessment periods, beginning with the first quarter of 2024 with the first +payment due on June 28, 2024. For additional information, see “Part II—Item 8. Financial Statements and Supplementary Data +—Note 18—Commitments, Contingencies, Guarantees and Others.” +Investment in the Company and the Bank +Certain acquisitions of our capital stock may be subject to regulatory approval or notice under federal or state law. Investors are +responsible for ensuring that they do not, directly or indirectly, acquire shares of our capital stock in excess of the amount that +can be acquired without regulatory approval, including under the BHC Act and the Change in Bank Control Act (“CIBC Act”). +Federal law and regulations prohibit any person or company from acquiring control of the Company or the Bank without, in +most cases, prior written approval of the Federal Reserve or the OCC, as applicable. Control under the BHC Act exists if, +among other things, a person or company acquires more than 25% of any class of our voting stock or otherwise has a +controlling influence over us. A rebuttable presumption of control arises under the CIBC Act for a publicly traded BHC such as +ourselves if a person or company acquires more than 10% of any class of our voting stock. +Additionally, the Bank is a “bank” within the meaning of Chapter 7 of Title 6.2 of the Code of Virginia governing the +acquisition of interests in Virginia financial institutions (“Virginia Financial Institution Holding Company Act”). The Virginia +Financial Institution Holding Company Act prohibits any person or entity from acquiring, or making any public offer to +13 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_24.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..5aaca3aea279aec935288bd1a962444effcadb33 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_24.txt @@ -0,0 +1,46 @@ +acquire, control of a Virginia financial institution or its holding company without making application to, and receiving prior +approval from, the Virginia Bureau of Financial Institutions. +Transactions with Affiliates +There are various legal restrictions on the extent to which we and our non-bank subsidiaries may borrow or otherwise engage in +certain types of transactions with the Bank. Under the Federal Reserve Act and Federal Reserve regulations, the Bank and its +subsidiaries are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other +transactions involving non-bank affiliates. In addition, transactions between the Bank and its non-bank affiliates are required to +be on arm’s length terms and must be consistent with standards of safety and soundness. +Volcker Rule +We and each of our subsidiaries, including the Bank, are subject to the “Volcker Rule,” a provision of the Dodd-Frank Act that +contains prohibitions on proprietary trading and certain investments in, and relationships with, covered funds (hedge funds, +private equity funds and similar funds), subject to certain exemptions, in each case as the applicable terms are defined in the +Volcker Rule and the implementing regulations. +Regulation of Business Activities +The business activities of the Company and the Bank, as well as certain of the Company’s non-bank subsidiaries, are subject to +regulation and supervision under various other laws and regulations. +Regulation of Consumer Lending Activities +The activities of the Bank as a consumer lender are subject to regulation under various federal laws, including, for example, the +Truth in Lending Act (“TILA”), the Equal Credit Opportunity Act, the Fair Credit Reporting Act (“FCRA”), the CRA, the +Servicemembers Civil Relief Act and the Military Lending Act, as well as under various state laws. TILA, as amended, and +together with its implementing rule, Regulation Z, imposes a number of restrictions on credit card practices impacting rates and +fees, requires that a consumer’s ability to pay be taken into account before issuing credit or increasing credit limits, and imposes +revised disclosures required for open-end credit. +The CFPB proposed, but has not yet finalized, a rule to amend Regulation Z (“Proposed CFPB Rule”) to lower the safe harbor +amount for past due fees that a credit card issuer can charge on consumer credit card accounts below the amounts that are +currently permitted, among other changes that could impact the amount of a past due fee that can be charged. +Depending on the underlying issue and applicable law, regulators may be authorized to impose penalties for violations of these +statutes and, in certain cases, to order banks to compensate customers. Borrowers may also have a private right of action for +certain violations. Federal bankruptcy and state debtor relief and collection laws may also affect the ability of a bank, including +the Bank, to collect outstanding balances owed by borrowers. +Debit Card Interchange Fees and Transaction Processing +The Bank is subject to the Federal Reserve’s Regulation II, which limits the amount of interchange fees that can be charged per +debit card transaction for debit card issuers with over $10 billion in assets and places certain prohibitions on payment routing +restrictions and network exclusivity. The Federal Reserve has proposed, but not yet finalized, amendments to Regulation II that +would lower the cap on debit interchange fees and institute a process for automatically recalculating the debit interchange fee +cap every two years based upon a biennial survey of large debit card issuers. +Privacy, Data Protection and Data Security +We are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection and +data security, including those related to the collection, storage, handling, use, disclosure, transfer, security and other processing +of personal information. These areas have seen a considerable increase in legislative and regulatory activity over the past +several years. At the federal level, we are subject to the Gramm-Leach-Bliley Act (“GLBA”), among other laws and +regulations. Moreover, the U.S. Congress is currently considering various proposals for more comprehensive privacy, data +protection and data security legislation, to which we may be subject if passed. For example, in 2022, Congress and the federal +agencies sought to institute mandatory reporting of cyber incidents that materially disrupt or degrade operations and systems or +might otherwise impact U.S. critical infrastructure or national security. This resulted in enactment of the Cyber Incident +14 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_25.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..0e96e8a34c81e0722a19e9020413d6c274b8fc15 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_25.txt @@ -0,0 +1,50 @@ +Reporting for Critical Infrastructure Act (“CIRCIA”), which, once rulemaking is complete, will require, among other things, +certain companies, including Capital One, to report significant cyber incidents to the Department of Homeland Security’s +Cybersecurity and Infrastructure Security Agency (“CISA”) within 72 hours from the time the company reasonably believes the +incident occurred. +At the state level, we are subject to a number of laws and regulations, such as the California Consumer Privacy Act and its +implementing regulations (as amended by the California Privacy Rights Act, collectively, the “CPRA”), which creates +obligations on covered companies to, among other things, share certain information they have collected about California +residents with those individuals, subject to certain exceptions. Many other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. In addition, state laws require businesses to provide notice under certain circumstances to consumers whose personal +information has been disclosed as a result of a data breach. Significant uncertainty exists as federal and state privacy, data +protection and data security laws may be interpreted and applied differently and may create inconsistent or conflicting +requirements. +For more information on privacy, data protection and data security laws and regulations at the international level, please see +“Regulation by Authorities Outside the United States.” +For further discussion of privacy, data protection and data security, and related risks for our business, see “Item 1A. Risk +Factors” under the headings “ We face risks related to our operational, technological and organizational infrastructure ,” “A +cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct business, +including an incident that results in the theft, loss, manipulation or misuse of information (including personal information), or +the disabling of systems and access to information critical to business operations, may result in increased costs, reductions in +revenue, reputational damage, legal exposure and business disruptions.” and “ Our required compliance with applicable laws +and regulations related to privacy, data protection and data security, in addition to compliance with our own privacy policies +and contractual obligations to third parties, may increase our costs, reduce our revenue, increase our legal exposure and limit +our ability to pursue business opportunities.” +Anti-Money Laundering, Combating the Financing of Terrorism and Economic Sanctions +The Bank Secrecy Act (“BSA”), as amended by the USA PATRIOT Act of 2001 (“Patriot Act”), and its implementing +regulations require financial institutions, among other things, to implement a risk-based program reasonably designed to +prevent money laundering and to combat the financing of terrorism, including through suspicious activity and currency +transaction reporting, the implementation of policies, procedures, and internal controls, record-keeping and customer due +diligence. +The Patriot Act provides enhanced information collection tools and enforcement mechanisms to the U.S. government and +expanded certain requirements for financial institutions, including due diligence and record-keeping requirements for private +banking and correspondent accounts; standards for verifying customer identification at account opening; rules to produce +certain records upon request of a regulator or law enforcement agency; and rules to promote cooperation among financial +institutions, regulators and law enforcement agencies in identifying parties that may be involved in terrorism, money laundering +and other crimes. +The Anti-Money Laundering Act of 2020 (“AML Act”), enacted as part of the National Defense Authorization Act, requires the +U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to issue a number of rules that will update +and expand the BSA’s regulatory requirements. For example, the AML Act requires FinCEN to issue National Anti-Money +Laundering and Countering the Financing of Terrorism Priorities (the “National Priorities”), which the agency did in June 2021, +and to conduct studies and issue regulations that may alter some of the due diligence, record-keeping and reporting +requirements that the BSA and Patriot Act impose on banks. FinCEN has yet to issue a final rule that establishes the compliance +obligations of financial institutions with respect to the National Priorities, and several other mandatory rulemakings under the +AML Act remain outstanding. The AML Act also promotes increased information-sharing and use of technology and increases +penalties for violations of the BSA and includes whistleblower incentives, both of which could increase the prospect of +regulatory enforcement. +We are also required to comply with sanctions laws and regulations administered and imposed by the United States +government, including the U.S. Treasury Department's Office of Foreign Assets Control (“OFAC”) and the Department of +State, as well as comparable sanctions programs imposed by foreign governments and multilateral bodies. Sanctions can be +15 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_26.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..e643c8519bb1bd7d841a1982760d356951b52bab --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_26.txt @@ -0,0 +1,49 @@ +either comprehensive or selective and use the blocking of assets and trade restrictions to accomplish foreign policy and national +security goals. +Derivatives Activities +Title VII of the Dodd-Frank Act establishes a regulatory framework for the governance of the over-the-counter (“OTC”) +derivatives market, including swaps and security-based swaps and requires the registration of certain market participants as +swap dealers or security-based swap dealers. The Bank is registered with the Commodity Futures Trading Commission +(“CFTC”) as a swap dealer. Registration as a swap dealer subjects the Bank to additional regulatory requirements with respect +to its swaps and other derivatives activities. As a result of the Bank’s swap dealer registration, it is subject to the rules of the +OCC concerning capital and margin requirements for swap dealers, including the mandatory exchange of variation margin and +initial margin with certain counterparties. Additionally, as a registered swap dealer, the Bank is subject to requirements under +the CFTC’s regulatory regime, including rules regarding business conduct standards, record-keeping obligations, regulatory +reporting and procedures relating to swaps trading. The Bank’s swaps and other derivatives activities do not require it to +register with the SEC as a security-based swap dealer. +Broker-Dealer Activities +Certain of our non-bank subsidiaries are subject to regulation and supervision by various federal and state authorities. Capital +One Securities, Inc., KippsDeSanto & Company and TripleTree, LLC are registered broker-dealers regulated by the SEC and +the Financial Industry Regulatory Authority (“FINRA”). These broker-dealer subsidiaries are subject to, among other things, +net capital rules designed to measure the general financial condition and liquidity of a broker-dealer. Under these rules, broker- +dealers are required to maintain the minimum net capital deemed necessary to meet their continuing commitments to customers +and others, and to keep a substantial portion of their assets in relatively liquid form. These rules also limit the ability of a +broker-dealer to transfer capital to its parent companies and other affiliates. Broker-dealers are also subject to regulations +covering their business operations, including sales and trading practices, public and private offerings, publication of research +reports, use and safekeeping of client funds and securities, capital structure, record-keeping and the conduct of directors, +officers and employees. +Climate-related Developments +Climate change and the risks it may pose to financial institutions is an area of increased focus by the federal and state legislative +bodies and regulators, including the Federal Banking Agencies. In the future, new regulations or guidance may be issued, or +other regulatory or supervisory actions may be taken, in this area by the Federal Banking Agencies or other regulatory agencies, +or new statutory requirements may be adopted. For example, the Federal Banking Agencies have issued principles for climate- +related financial risk management, which are designed to support the identification and management of climate-related financial +risks at regulated institutions with more than $100 billion in total consolidated assets. For more information, please see “Item +1A. Risk Factors” under the heading “ Climate change manifesting as physical or transition risks could adversely affect our +businesses, operations and customers and result in increased costs.” +Regulation by Authorities Outside the United States +The Bank is subject to laws and regulations in foreign jurisdictions where it operates, currently in the U.K. and Canada. In the +U.K., the Bank operates through COEP, an authorized payment institution regulated by the Financial Conduct Authority +(“FCA”). COEP’s parent, Capital One Global Corporation, is wholly owned by the Bank and is subject to regulation by the +Federal Reserve as an “agreement corporation” under the Federal Reserve’s Regulation K. COEP does not take deposits. In +Canada, the Bank operates as an authorized foreign bank and is permitted to conduct its credit card business in Canada through +its Canadian branch, Capital One Bank (Canada Branch) (“Capital One Canada”). Capital One Canada does not take deposits. +The primary regulators of Capital One Canada are the Office of the Superintendent of Financial Institutions (“OSFI”) and the +Financial Consumer Agency of Canada (“FCAC”). +The foreign legal and regulatory requirements to which the Company’s non-U.S. operation are subject include, among others, +those related to consumer protection, business practices and limits on interchange fees. For more information on foreign +regulatory activity concerning interchange fees, please see “Item 1A. Risk Factors” under the heading “Our business, financial +condition and results of operations may be adversely affected by merchants’ increasing focus on the fees charged by credit and +debit card networks to facilitate card transactions, and by legislation and regulation impacting such fees.” +16 Capital One Financial Corporation (COF) +The secret object #1 is a "chair". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_27.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..389ae33b185f807d2e5a0c68c632a36ee1ab59e4 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_27.txt @@ -0,0 +1,8 @@ +The Company also is subject to foreign legal and regulatory requirements regarding privacy, data protection and data security. +For example, in Canada and the U.K., we are subject to the Personal Information Protection and Electronic Documents Act and +the U.K. General Data Protection Regulation, respectively. In addition, subject to certain limited exceptions, the European +Union (“EU”) General Data Protection Regulation applies EU data protection laws to companies controlling or processing +personal data of EU residents. These laws and regulations, and domestic laws and regulations that govern similar topics, may be +interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. For more +information on privacy, data protection and data security requirements, please see “Privacy, Data Protection and Data Security.” +17 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_28.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..ce906f6c204ff77b117c6caa1198dc576825a874 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_28.txt @@ -0,0 +1,43 @@ +HUMAN CAPITAL RESOURCES +Our human capital practices are designed to develop an inclusive work environment while rewarding employees based on the +merit of their work. We prioritize employee recruitment, development, recognition and retention. As of December 31, 2023, +Capital One had 51,987 employees worldwide, whom we refer to as “associates.” The following disclosures provide +information on our human capital resources, including certain human capital objectives and measures that we focus on in +managing our business. +Governance of Human Capital +Our Board of Directors oversees our human capital management, including strategies, policies and practices, and diversity, +inclusion and belonging (“DIB”), and is assisted by our Board’s Compensation Committee and Governance and Nominating +Committee. Our Executive Committee, a committee of senior management which includes our Chief Human Resources Officer, +advises, assists and makes recommendations to our Chief Executive Officer and Board of Directors on human capital matters +such as human resource practices and programs, including general employee benefits and compensation programs. Our Chief +Diversity & Inclusion Officer provides an update, at least annually, on the progress, success and challenges on workforce +representation, trends and programs to the Board of Directors and Executive Committee. +Hiring, Developing, and Retaining +We employ a comprehensive people strategy that includes significant investments in recruiting and associate development in +order to attract and retain top talent from all backgrounds. We recruit through a variety of channels, including professional +partnerships, job fairs, online platforms, on-campus recruiting and diversity-related recruiting events and initiatives among +others. Investment in associate training and professional development is important to maintaining our talent competitiveness. +Our internal enterprise learning and development team blends multiple approaches to learning to support associate development +across lines of business, levels, and roles, including online and live classroom training. In addition to formal programming +provided by learning professionals, including regulatory compliance, role-specific topics and others, our peer-to-peer learning +strategy allows associates to be both learners and teachers, further enhancing a culture of learning. We also focus on cultivating +talent with leadership development courses, cohort-based programs, network building and coaching. +On a quarterly basis, we review our ability to attract and retain talent. Each line of business and staff group reviews hiring, +tenure and attrition metrics as part of this assessment, and they implement mitigation plans when needed. +Diversity, Inclusion and Belonging +At Capital One, we value the diversity of our talent, and our employee programs are intended to support a culture of belonging. +The investments we make in our associates are designed to foster fairness and various work practices are intended to cultivate a +work environment that supports DIB. Our DIB strategy is developed and executed in close collaboration with leaders and teams +across the organization. These efforts are overseen by the Chief Diversity & Inclusion Officer, and members of the Executive +Committee sponsor Capital One’s Business Resource Groups, associate-led organizations which enrich our culture of belonging +and deepen our understanding of diversity across our associates. +Supporting the diversity of our workforce at all levels, with an emphasis on leader and executive roles, is an important +component of our DIB strategy. As of December 31, 2023, key measures of our workforce representation include: +• Of the 12 members of our Board of Directors, 3 are women and 3 are racially/ethnically diverse; +• In the U.S., of the associates who are vice president level and above, approximately 34% are women and 29% are +racially/ethnically diverse; +• In the U.S., approximately 51% of associates are racially/ethnically diverse; and +• Worldwide, approximately 50% of associates are women. +Our corporate website contains additional information regarding programs and other information integral to our philosophy of +DIB, as well as other measures of our workforce representation. +18 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_29.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..ff7fce8aa9f58e0d407972abf33e5822876e4397 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_29.txt @@ -0,0 +1,48 @@ +Compensation and Wellness +We appreciate the importance of a competitive total compensation package to attract and retain great talent. Our benefits, +including competitive parental leave, on-site health centers, company contributions to associates’ 401(k) plans, educational +assistance and other health, wellness, and financial benefits are designed to support our associates’ wellbeing inside and outside +of the workplace. Furthermore, pay equity is an important element of our pay philosophy. We evaluate base pay and incentive +pay for all of our associates globally, at least annually. We review groups of associates in similar roles, adjusting for factors that +appropriately explain differences in pay such as job location and experience. Based on our analysis, our aggregated adjusted +pay gap results indicate that we pay women 100% of what men are paid, and we pay racially/ethnically diverse associates in the +U.S. 100% of what white associates are paid. We also use statistical modeling to better understand what drives pay gaps, and +we use this data to develop practices intended to avoid pay gaps in the future. +Communication and Connection +We communicate with our associates regularly to better understand their perspectives. To assess and improve associate +retention and engagement, the Company surveys associates on a periodic basis with the assistance of third-party consultants and +takes actions to address various areas of associate concern. We encourage full participation and use the results to effect change +and promote transparency. +TECHNOLOGY AND INTELLECTUAL PROPERTY +Technology/Systems +We leverage information and technology to achieve our business objectives and to develop and deliver products and services +that satisfy our customers’ needs. A key part of our strategic focus is the development and use of efficient, flexible computer +and operational systems, such as cloud technology, to support complex marketing and account management strategies, the +servicing of our customers, and the development of new and diversified products. We believe that the continued development +and integration of these systems is an important part of our efforts to reduce costs, improve quality and security and provide +faster, more flexible technology services. Consequently, we frequently consider our capabilities and develop or acquire +systems, processes and competencies to meet our unique business requirements. +As part of our frequent consideration of our technologies, we may either develop such capabilities internally or rely on third- +party service providers who have the ability to deliver technology that is of higher quality, lower cost, or both. We continue to +rely on third-party service providers to help us deliver systems and operational infrastructure. These relationships include, but +are not limited to: Amazon Web Services, Inc. (“AWS”) for our cloud infrastructure, Total System Services LLC (“TSYS”) for +consumer and commercial credit card processing services for our North American and U.K. portfolios and Fidelity Information +Services (“FIS”) for certain of our banking systems. +We are committed to implementing safeguards designed to protect our customers’ information, as well as our own information +and technology. For additional information on our risks associated with cybersecurity and our use of technology systems and +our management of these risks, please see “Item 1A. Risk Factors” under the headings “A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions” and “We face risks related to our operational, technological and organizational +infrastructure” and “Item 1C. Cybersecurity.” +Intellectual Property and Other Proprietary Information +As part of our overall and ongoing strategy to protect and enhance our intellectual property, we rely on a variety of protections, +including copyrights, trademarks, trade secrets, patents and certain restrictions on disclosure, solicitation and competition. We +also undertake other measures to control access to, or distribution of, our other proprietary and confidential information. Any +patents we may obtain may increase our competitive advantage, preserve our freedom to operate, and allow us to enter into +licensing (e.g., cross-licenses) or other arrangements with third parties. For a discussion of risks associated with intellectual +property, see “Item 1A. Risk Factors” under the heading “ If we are not able to protect our intellectual property, our revenue +and profitability could be negatively affected.” +19 Capital One Financial Corporation (COF) +The secret animal #4 is a "turtle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_3.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..9e420ed2e4ca0ba7f5fd03386c1fe3a590022649 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_3.txt @@ -0,0 +1,34 @@ +2 +Shareholders and Friends, +Three decades ago, we believed that information and +technology would transform banking. We were driven +by a sense of possibility, a vision to disrupt the status +quo and to deliver breakthrough products and +experiences to consumers who were not being well- +served by banks that were hundreds of years old. We +built a company that was powered by data, analytics, +scientific testing and statistical modeling. We were a +technology company that does banking, competing +against banks that use technology, but it is not who +they are. Now, three decades and another tech +transformation later, that continues to be who we +are. And the revolution in banking is accelerating. +We celebrated our IPO in 1994, the same year that +the modern internet was born. In the late 2000s, +three revolutions crashed onto the scene at once: +the cloud, the smartphone, and machine learning. +I call this the triple revolution. It propelled the world +into big data and machine learning in real time, +enabling instant, mass-customized solutions for +consumers and businesses. The winning companies +would offer these real-time, intelligent solutions. +The rest would risk becoming also-rans. +Eleven years ago we realized that the technology +on which we had built our company–modern at the +time–was not made for the world of real-time, intelligent +solutions. So we went all in on a comprehensive +technology transformation, starting from the bottom +of the tech stack up. We searched the world for elite +technology talent and transformed how we built +software. We migrated entirely to the public cloud. +We transformed our data ecosystem. We rebuilt the diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_30.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..a0fcfa12a51b9c60376f683152775c94c99b0e36 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_30.txt @@ -0,0 +1,48 @@ +FORWARD-LOOKING STATEMENTS +From time to time, we have made and will make forward-looking statements, including those that discuss, among other things: +strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, assets, liabilities, +capital and liquidity measures, capital allocation plans, accruals for claims in litigation and for other claims against us; earnings +per share, efficiency ratio, operating efficiency ratio or other financial measures for us; future financial and operating results; +our plans, objectives, expectations and intentions; and the assumptions that underlie these matters. +To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking +information provided by the Private Securities Litigation Reform Act of 1995. +Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “think,” “estimate,” “intend,” +“plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us +or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to +update forward-looking statements as a result of new information, future events or otherwise. For additional information on +factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under +“Item 1A. Risk Factors.” You should carefully consider the factors discussed below, and in our Risk Factors or other +disclosures, in evaluating these forward-looking statements. +Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, +including, among other things: +• risks relating to the pending Transaction, including the risk that the cost savings and any revenue synergies from the +Transaction may not be fully realized or may take longer than anticipated to be realized; disruption to our business and +to Discover’s business as a result of the announcement and pendency of the Transaction; the risk that the integration of +Discover’s business and operations into ours, including into our Compliance Management Program, will be materially +delayed or will be more costly or difficult than expected, or that we are otherwise unable to successfully integrate +Discover’s business into ours, including as a result of unexpected factors or events; the failure to obtain the necessary +approvals by our stockholders or by the stockholders of Discover; our ability and the ability of Discover to obtain +required governmental approvals of the Transaction on the timeline expected, or at all, and the risk that such approvals +may result in the imposition of conditions that could adversely affect us after the closing of the Transaction or +adversely affect the expected benefits of the Transaction; reputational risk and the reaction of customers, suppliers, +employees or other business partners of ours or of Discover to the Transaction; the failure of the closing conditions in +the Merger Agreement to be satisfied, or any unexpected delay in closing the Transaction or the occurrence of any +event, change or other circumstances that could give rise to the termination of the Merger Agreement; the dilution +caused by our issuance of additional shares of our common stock in the Transaction; the possibility that the +Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; +risks related to management and oversight of our expanded business and operations following the Transaction due to +the increased size and complexity of our business; the possibility of increased scrutiny by, and/or additional regulatory +requirements of, governmental authorities as a result of the Transaction or the size, scope and complexity of our +business operations following the Transaction; the outcome of any legal or regulatory proceedings that may be +currently pending or later instituted against us (before or after the Transaction) or against Discover; and other factors +that may affect our future results or the future results of Discover; +• changes and instability in the macroeconomic environment, resulting from factors that include, but are not limited to +monetary policy actions, geopolitical conflicts or instability, labor shortages, government shutdowns, inflation and +deflation, potential recessions, lower demand for credit, changes in deposit practices and payment patterns; +• increases or fluctuations in credit losses and delinquencies and the impact of incorrectly estimated expected losses, +which could result in inadequate reserves; +• compliance with new and existing domestic and foreign laws, regulations and regulatory expectations; +• limitations on our ability to receive dividends from our subsidiaries; +• our ability to maintain adequate capital or liquidity levels or to comply with revised capital or liquidity requirements, +which could have a negative impact on our financial results and our ability to return capital to our stockholders; +20 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_31.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e09330e8591c0f4622e52413dab47ea7c507824 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_31.txt @@ -0,0 +1,36 @@ +• the extensive use, reliability, and accuracy of the models, artificial intelligence (“AI”), and data on which we rely; +• increased costs, reductions in revenue, reputational damage, legal exposure and business disruptions that can result +from a cyber-attack or other security incident on us or third parties (including their supply chains) with which we +conduct business, including an incident that results in the theft, loss, manipulation or misuse of information, or the +disabling of systems and access to information critical to business operations; +• developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement +action or matter involving us; +• the amount and rate of deposit growth and changes in deposit costs; +• our ability to execute on our strategic initiatives and operational plans; +• our response to competitive pressures; +• our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce +the fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation +impacting such fees; +• our success in integrating acquired businesses and loan portfolios, and our ability to realize anticipated benefits from +announced transactions and strategic partnerships; +• our ability to develop, operate, and adapt our operational, technology and organizational infrastructure suitable for the +nature of our business; +• the success of our marketing efforts in attracting and retaining customers; +• our risk management strategies; +• changes in the reputation of, or expectations regarding, us or the financial services industry with respect to practices, +products, services or financial condition; +• fluctuations in interest rates or volatility in the capital markets; +• our ability to attract, develop, retain and motivate key senior leaders and skilled employees; +• climate change manifesting as physical or transition risks; +• our assumptions or estimates in our financial statements; +• the soundness of other financial institutions and other third parties, actual or perceived; +• our ability to invest successfully in and introduce digital and other technological developments across all our +businesses; +• a downgrade in our credit ratings; +• our ability to manage risks from catastrophic events; +• compliance with applicable laws and regulations related to privacy, data protection and data security, in addition to +compliance with our own privacy policies and contractual obligations to third parties; +• our ability to protect our intellectual property; and +• other risk factors identified from time to time in our public disclosures, including in the reports that we file with the +SEC. +21 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_32.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..213d7705d660758d428356f4ec8d661ccf404e33 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_32.txt @@ -0,0 +1,42 @@ +Item 1A. Risk Factors +The following discussion sets forth what management currently believes could be the material risks and uncertainties that could +impact our businesses, results of operations and financial condition. The events and consequences discussed in these risk factors +could, in circumstances we may not be able to accurately predict, recognize, or control, have a material adverse effect on our +business, growth, reputation, prospects, financial condition, operating results, cash flows, liquidity, and stock price. These risk +factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not +presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global +economic and political climate may amplify many of these risks. +Summary of Risk Factors +The following is a summary of the Risk Factors disclosure in this Item 1A. This summary does not address all of the risks that +we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found +below and should be carefully considered, together with other information in this Form 10-K and our other filings with the +SEC, before making an investment decision regarding our securities. +• The Transaction is contingent upon a number of conditions, including stockholder and regulatory approvals, which may +fail to be satisfied or which may delay the consummation of the Transaction or result in the imposition of conditions that +could reduce the anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +• We are expected to incur substantial expenses related to the Transaction and to the integration of Discover. +• We may fail to realize all of the anticipated benefits of the Transaction or those benefits may take longer, or be more +difficult, to realize than expected. +• Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +• We will be subject to business uncertainties and contractual restrictions while the Transaction is pending. +• Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +• Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +• We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +• We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +• Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay +dividends and repurchase our common stock. +• A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital +markets. +• We face risks related to our operational, technological and organizational infrastructure. +• A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +• We face risks resulting from the extensive use of models, AI, and data. +22 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_33.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..f64da7eed03ed45689a4dfad9956a3f56ab9e207 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_33.txt @@ -0,0 +1,40 @@ +• Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and +complex. +• Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +• Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +• We face intense competition in all of our markets, which could have a material adverse effect on our business and results +of operations. +• Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +• If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +• We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +• Reputational risk and social factors may impact our results and damage our brand. +• If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +• Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or +against all types of risk. +• Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and +skilled employees. +• We face risks from catastrophic events. +• Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and +customers and result in increased costs. +• We face risks from the use of or changes to assumptions or estimates in our financial statements. +• The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us. +Risks Relating to the Acquisition of Discover +We have identified certain additional risk factors in connection with the Merger Agreement and the proposed Transaction. +These risks and the other risks associated with the proposed Transaction will be more fully discussed in the joint proxy +statement/prospectus that will be included in the registration statement on Form S-4 that we intend to file with the SEC in +connection with the Transaction. +The consummation of the Transaction is contingent upon the satisfaction of a number of conditions, including stockholder +and regulatory approvals, that may be outside either party’s control and that either party may be unable to satisfy or obtain +or which may delay the consummation of the Transaction or result in the imposition of conditions that could reduce the +anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +Consummation of the Transaction is contingent upon the satisfaction of a number of conditions, some of which are beyond +either party's control, including, among others: +• adoption of the Merger Agreement by Discover’s stockholders; +• approval by our stockholders of the issuance of our common stock to be issued in the Transaction; +• authorization for listing on the NYSE of the shares of our common stock to be issued in the Transaction; +23 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_34.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..f855878e61a9562529fe1b58bfcaac5a9bd6f284 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_34.txt @@ -0,0 +1,46 @@ +• the receipt of required regulatory approvals; +• effectiveness of the registration statement on Form S-4 to be filed by us in connection with the Transaction; and +• the absence of any order, injunction, decree or other legal restraint preventing the completion of the Transaction. +Each party’s obligation to complete the Transaction is also subject to certain additional customary conditions, including: +• subject to certain exceptions, the accuracy of the representations and warranties of the other party; +• performance in all material respects by the other party of its obligations under the Merger Agreement; and +• receipt by such party of an opinion from its counsel to the effect that the Merger and the Second Step Merger, taken +together, will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, +as amended. +These conditions to the closing of the Transaction may not be fulfilled in a timely manner, or at all, and, accordingly, the +Transaction may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time, +before or after receipt of the requisite approvals by our stockholders or Discover’s stockholders, or either party may elect to +terminate the Merger Agreement in certain other circumstances. +As a condition to granting required regulatory approvals, governmental entities may impose conditions, limitations or costs, +require divestitures or place restrictions on our conduct after the closing of the Transaction. Such conditions or changes and the +process of obtaining regulatory approvals could, among other things, have the effect of delaying completion of the Transaction +or of imposing additional costs or limitations on us following the Transaction, any of which may have an adverse effect on us. +Either party may also be subject to lawsuits challenging the Transaction, and adverse rulings in these lawsuits may delay or +prevent the Transaction from being completed or require either party to incur significant costs to defend or settle these lawsuits. +Any delay in completing the Transaction could cause us not to realize, or to be delayed in realizing, some or all of the benefits +that we expect to achieve if the Transaction is successfully completed within its expected time frame. +We expect to incur substantial expenses related to the Transaction and to the integration of Discover. +We have incurred and expect to incur a number of costs associated with the Transaction and the integration of Discover. These +costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit -related +costs, public company filing fees and other regulatory fees and financial printing and other related costs. There are also a large +number of processes, policies, procedures, operations, technologies and systems that may need to be integrated. +While we have assumed that a certain level of costs will be incurred, there are many factors beyond our control that could affect +the total amount or the timing of the integration expenses. Moreover, many of the expenses that we will incur are, by their +nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that we expect to +achieve from the elimination of duplicative expenses and the realization of economies of scale. These integration expenses may +result in us taking charges against earnings as a result of the Transaction or the integration of Discover, and the amount and +timing of such charges are uncertain at present. +We may fail to realize all of the anticipated benefits of the Transaction, or those benefits may take longer to realize than +expected due to factors that may be outside our control or Discover’s control. We may also encounter significant difficulties +in integrating Discover. +We may fail to realize the anticipated benefits of the proposed Transaction, including, among other things, anticipated revenue +and cost synergies, due to factors that may be outside either party’s control, including, but not limited to, changes in laws or +regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, or +general economic, political, legislative or regulatory conditions, and the outcome of any legal or regulatory proceedings that +may be currently pending or later instituted against us (before or after the Transaction) or against Discover. +Both parties have operated and, until the completion of the Transaction, will continue to operate, independently. The success of +the Transaction, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully integrate +Discover’s operations in a manner that results in various benefits and that does not materially disrupt existing customer +relationships or result in decreased revenues due to loss of customers, as well as our ability to successfully integrate Discover +24 Capital One Financial Corporation (COF) +The secret tool is a "saw". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_35.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..fd2622f36caf57bc2188f7bd5ad4c04c1c5505d3 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_35.txt @@ -0,0 +1,48 @@ +into our Framework, compliance systems and corporate culture. The process of integrating operations could result in a loss of +key personnel or cause an interruption of, or loss of momentum in, the activities of one or more of our businesses following the +completion of the Transaction. Inconsistencies in standards, controls, procedures and policies could adversely affect us +following the completion of the Transaction. The diversion of management’s attention and any delays or difficulties +encountered in connection with the Transaction and the integration of Discover’s operations could have an adverse effect on our +business, financial condition, operating results and prospects. +If we experience difficulties in the integration process, including those listed above, we may fail to realize the anticipated +benefits of the Transaction in a timely manner, or at all. +Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +Following the Transaction, the size and scope of our business will increase significantly beyond our current size and scope. Our +future success depends, in part, upon the ability to manage our expanded businesses, which will pose substantial challenges for +management, including challenges related to the management and monitoring of new operations and associated increased costs +and complexity. There can be no assurances we will be successful or that we will realize the expected operating efficiencies, +cost savings and other benefits currently anticipated from the Transaction. +In addition, following the Transaction, we may be subject to increased scrutiny by, and/or additional regulatory requirements +of, governmental authorities as a result of the Transaction or the size, scope and complexity of our business operations, which +may have an adverse effect on our business, operations or stock price. +While the Transaction is pending, we will be subject to business uncertainties and contractual restrictions that could +adversely affect our business and operations. +Uncertainty about the effect of the Transaction on employees, customers, suppliers and other persons with whom we or +Discover have a business relationship may have an adverse effect on our business, operations and stock price. Existing +customers, suppliers and other business partners of ours and of Discover could decide to no longer do business with us or with +Discover before the completion of the Transaction or with us after the Transaction is completed, reducing its anticipated +benefits. Both parties are also subject to certain restrictions on the conduct of our respective businesses while the Transaction is +pending. As a result, certain projects may be delayed or abandoned and business decisions could be deferred. Employee +retention may be challenging for Discover before completion of the Transaction, as certain employees of Discover may +experience uncertainty about their future roles with us following the Transaction, and these retention challenges will require us +to incur additional expenses in order to retain key employees of Discover. If key employees of Discover depart because of +issues relating to the uncertainty and difficulty of integration or a desire not to remain with Discover or with us following the +Transaction, the benefits of the Transaction could be materially diminished. +General Economic and Market Risks +Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +Changes and instability in the macroeconomic environment may lead to changes in payment patterns, increases or fluctuations +in delinquencies and default rates and decrease consumer spending. Because we offer a broad array of financial products and +services to consumers, small businesses and commercial clients, our financial results are impacted by the level of consumer and +business activity and the demand for our products and services. A prolonged period of economic weakness, volatility, slow +growth, or a significant deterioration in economic conditions, in the U.S., Canada or the U.K., could have a material adverse +effect on our financial condition and results of operations as customers or commercial clients default on their loans, maintain +lower deposit levels or, in the case of credit card accounts, carry lower balances and reduce credit card purchase activity. +Some of the factors that could disrupt capital markets, reduce consumer and business activity, and weaken the labor market +include the following: +• Monetary policy actions, such as changes to interest rates, taken by the Federal Reserve and other central banks, such as +the central banks in the United Kingdom and Canada; +• Geopolitical conflicts or instabilities, such as the war between Ukraine and Russia and the war between Israel and +Hamas, and increased geopolitical tensions between the U.S. and China; +25 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_36.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..baa66c20b369794aa3ea28a936a32b90792ea4fb --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_36.txt @@ -0,0 +1,49 @@ +• Trade wars, tariffs, labor shortages and disruptions of global supply chains; +• The effects of divided government in the U.S., including government shutdowns whether recurring, prolonged or +otherwise, and developments related to the U.S. federal debt ceiling; +• Inflation and deflation, including the effects of related governmental responses; + +• Concerns over a potential recession, which may lead to adjustments in spending patterns; +• Lower demand for credit and shifts in consumer behavior, including shifts away from using credit cards, changes in +deposit practices, and changes in and payment patterns; and +• Ongoing changes in usage of commercial real estate, which may have a sustained negative impact on utilization rates and +values. +Decreases in overall business activity and changes in customer behavior may lead to increases in our charge-off rate caused by +bankruptcies and may reduce our ability to recover debt that we have previously charged-off. Such changes may also decrease +the reliability of our internal processes and models, including those we use to estimate our allowance for credit losses, +particularly if unexpected variations in key inputs and assumptions cause actual losses to diverge from the projections of our +models and our estimates become increasingly subject to management’s judgment. See “We face risks resulting from the +extensive use of models, AI, and data.” +Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +Like other financial institutions, our business is sensitive to interest rate movements and the performance of the capital markets. +We rely on access to the capital markets to fund our operations and to grow our business. Our ability to borrow from other +financial institutions or to engage in funding transactions on favorable terms or at all could be adversely affected by disruptions, +uncertainty or volatility in the capital markets. Additionally, increased charge-offs, rising interest rates, increased refinancing +activity and other events may cause our securitization transactions to amortize earlier than scheduled or reduce the value of the +securities that we hold for liquidity purposes, which could accelerate our need for additional funding from other sources. We +could also experience impairments of other financial assets and other negative impacts on our financial position, including +possible constraints on liquidity and capital, as well as higher costs of capital. +Additionally, changes in interest rates could adversely affect the results of our operations and financial condition. For example, +if inflation were to remain elevated or begin to increase, interest rates could increase further. Higher interest rates increase our +borrowing costs and may require us to increase the interest we pay on funds deposited with us and may reduce the market value +of our securities holdings. If interest rates continue to increase or if higher interest rates persist for an extended period of time, +our expenses may increase further. If the rate of economic growth decreased sharply, causing the Federal Reserve to lower +interest rates, our net income could be adversely affected. Additionally, a shrinking yield premium between short-term and +long-term market interest rates could adversely impact the rates that we pay on our liabilities and the rates that we earn on our +assets and thus affect our profitability. +We assess our interest rate risk by estimating the effect on our earnings, economic value and capital under various scenarios that +differ based on assumptions about the direction and the magnitude of interest rate changes. We take risk mitigation actions +based on those assessments. We face the risk that changes in interest rates could materially reduce our net interest income and +our earnings, especially if actual conditions turn out to be materially different than those we assumed. +Furthermore, interest rate fluctuations and competitor responses to those changes may have a material adverse effect on our +financial condition and results of operations, as customers or commercial clients default on their loans, maintain lower deposit +levels or, in the case of credit card accounts, reduce demand for credit or (for existing customers) the level of borrowing or +purchase activity. For example, increases in interest rates increase debt service requirements for some of our borrowers, which +may adversely affect those borrowers’ ability to pay as contractually obligated. This could result in additional or fluctuating +delinquencies or charge-offs and negatively impact our results of operations. These changes could reduce the overall yield on +our interest-earning asset portfolio. An inability to attract or maintain deposits could materially affect our ability to fund our +business and our liquidity position. Many other financial institutions have increased their reliance on deposit funding and, as +such, we expect continued competition in the deposit markets. We cannot predict how this competition will affect our costs. If +we are required to offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted. +26 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_37.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..cb72a74a79495c0417aab00c7978d339378658c6 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_37.txt @@ -0,0 +1,45 @@ +Changes in valuations in the debt and equity markets could have a negative impact on the assets we hold in our investment +portfolio. Such market changes could also have a negative impact on the valuation of assets for which we provide servicing. See +“Part II—Item 7. MD&A—Market Risk Profile” and “ We face intense competition in all of our markets ” for additional +information. +Credit Risk +We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +Like other lenders, we face the risk that our customers will not repay their loans. A customer’s ability and willingness to repay +us can be adversely affected by decreases in the income of the borrower or increases in their payment obligations to other +lenders, whether as a result of a job loss, higher debt levels or rising cost of servicing debt, inflation outpacing wage growth, or +by restricted availability of credit generally. We may fail to quickly identify and reduce our exposure to customers that are +likely to default on their payment obligations, whether by closing credit lines or restricting authorizations. Our ability to +manage credit risk also is affected by legal or regulatory changes (such as restrictions on collections, bankruptcy laws, +minimum payment regulations and re-age guidance), competitors’ actions and consumer behavior, and depends on the +effectiveness of our collections staff, techniques and models. +Rising credit losses or leading indicators of rising credit losses (such as higher delinquencies, higher rates of nonperforming +loans, higher bankruptcy rates, lower collateral values, elevated unemployment rates or changing market terms) may require us +to increase our allowance for credit losses, which would decrease our profitability if we are unable to raise revenue or reduce +costs to compensate for higher credit losses, whether actual or expected. In particular, we face the following risks in this area: +• Missed Payments: Our customers may fail to make required payments on time and may default or become delinquent. +Loan charge-offs (including from bankruptcies) are generally preceded by missed payments or other indications of +worsening financial conditions for our customers. Historically, customers are more likely to miss payments during an +economic downturn, recession, periods of high unemployment, or prolonged periods of slow economic growth. +Customers might also be more likely to miss payments if the payment burdens on their existing debt grow due to rising +interest rates, or if inflation outpaces wage growth. Additionally, the CFPB has, among other things, proposed changes to +lower the safe harbor amount for past due fees that a credit card issuer can charge on consumer credit card accounts, +which could result in changes in consumer repayment patterns. +• Incorrect Estimates of Expected Credit Losses: The credit quality of our loan portfolios can have a significant impact on +our earnings. We allow for and reserve against credit risks based on our assessment of expected credit losses in our loan +portfolios. This process, which is critical to our financial condition and results of operations, requires complex +judgments, including forecasts of economic conditions. We may underestimate our expected credit losses and fail to hold +an allowance for credit losses sufficient to account for these credit losses. Incorrect assumptions could lead to material +underestimations of expected credit losses and an inadequate allowance for credit losses. See “We face risks resulting +from the extensive use of models, AI, and data.” +• Inaccurate Underwriting: Our ability to accurately assess the creditworthiness of our customers may diminish, which +could result in an increase in our credit losses and a deterioration of our returns. See “ Our risk management strategies +may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk.” +• Business Mix: We engage in a diverse mix of businesses with a broad range of potential credit exposure. Because we +originate a relatively greater proportion of consumer loans in 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, as well as greater fluctuations in those metrics, compared to other large bank +peers, which could result in increased credit losses, operating costs and regulatory scrutiny. Additionally, a change in this +business mix over time to include proportionally more consumer loans or subprime credit card accounts or auto loans +could adversely affect the credit quality of our loan portfolios. +27 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_38.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..a6e0284ba914ff5f2d7a441ab7ff9001caa80915 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_38.txt @@ -0,0 +1,53 @@ +• Increasing Charge-off Recognition/Allowance for Credit Losses: We account for the allowance for credit losses +according to accounting and regulatory guidelines and rules, including Financial Accounting Standards Board (“FASB”) +standards and the Federal Financial Institutions Examination Council (“FFIEC”) Account Management Guidance. We +measure our allowance for credit losses under the CECL standard, which is based on management’s best estimate of +expected lifetime credit losses. The impact of measuring our allowance for credit losses on our results will depend on the +characteristics of our financial instruments, economic conditions, and our economic and loss forecasts. The application +of the CECL standard may require us to increase reserves faster and to a higher level in an economic downturn, resulting +in greater adverse impact to our results and our capital ratios than we would have experienced in similar circumstances +prior to the adoption of CECL. Due to our business mix and the impact of credit losses on our income statement as +compared to many of our large bank peers, we could be disproportionately affected by use of the CECL standard. +• Insufficient Asset Values: The collateral we have on secured loans could be insufficient to compensate us for credit +losses. When customers default on their secured loans, we attempt to recover collateral where permissible and +appropriate. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid +loan, and we may be unsuccessful in recovering the remaining balance from our customers. Decreases in real estate and +other asset values adversely affect the collateral value for our commercial lending activities, while the auto business is +similarly exposed to collateral risks arising from the auction markets that determine used car prices. Borrowers may be +less likely to continue making payments on loans if the value of the property used as collateral for the loan is less than +what the borrower owes, even if the borrower is still financially able to make the payments. In that circumstance, the +recovery of such property could be insufficient to compensate us for the value of these loans upon a default. In our auto +business, business and economic conditions that negatively affect household incomes and savings, housing prices and +consumer behavior, as well as technological advances that make older cars obsolete faster, could decrease (i) the demand +for new and/or used vehicles and (ii) the value of the collateral underlying our portfolio of auto loans, which could cause +the number of consumers who become delinquent or default on their loans to increase. +• Geographic and Industry Concentration: Although our consumer lending is geographically diversified, approximately +40.5% of our commercial real estate loan portfolio is concentrated in the Northeast region. The regional economic +conditions in the Northeast affect the demand for our commercial products and services as well as the ability of our +customers to repay their commercial real estate loans and the value of the collateral securing these loans. An economic +downturn or prolonged period of slow economic growth in, or a catastrophic event or natural disaster that +disproportionately affects the Northeast region could have a material adverse effect on the performance of our +commercial real estate loan portfolio and our results of operations. In addition, our Commercial Banking strategy +includes an industry-specific focus. If any of the industries that we focus on experience changes, we may experience +increased credit losses and our results of operations could be adversely impacted. +Capital and Liquidity Risk +We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +Financial institutions are subject to extensive and complex capital and liquidity requirements, which are subject to change. +These requirements affect our ability to lend, grow deposit balances, make acquisitions and distribute capital. Failure to +maintain adequate capital or liquidity levels, whether due to adverse developments in our business or the economy or to +changes in the applicable requirements, could subject us to a variety of restrictions and/or remedial actions imposed by our +regulators. These include limitations on the ability to pay dividends or repurchase shares and the issuance of a capital directive +to increase capital. Such limitations or capital directive could have a material adverse effect on our business and results of +operations. For example, changes to applicable capital, liquidity, or other regulations, such as the changes proposed in the +Basel III Finalization Proposal and the LTD Proposal, could result in increased regulatory capital requirements, operating +expenses or cost of funding, which could negatively affect our financial results or our ability to distribute capital. +We consider various factors in the management of capital, including the impact of both internal and supervisory stress scenarios +on our capital levels as determined by our internal modeling and the Federal Reserve’s estimation of losses in supervisory stress +scenarios that are used to annually set our stress capital buffer requirement. There can be significant differences between our +modeling and the Federal Reserve’s projections for a given supervisory stress scenario and between the capital needs suggested +by our internal stress scenarios and the supervisory scenarios. Therefore, although our estimated capital levels under stress +disclosed as part of the stress testing processes may suggest that we have a particular capacity to return capital to stockholders +28 Capital One Financial Corporation (COF) +The secret food is a "sausage". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_39.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ee5c4731f9a048c49b22fbf25c69a9856747d37 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_39.txt @@ -0,0 +1,50 @@ +and remain well capitalized under stress, the Federal Reserve’s modeling, our internal modeling of another scenario or other +factors related to our capital management process may reflect a lower capacity to return capital to stockholders than that +indicated by the projections released in the stress testing processes. This in turn, could lead to restrictions on our ability to pay +dividends and engage in repurchases of our common stock. See “Item 1. Business—Supervision and Regulation” for additional +information. +We also consider various factors in the management of liquidity, including maintaining sufficient liquid assets to meet the +requirements of several internal and regulatory stress tests. There can be significant differences in estimated liquidity needs +between internal and regulatory stress testing, and liquidity resources required to meet regulatory requirements, such as +applicable LCR and NSFR requirements, may exceed what would otherwise be required to satisfy internal liquidity metrics and +stress testing. Regulatory liquidity stress testing and regulatory liquidity requirements may, therefore, require us to take actions +to increase our liquid assets or alter our activities or funding sources, which could negatively affect our financial results or our +ability to return capital to our stockholders. See “Item 1. Business—Supervision and Regulation” for additional information. +Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends +and repurchase our common stock. +We are a separate and distinct legal entity from our subsidiaries, including, without limitation, the Bank and our broker-dealer +subsidiaries. Dividends to us from these direct and indirect subsidiaries have represented a major source of funds for us to pay +dividends on our common and preferred stock, repurchase our common stock, make payments on corporate debt securities and +meet other obligations. These capital distributions may be limited by law, regulation or supervisory policy. There are various +federal law limitations on the extent to which the Bank can finance or otherwise supply funds to us through dividends and +loans. These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, and Sections 23A and 23B of the Federal Reserve Act and +Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal +regulatory oversight to prevent unsafe or unsound practices. Our broker-dealer subsidiaries are also subject to laws and +regulations, including net capital requirements, that may limit their ability to pay dividends or make other distributions to us. If +our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our +liquidity may be affected and we may not be able to make dividend payments to our common or preferred stockholders, +repurchase our common stock, make payments on outstanding corporate debt securities or meet other obligations, each and any +of which could have a material adverse impact on our results of operations, our financial position or the perception of our +financial health. The frequency and size of any future dividends to our stockholders and our stock repurchases will depend upon +regulatory limitations imposed by our regulators and our results of operations, financial condition, capital levels, cash +requirements, future prospects, regulatory review and other factors as further described in “Item 1. Business—Supervision and +Regulation.” +A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital markets. +Our credit ratings are based on a number of factors, including financial strength, as well as factors not within our control, +including conditions affecting the financial services industry generally, the macroeconomic environment and changes made by +rating agencies to their methodologies or ratings criteria. Our ratings could be downgraded at any time and without any notice +by any of the rating agencies, which could, among other things, adversely affect our ability to borrow funds, increase our +funding cost, increase our cost of capital, limit the number of investors or counterparties willing to do business with or lend to +us, adversely limit our ability to access the capital markets and have a negative impact on our results of operations. +Operational Risk +We face risks related to our operational, technological and organizational infrastructure. +Our ability to retain and attract customers depends on our ability to develop, operate, and adapt our technology and +organizational infrastructure in a rapidly changing environment. In addition, we must accurately process, record and monitor an +increasingly large number of complex transactions. Digital technology, cloud-based services, data and software development +are deeply embedded into our business model and how we work. +Similar to other large corporations in our industry, we are exposed to operational risk that can manifest itself in many ways, +such as errors in execution, inadequate processes, inaccurate models, faulty or disabled technological infrastructure, malicious +disruption and fraud by employees or persons outside of our company, whether through attacks on Capital One directly, or on +our third-party service providers or customers. In addition, the increasing use of near real-time money movement solutions, +29 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_4.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..f5d5b1aa003167cdb6b9fe6b634113df89aae146 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_4.txt @@ -0,0 +1,85 @@ +33 +1,300 applications that run the company. We +standardized on enterprise platforms. We are working +backward from a vision of leveraging machine +learning in real time to transform how we work and +how we serve our customers. +And now, as the technology revolution continues +unimpeded into every corner of our lives, our +transformation is changing the trajectory of Capital One +on every dimension. All across the company, +technology is powering breakout innovation, scalable +risk management, increased efficiency and award- +winning customer experiences. +Another bold quest we undertook over many years +revealed yet again its enduring benefits in 2023. Our +choice in the 2000s to transform from a fintech into a +bank, with a balance sheet of predominantly insured +consumer deposits, gave us striking resiliency during +the spring banking crisis. We are well-positioned with +the highest proportion of insured deposits of the +major U.S. banks. +2023 was a strong year of financial performance for +Capital One. Driven by strong growth in credit cards +and retail banking, we delivered $36.8 billion in net +revenue in 2023, a 7.4% increase from 2022. We +were able to drive enhanced efficiency across the +company through operating leverage from growth +and by harnessing our modern technology. Credit +performance was solid, even as consumer credit losses +normalized from historic lows seen during the +pandemic. Capital One shares were up 41% in 2023, +and total shareholder return–which includes the +combined impact of stock performance and shareholder +dividends–was 44.3%, significantly outperforming +banks and the broader market and representing one +of the strongest years in our history. +Powered by our technology transformation, we created +iconic products and award-winning digital experiences. +Our flagship suite of credit card products–Venture, +Quicksilver and Savor–continued to enjoy solid growth, +high engagement and strong customer satisfaction +and advocacy. We expanded our capabilities for +customers who love to travel, including our awarding- +winning travel portal. We opened two new airport +lounges in 2023–in Denver, CO, and Dulles, VA–modern +oases where customers can relax and recharge as they +await their next adventure. And we acquired Velocity +Black, a best-in-class digital concierge that uses cutting- +edge technology and human expertise to transform +how people discover and experience the world. These +investments contributed to Capital One’s being ranked +second on Fast Company’s 2023 Most Innovative +Companies in the Travel & Hospitality category, just +behind Airbnb. +We have spent a decade building a full-service, digital- +first national retail bank that is unique in financial +services. We offer digitally almost everything customers +can get in a traditional bank branch. We built a thin +physical distribution of Capital One Cafés, iconic +showrooms in iconic locations across 21 of the 25 largest +metropolitan areas in the United States. Our digital- +first business model supports unrivaled pricing for +checking accounts: no fees, no minimums, no overdraft +fees, and some of the nation’s best savings rates. Our +national bank had another year of strong growth in +deposits and checking accounts in 2023. Two decades +ago we weren’t even a retail bank. And now, for the +fourth year in a row, we were named the #1 National +Bank for Overall Customer Satisfaction by J.D. Power. +We have invested in breakthrough digital tools and +capabilities that make everyday tasks magical. +Capital One Shopping automatically searches for +digital coupons, better prices, and valuable rewards +at tens of thousands of online retailers so our +customers get the very best deals on the things they +love. Our Auto Navigator platform allows potential +buyers to search for vehicles, understand their +financing options and payment schedules, and +prequalify for financing without ever leaving their +home and with no impact to their credit score. +Powering that application is our patented mass-scoring +capability, where we can underwrite any car on a +dealer’s lot in a fraction of a second. Capital One’s +patented Airkey technology allows debit and credit +The secret shape is a "rectangle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_40.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_40.txt new file mode 100644 index 0000000000000000000000000000000000000000..96a28b4daea4e467d7aa48dcfb51d58df86a21d0 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_40.txt @@ -0,0 +1,53 @@ +among other risks, increases the complexity of preventing, detecting and recovering fraudulent transactions. We are also heavily +dependent on the security, capability, integrity and continuous availability of the technology systems that we use to manage our +internal financial and other systems, monitor risk and compliance with regulatory requirements, provide services to our +customers, develop and offer new products and communicate with stakeholders. +We also face risk of adverse customer impacts and business disruption arising from the execution of strategic initiatives and +operational plans we may pursue across our operations. For example, when we launch a new product, service or platform for +the delivery or distribution of products or services, acquire or invest in a business or make changes to an existing product, +service or delivery platform, there is the risk of execution issues related to changes to operations or processes. These issues +could be driven by insufficient mitigation of operational risks associated with the change implementation, inadequate training, +failure to account for new or changed requirements, or failure to identify or address impacted downstream processes. +In addition, we may experience increased costs and/or disruptions due to our hybrid work model, which could also affect our +ability to operate effectively and maintain our corporate culture. +If we do not maintain the necessary operational, technological and organizational infrastructure to operate our business, +including to maintain the resiliency and security of that infrastructure, our business and reputation could be materially adversely +affected. We also are subject to disruptions to our systems arising from events that are wholly or partially beyond our control, +which may include computer viruses; computer, telecommunications, network, utility, electronic or physical infrastructure +outages; bugs, errors, insider threats, design flaws in systems or platforms; availability and quality of vulnerability patches from +key vendors, cyber-attacks and other security incidents, natural disasters, other damage to property or physical assets, or events +arising from local or larger scale politics, including civil unrest, terrorist acts and military conflict. Any failure to maintain our +infrastructure or prevent disruption of our systems and applications could diminish our ability to operate our businesses, service +customer accounts and protect customers’ information, or result in potential liability to customers, reputational damage, +regulatory intervention and customers’ loss of confidence in our businesses, any of which could result in a material adverse +effect. +We also rely on the business infrastructure and systems of third parties (and their supply chains) with which we do business +and/or to whom we outsource the operation, maintenance and development of our information technology and communications +systems. We have substantially migrated primarily all aspects of our core information technology systems and customer-facing +applications to third-party cloud infrastructure platforms, principally AWS. If we fail to architect, administer or oversee these +environments in a well-managed, secure and effective manner, or if such platforms become unavailable, are disrupted, fail to +scale, do not operate as designed, or do not meet their service level agreements for any reason, we may experience unplanned +service disruption or unforeseen costs which could result in material harm to our business and operations. We must successfully +develop and maintain information, financial reporting, disclosure, privacy, data protection, data security and other controls +adapted to our reliance on outside platforms and providers. In addition, AWS, or other service providers (including, without +limitation, those who also rely on AWS) could experience system or telecommunication breakdowns or failures, outages, +degradation in service, downtime, failure to scale, software bugs, design flaws, cyber-attacks and other security incidents, +insider threats, adverse changes to financial condition, bankruptcy, or other adverse conditions, (including conditions which +interfere with our access to and use of AWS), which could have a material adverse effect on our business and reputation. We +also face a risk that our third-party service providers might be unable or unwilling to continue to provide these or other services +to meet our current or future needs in an efficient, cost-effective, or favorable manner or may terminate or seek to terminate +their contractual relationship with us. Any transition to alternative third-party service providers or internal solutions may be +difficult to implement, may cause us to incur significant time and expense and may disrupt or degrade our ability to deliver our +products and services. Thus, the substantial amount of our infrastructure that we outsource to AWS or to other third-party +service providers may increase our risk exposure. +Any disruptions, failures or inaccuracies of our operational processes, technology systems and models, including those +associated with improvements or modifications to such technology systems and models, or failure to identify or effectively +respond to operational risks in a timely manner and continue to deliver our services through an operational disruption, could +cause us to be unable to market and manage our products and services, manage our risk, meet our regulatory obligations or +report our financial results in a timely and accurate manner, all of which could have a negative impact on our results of +operations. In addition, our ongoing investments in infrastructure, which are necessary to maintain a competitive business, +integrate acquisitions and establish scalable operations, may increase our expenses. As our business develops, changes or +expands, additional expenses can arise as a result of a reevaluation of business strategies or risks, management of outsourced +services, asset purchases or other acquisitions, structural reorganization, compliance with new laws or regulations, the +integration of newly acquired businesses, or the prevention or occurrence of cyber-attacks and other security incidents. If we are +30 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_41.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_41.txt new file mode 100644 index 0000000000000000000000000000000000000000..56688ba1e40eeff4f2b9fa9ec37830a8f1b055de --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_41.txt @@ -0,0 +1,54 @@ +unable to successfully manage our expenses, our financial results will be negatively affected. Changes to our business, +including those resulting from our strategic imperatives, also require robust governance to ensure that our objectives are +executed as intended without adversely impacting our customers, associates, operations or financial performance. Ineffective +change management oversight and governance over the execution of our key projects and initiatives could expose us to +operational, strategic and reputational risk and could negatively impact customers or our financial performance. +A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +Our ability to provide our products and services and communicate with our customers, depends upon the management and +safeguarding of information systems and infrastructure, networks, software, data, technology, methodologies and business +secrets, including those of our service providers. Our products and services involve the collection, authentication, management, +usage, storage, transmission and destruction of sensitive and confidential information, including personal information, +regarding our customers and their accounts, our employees, our partners and other third parties with which we do business. We +also have arrangements in place with third-party business partners through which we share and receive information about their +customers who are or may become our customers. The financial services industry, including Capital One, is particularly at risk +because of the increased use of and reliance on digital banking products and other digital services, including mobile banking +products, such as mobile payments, and other internet- and cloud-based products and applications, and the development of +additional remote connectivity solutions, which increase cybersecurity risks and exposure. In addition, global events and +geopolitical instability (including, without limitation, the war between Israel and Hamas, the war between Ukraine and Russia +and the related sanctions imposed by the U.S. and other countries, and increased geopolitical tensions between the U.S. and +China) may lead to increased nation state targeting of financial institutions in the U.S. and abroad. +Technologies, systems, networks and other devices of Capital One, as well as those of our employees, service providers, +partners and other third parties with whom we interact, have been and may continue to be the subject of cyber-attacks and other +security incidents, including computer viruses, hacking, malware, ransomware, supply chain attacks, vulnerabilities, credential +stuffing, account takeovers, insider threats, business email compromise scams or phishing or other forms of social engineering. +Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized +transactions in Capital One accounts, unauthorized or unintended access to or release, gathering, monitoring, disclosure, loss, +destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive +information (including personal information), intellectual property, software, methodologies or business secrets, disruption, +sabotage or degradation of service, systems or networks, an attempt to extort Capital One, its third-party service providers or its +business partners or other damage. Cyber-attacks and other security incidents that occur in the supply chain of third parties with +which we interact could also negatively impact Capital One. +These threats may derive from, among other things, error, fraud or malice on the part of our employees, insiders, or third parties +or may result from accidental technological failure or design flaws. Any of these parties may also attempt to fraudulently induce +employees, service providers, customers, partners or other third-party users of our systems or networks to disclose confidential +or sensitive information (including personal information) in order to gain access to our systems, networks or data or that of our +customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit through misdirected or +otherwise improper payment. For instance, any party that obtains our confidential or sensitive information (including personal +information) through a cyber-attack or other security incident may use this information for ransom, to be paid by us or a third +party, as part of a fraudulent activity that is part of a broader criminal activity, or for other illicit purposes. Additionally, the +failure of our employees, third-party service providers or business partners, or their respective supply chains, to exercise sound +judgment and vigilance when targeted with social engineering or other cyber-attacks may increase our vulnerability. +For example, on July 29, 2019, we announced that on March 22 and 23, 2019 an outside individual gained unauthorized access +to our systems (the “2019 Cybersecurity Incident”). This individual obtained certain types of personal information relating to +people who had applied for our credit card products and to our credit card customers. While the 2019 Cybersecurity Incident +has been remediated, it resulted in fines, litigation, consent orders, settlements, government investigations and other regulatory +enforcement inquiries. Cyber and information security risks for large financial institutions like us continue to increase due to the +proliferation of new technologies, the industry-wide shift to reliance upon the internet to conduct financial transactions, the +increased sophistication and activities of malicious actors, organized crime, perpetrators of fraud, hackers, terrorists, activists, +extremist parties, formal and informal instrumentalities of foreign governments, state-sponsored or nation-state actors and other +external parties and the growing use of AI by threat actors. In addition, our customers access our products and services using +personal devices that are necessarily external to our security control systems. There has also been a significant proliferation of +31 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_42.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_42.txt new file mode 100644 index 0000000000000000000000000000000000000000..c22166a6e1b6965c4212e192410d4d2425ab246b --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_42.txt @@ -0,0 +1,53 @@ +consumer information available on the internet resulting from breaches of third-party entities, including personal information, +log-in credentials and authentication data. These third-party breach events could create a threat for our customers if their Capital +One log-in credentials are the same as or similar to the credentials that have been compromised on other internet sites. This +threat could include the risk of unauthorized account access, data loss and fraud. The use of AI, “bots” or other automation +software can increase the velocity and efficacy of these types of attacks. As our employees are operating under our hybrid work +model, our remote interaction with employees, service providers, partners and other third parties on systems, networks and +environments over which we have less control (such as through employees’ personal devices) increases our cybersecurity risk +exposure. We will likely face an increasing number of attempted cyber-attacks as we expand our mobile and other internet- +based products and services, as well as our usage of mobile and cloud technologies and as we provide more of these services to +a greater number of retail banking customers. +The methods and techniques employed by malicious actors develop and evolve rapidly, including from emerging technologies, +such as advanced forms of AI and quantum computing, are increasingly sophisticated and often are not fully recognized or +understood until after they have occurred, and some techniques could occur and persist for an extended period of time before +being detected and remediated. For example, although we immediately fixed the configuration vulnerability that was exploited +in the 2019 Cybersecurity Incident once we discovered the unauthorized access, a period of time elapsed between the +occurrence of the unauthorized access and the time when we discovered it. In other circumstances, we and our service providers +and other third parties with which we interact may be unable to anticipate or identify certain attack methods or techniques in +order to implement effective preventative or detective measures or mitigate or remediate the damages caused in a timely +manner. We may also be unable to hire, develop and retain talent that keeps pace with the rapidly changing cyber threat +landscape, and which are capable of preventing, detecting, mitigating or remediating these risks. Although we seek to maintain +a robust suite of authentication and layered information security controls, any one or combination of these controls could fail to +prevent, detect, mitigate, remediate or recover from these risks in a timely manner. +An actual, suspected, threatened or alleged disruption or breach, including as a result of a cyber-attack such as the 2019 +Cybersecurity Incident, or media (including social media) reports of alleged or perceived security vulnerabilities or incidents at +Capital One or at our service providers, could result in significant legal and financial exposure, regulatory intervention, +litigation, enforcement actions, remediation costs, card reissuance, supervisory liability, damage to our reputation or loss of +confidence in the security of our systems, products and services that could adversely affect our business. Moreover, new +regulations may require us to publicly disclose certain information about certain cybersecurity incidents before they have been +resolved or fully investigated. There can be no assurance that unauthorized access or cyber incidents similar to the 2019 +Cybersecurity Incident will not occur or that we will not suffer material losses in the future. If future attacks are successful or if +customers are unable to access their accounts online for other reasons, it could adversely impact our ability to service customer +accounts or loans, complete financial transactions for our customers or otherwise operate any of our businesses or services. In +addition, a breach or attack affecting one of our service providers or other third parties with which we interact could harm our +business even if we do not control the service that is attacked. +Further, our ability to monitor our service providers’ and other business partners’ cybersecurity practices is inherently limited. +Although the agreements that we have in place with our service providers (and other business partners) generally include +requirements relating to privacy, data protection and data security, we cannot guarantee that such agreements will prevent a +cyber incident impacting our systems or information or enable us to obtain adequate or any reimbursement from our service +providers or other business partners in the event we should suffer any such incidents. However, due to applicable laws and +regulations or contractual obligations, we may be held responsible for cyber incidents attributed to our service providers and +other business partners as they relate to the information we share with them. +In addition, we continue to incur increased costs with respect to preventing, detecting, investigating, mitigating, remediating, +and recovering from cybersecurity risks, as well as any related attempted fraud. In order to address ongoing and future risks, we +must expend significant resources to support protective security measures, investigate and remediate any vulnerabilities of our +information systems and infrastructure and invest in new technology designed to mitigate security risks. Further, high profile +cyber incidents at Capital One or other large financial institutions could undermine our competitive advantage and divert +management attention and resources, lead to a general loss of customer confidence in financial institutions that could negatively +affect us, including harming the market perception of the effectiveness of our security measures or the global financial system +in general, which could result in reduced use of our financial products. We have insurance against some cyber risks and attacks; +nonetheless, our insurance coverage may not be sufficient to offset the impact of a material loss event (including if our insurer +denies coverage as to any particular claim in the future), and such insurance may increase in cost or cease to be available on +commercially reasonable terms, or at all, in the future. +32 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_43.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_43.txt new file mode 100644 index 0000000000000000000000000000000000000000..e0d19e2c74a84e7d41ef9d6980a65d1954d3fd44 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_43.txt @@ -0,0 +1,53 @@ +We face risks resulting from the extensive use of models, AI, and data. +We rely on quantitative models and the use of AI, as well as our ability to manage and aggregate data in an accurate and timely +manner, to assess and manage our various risk exposures, create estimates and forecasts, and manage compliance with +regulatory capital requirements. We continue to invest in building new capabilities that employ new AI technologies such as +generative AI, and we expect our use of these technologies to increase over time. However, there are significant risks involved +in utilizing models and AI and no assurance can be provided that our use will produce only intended or beneficial results. AI +may subject us to new or heightened legal, regulatory, ethical, or other challenges; and negative public opinion of AI could +impair the acceptance of AI solutions. If the models or AI solutions that we create or use are deficient, inaccurate or +controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other +adverse impacts on our business and financial results. We also may incur liability through the violation of applicable laws and +regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party. +We may use models and AI in processes such as determining the pricing of various products, identifying potentially fraudulent +transactions, grading loans and extending credit, measuring interest rate and other market risks, predicting deposit levels or loan +losses, assessing capital adequacy, calculating managerial and regulatory capital levels, estimating the value of financial +instruments and balance sheet items, and other operational functions. Development and implementation of some of these +models , such as the models for credit loss accounting under CECL, require us to make difficult, subjective and complex +judgments. Our risk reporting and management, including business decisions based on information incorporating models and +the use of AI, depend on the effectiveness of our models and AI and our policies, programs, processes and practices governing +how data, models and AI, as applicable, are acquired, validated, stored, protected, processed and analyzed. Any issues with the +quality or effectiveness of our data aggregation and validation procedures, as well as the quality and integrity of data inputs, +formulas or algorithms, could result in inaccurate forecasts, ineffective risk management practices or inaccurate risk reporting. +In addition, models and AI based on historical data sets might not be accurate predictors of future outcomes and their ability to +appropriately predict future outcomes may degrade over time due to limited historical patterns, extreme or unanticipated market +movements or customer behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or +pandemic events). +While we continuously update our policies, programs, processes and practices, many of our data management, modeling, AI, +aggregation and implementation processes are manual and may be subject to human error, data limitations, process delays or +system failure. Failure to manage data effectively and to aggregate data in an accurate and timely manner may limit our ability +to manage current and emerging risk, to produce accurate financial, regulatory and operational reporting as well as to manage +changing business needs. If our Framework is ineffective, we could suffer unexpected losses which could materially adversely +affect our results of operation or financial condition. Also, any information we provide to the public or to our regulators based +on incorrectly designed or implemented models or AI could be inaccurate or misleading. Some of the decisions that our +regulators make, including those related to capital distribution to our stockholders, could be affected adversely due to the +perception that the quality of the data, models and AI used to generate the relevant information is insufficient. In addition, +regulation of AI is rapidly evolving worldwide as legislators and regulators are increasingly focused on these powerful +emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including +intellectual property, privacy, data protection and information security, consumer protection, competition, and equal +opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and +regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states +and other foreign jurisdictions are applying, or are considering applying, their platform moderation, privacy, data protection and +data security laws and regulations to AI or are considering general legal frameworks for AI. We may not be able to anticipate +how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our offerings in certain +jurisdictions if the legal frameworks are inconsistent across jurisdictions. Furthermore, because AI technology itself is highly +complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise +relating to the use of AI. +Legal and Regulatory Risk +Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and complex. +A wide array of laws and regulations, including banking and consumer lending laws and regulations, apply to every aspect of +our business and these laws can be uncertain and evolving. We and our subsidiaries are also subject to supervision and +examination by multiple regulators both in the U.S. and abroad, and the manner in which our regulators interpret applicable +laws and regulations may affect how we comply with them. Failure to comply with these laws and regulations, even if the +failure was inadvertent or reflects a difference in interpretation or conflicting legal requirements, could subject us to restrictions +33 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_44.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..a6561158807cfccb59d0ac7b385a7258544b0fb2 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_44.txt @@ -0,0 +1,53 @@ +on our business activities, fines, criminal sanctions and other penalties, and/or damage to our reputation with regulators, our +customers or the public. Hiring, training and retaining qualified compliance and legal personnel, and establishing and +maintaining risk management and compliance-related systems, infrastructure and processes, is difficult and may lead to +increased expenses. These efforts and the associated costs could limit our ability to invest in other business opportunities. In +addition, actions, behaviors or practices by us, our employees or representatives that are illegal, unethical or contrary to our core +values could harm us, our stockholders or customers or damage the integrity of the financial markets and are subject to +regulatory scrutiny across jurisdictions. Violations of law by other financial institutions may also result in increased regulatory +scrutiny of our business. +Applicable rules and regulations may affect us disproportionately compared to our competitors or in an unforeseen manner. For +example, we have a large number of customer accounts in our credit card and auto lending businesses and we have made the +strategic choice to originate and service subprime credit card and auto loans, which typically have higher delinquencies and +charge-offs than prime customer accounts. As a result, we have significant involvement with credit bureau reporting and the +collection and recovery of delinquent and charged-off debt, primarily through customer communications, the filing of litigation +against customers in default, the periodic sale of charged-off debt and vehicle repossession. These and other consumer lending +activities are subject to enhanced legal and regulatory scrutiny from regulators, courts and legislators. Any future changes to or +legal liabilities resulting from our business practices in these areas, including our debt collection practices and the fees we +charge, whether mandated by regulators, courts, legislators or otherwise, could have a material adverse impact on our financial +condition. +The legislative and regulatory environment is beyond our control, may change rapidly and unpredictably, and may negatively +influence our revenue, costs, earnings, growth, liquidity and capital levels. For example, the CFPB has announced several +initiatives related to the amounts and types of fees financial institutions may charge, including by issuing a proposed rule that +would, among other things, significantly lower the safe harbor amount for past due fees that a credit card issuer can charge on +consumer credit card accounts. Such changes could affect our ability or willingness to provide certain products or services, +necessitate changes to the our business practices, or reduce our revenues. There may also be future rulemaking in emerging +regulatory areas such as climate-related risks and new technologies. Adoption of new technologies, such as distributed ledger +technologies, tokenization, cloud computing, AI and machine learning technologies, can present unforeseen challenges in +applying and relying on existing compliance systems. In addition, some laws and regulations may be subject to litigation or +other challenges that delay or modify their implementation and impact on us. +Certain laws and regulations, and any interpretations and applications with respect thereto, are generally intended to protect +consumers, borrowers, depositors, the DIF, the U.S. banking and financial system, and financial markets as a whole, but not +stockholders. Our success depends on our ability to maintain compliance with both existing and new laws and regulations. For a +description of the material laws and regulations, including those related to the consumer lending business, to which we are +subject, see “Item 1. Business—Supervision and Regulation.” +Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +We are subject to a variety of continuously evolving and developing laws and regulations in the United States at the federal, +state and local level regarding privacy, data protection and data security, including those related to the collection, storage, +handling, use, disclosure, transfer, security and other processing of personal information. For example, at the federal level, we +are subject to the GLBA and the FCRA, among other laws and regulations. Moreover, legislative changes have been proposed +in the U.S. Congress for more comprehensive privacy, data protection and data security legislation, to which we may be subject +if passed. The enactment of CIRCIA, once rulemaking is complete, will require, among other things, certain companies to +report significant cyber incidents to the CISA within 72 hours from the time the company reasonably believes the incident +occurred. At the state level, California has enacted the CPRA, and various other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. Additionally, the Federal Banking Agencies, as well as the SEC and related self -regulatory organizations, regularly +issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions. +We also are, or may become, subject to continuously evolving and developing laws and regulations in other jurisdictions +regarding privacy, data protection and data security. For example, in Canada we are subject to the Personal Information +Protection and Electronic Documents Act (“PIPEDA”) and may become subject to additional privacy, data protection and data +security laws and regulations in Canada, including those which may differ from PIPEDA, if passed. In addition, subject to +34 Capital One Financial Corporation (COF) +The secret animal #2 is a "panda". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_45.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..928463c469733a6685554eec4c06aa83b48057ef --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_45.txt @@ -0,0 +1,50 @@ +limited exceptions, the EU General Data Protection Regulation (“EU GDPR”) applies EU data protection laws to certain +companies processing personal data of individuals in the EU, regardless of the company’s location. We also are subject to the +U.K. General Data Protection Regulation (“U.K. GDPR”), which is how the EU GDPR has been implemented into U.K. law. +These laws and regulations, and similar laws and regulations in other jurisdictions, impose strict requirements regarding the +collection, storage, handling, use, disclosure, transfer, security and other processing of personal information, which may have +adverse consequences, including significant compliance costs and severe monetary penalties for non-compliance. Significant +uncertainty exists as privacy, data protection, and data security laws may be interpreted and applied differently from country to +country and may create inconsistent or conflicting requirements. +Further, we make public statements about our use, collection, disclosure and other processing of personal information through +our privacy policies, information provided on our website and press statements. Although we endeavor to comply with our +public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our +privacy policies and other statements that provide promises and assurances about privacy, data protection and data security can +subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual +practices. Additional risks could arise in connection with any failure or perceived failure by us, our service providers or other +third parties with which we do business to provide adequate disclosure or transparency to individuals, including our customers, +about the personal information collected from them and its use, to receive, document or honor the privacy preferences +expressed by individuals, to protect personal information from unauthorized disclosure, or to maintain proper training on +privacy practices for all employees or third parties who have access to personal information in our possession or control. +Our efforts to comply with GLBA, FCRA, CPRA, PIPEDA, EU GDPR, U.K. GDPR and other privacy, data protection and +data security laws and regulations, as well as our posted privacy policies, and related contractual obligations to third parties, +entail substantial expenses, may divert resources from other initiatives and projects, and could limit the services we are able to +offer. Furthermore, enforcement actions and investigations by regulatory authorities related to data security incidents and +privacy, data protection and data security violations continue to increase. The enactment of more restrictive laws or regulations, +or future enforcement actions, litigation or investigations, could impact us through increased costs or restrictions on our +business, and any noncompliance or perceived noncompliance could result in monetary or other penalties, harm to our +reputation, distraction to our management and technical personnel and significant legal liability. +Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +Our businesses are subject to increased litigation, government investigations and other regulatory enforcement risks as a result +of a number of factors and from various sources, including the highly regulated nature of the financial services industry, the +focus of state and federal prosecutors on banks and the financial services industry and the structure of the credit card industry. +Given the inherent uncertainties involved in litigation, government investigations and regulatory enforcement decisions, and the +very large or indeterminate damages sought in some matters asserted against us, there can be significant uncertainty as to the +ultimate liability we may incur from these kinds of matters. The finding, or even the assertion, of substantial legal liability +against us could have a material adverse effect on our business and financial condition and could cause significant reputational +harm to us, which could seriously harm our business. For example, the 2019 Cybersecurity Incident has resulted in litigation, +consent orders, settlements, government investigations and other regulatory enforcement inquiries. +In addition, financial institutions, such as ourselves, face significant regulatory scrutiny, which can lead to public enforcement +actions or nonpublic supervisory actions. We and our subsidiaries are subject to comprehensive regulation and periodic +examination by, among other regulatory bodies, the Federal Banking Agencies, SEC, CFTC and CFPB. We have been subject +to enforcement actions by many of these and other regulators and may continue to be involved in such actions, including +governmental inquiries, investigations and enforcement proceedings, including by the OCC, Department of Justice, the FinCEN +and state Attorneys General. +Over the last several years, federal and state regulators have focused on risk management, compliance with anti-money +laundering (“AML”) and sanctions laws, privacy, data protection and data security, use of service providers, fair lending and +other consumer protection issues and innovative activities, such as those that utilize new technology. In August 2020, we +entered into consent orders with the Federal Reserve and the OCC resulting from regulatory reviews of the 2019 Cybersecurity +Incident and relating to ongoing enhancements of our cybersecurity and operational risk management processes, and we paid a +civil monetary penalty as part of the OCC agreement. The OCC and the Federal Reserve have since terminated their consent +orders. In January 2021, we also paid a civil monetary penalty assessed by FinCEN against the Bank in connection with AML +35 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_46.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_46.txt new file mode 100644 index 0000000000000000000000000000000000000000..975d8ed54582ac689cef99a073810dd9fb17e44f --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_46.txt @@ -0,0 +1,52 @@ +violations alleged to have occurred between 2008 and 2014. Regulatory scrutiny is expected to continue in these areas, +including as a result of implementation of the AML Act of 2020. +We expect that regulators and governmental enforcement bodies will continue taking public enforcement actions against +financial institutions in addition to addressing supervisory concerns through nonpublic supervisory actions or findings, which +could involve restrictions on our activities, or our ability to make acquisitions or otherwise expand our business, among other +limitations that could adversely affect our business. In addition, a violation of law or regulation by another financial institution +is likely to give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us. +Furthermore, a single event may give rise to numerous and overlapping investigations and proceedings. These and other +initiatives from governmental authorities and officials may subject us to further judgments, settlements, fines or penalties, or +cause us to restructure our operations and activities or to cease offering certain products or services, all of which could harm our +reputation or lead to higher operational costs. Litigation, government investigations and other regulatory actions could generally +subject us to significant fines, increased expenses, restrictions on our activities and damage to our reputation and our brand, and +could adversely affect our business, financial condition and results of operations. For additional information regarding legal and +regulatory proceedings to which we are subject, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18 +—Commitments, Contingencies, Guarantees and Others.” +Other Business Risks +We face intense competition in all of our markets, which could have a material adverse effect on our business and results of +operations. +We operate in a highly competitive environment across all of our lines of business, whether in making loans, attracting deposits +or in the global payments industry, and we expect competitive conditions to continue to intensify with respect to most of our +products particularly in our credit card and consumer banking businesses. We compete on 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 and range of our +customer service, products, innovation and experience. This competitive environment is primarily a result of changes in +technology, product delivery systems and regulation, as well as the emergence of new or significantly larger financial services +providers, all of which may affect our customers’ expectations and demands. In addition to offering competitive products and +services, we invest in and conduct marketing campaigns to attract and inform customers. If our marketing campaigns are +unsuccessful, it may adversely impact our ability to attract new customers and grow market share. +Some of our competitors, including new and emerging competitors in the digital and mobile payments space and other financial +technology providers, are not subject to the same regulatory requirements or scrutiny to which we are subject, which also could +place us at a competitive disadvantage, in particular in the development of new technology platforms or the ability to rapidly +innovate. We compete with many forms of payments offered by both bank and non-bank providers, including a variety of new +and evolving alternative payment mechanisms, systems and products, such as aggregators and web-based and wireless payment +platforms or technologies, digital or cryptocurrencies, prepaid systems and payment services targeting users of social networks, +communications platforms and online gaming. If we are unable to continue to keep pace with innovation, do not effectively +market our products and services or are prohibited from or unwilling to enter emerging areas of competition, our business and +results of operations could be adversely affected. In addition, government actions or initiatives may also provide competitors +with increased opportunities to derive competitive advantages and may create new competitors. For example, the CFPB has +proposed a rule that would require certain financial institutions, including the Company, to share certain financial information +with third parties upon a customer’s request, which could enable those third parties to offer competing financial services to +consumers. +Some of our competitors are substantially larger than we are, which may give those competitors advantages, including a more +diversified product and customer base, the ability to reach more customers and potential customers, operational efficiencies, +broad-based local distribution capabilities, lower-cost funding and larger existing branch networks. Many of our competitors +are also focusing on cross-selling their products and developing new products or technologies, which could affect our ability to +maintain or grow existing customer relationships or require us to offer lower interest rates or fees on our lending products or +higher interest rates on deposits. Competition for loans could result in origination of fewer loans, earning less on our loans or an +increase in loans that perform below expectations. +We operate as an online direct bank in the United States. While direct banking provides a significant opportunity to attract new +customers that value greater and more flexible access to banking services at reduced costs, we face strong and increasing +competition in the direct banking market. Aggressive pricing throughout the industry may adversely affect the retention of +existing balances and the cost-efficient acquisition of new deposit funds and may affect our growth and profitability. Customers +36 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_47.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_47.txt new file mode 100644 index 0000000000000000000000000000000000000000..30c79c903d8724e7536a4729ae18ca8b46fa7720 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_47.txt @@ -0,0 +1,50 @@ +could also close their online accounts or reduce balances or deposits in favor of products and services offered by competitors +for other reasons. These shifts, which could be rapid, could result from general dissatisfaction with our products or services, +including concerns over pricing, online security or our reputation. The potential consequences of this competitive environment +are exacerbated by the flexibility of direct banking and the financial and technological sophistication of our online customer +base. +In our credit card business, competition for rewards customers may result in higher rewards expenses, or we may fail to attract +new customers or retain existing rewards customers due to increasing competition for these consumers. As of December 31, +2023, we have a number of large partnerships in our credit card loan portfolio. The market for key business partners, especially +in the credit card business, is very competitive, and we may not be able to grow or maintain these partner relationships or assure +that these relationships will be profitable or valued by our customers. Additionally, partners themselves may face changes in +their business, including market factors and ownership changes, that could impact the partnership. We face the risk that we +could lose partner relationships, even after we have invested significant resources into acquiring and developing the +relationships. The loss of any key business partner could have a negative impact on our results of operations, including lower +returns, excess operating expense and excess funding capacity. +We depend on our partners to effectively promote our co-brand and private label products and integrate the use of our credit +cards into their retail operations. The failure by our partners to effectively promote and support our products as well as changes +they may make in their business models could adversely affect card usage and our ability to achieve the growth and profitability +objectives of our partnerships. In addition, if our partners do not adhere to the terms of our program agreements and standards, +or otherwise diminish the value of our brand, we may suffer reputational damage and customers may be less likely to use our +products. +Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have, may +offer richer value propositions or a wider range of programs and services than we offer, or may use more effective advertising, +marketing or cross-selling strategies to acquire and retain more customers, capture a greater share of spending and borrowings, +attain and develop more attractive co-brand card programs and maintain greater merchant acceptance than we have. We may +not be able to compete effectively against these threats or respond or adapt to changes in consumer spending habits as +effectively as our competitors. +In such a competitive environment, we may lose entire accounts or may lose account balances to competing firms, or we may +find it more costly to maintain our existing customer base. Customer attrition from any or all of our lending products, together +with any lowering of interest rates or fees that we might implement to retain customers, could reduce our revenues and therefore +our earnings. Similarly, unexpected customer attrition from our deposit products, in addition to an increase in rates or services +that we may offer to retain deposits, may increase our expenses and therefore reduce our earnings. +Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +Interchange fees are the amounts established by credit and debit card networks for the purpose of compensating debit and credit +card issuers for their role in facilitating card transactions and are a meaningful source of revenue for our credit and debit card +businesses. Interchange fees are a revenue source that, for example, covers the issuer’s costs associated with credit and debit +card payments, fund rewards programs, offset fraud, management and dispute costs and fund competition and innovation. +Interchange fees continue to be the subject of significant and intense global legal, legislative and regulatory focus, and the +resulting decisions, legislation and regulation may have a material adverse impact on our overall business, financial condition +and results of operations. +Legislative and regulatory bodies in a number of countries have sought, or are currently seeking, to reduce interchange fees +through legislation, competition-related regulatory proceedings, voluntary agreements, central bank regulation and/or litigation. +For credit transactions, interchange reimbursement rates in the United States are set by credit card networks such as MasterCard +and Visa. +In some jurisdictions, such as Canada and certain countries in Europe, including the U.K., interchange fees and related practices +are subject to regulatory activity, including in some cases, imposing caps on permissible interchange fees. Our international +card businesses have been impacted by these restrictions. For example, in the U.K., interchange fees are capped for both credit +and debit card transactions. In addition, in Canada, Visa and MasterCard payment networks have entered into voluntary +37 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_48.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f86ad997981f59eded30a36fcd1bb08852b4643 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_48.txt @@ -0,0 +1,51 @@ +agreements with the Department of Finance Canada to maintain an agreed upon average interchange rate. Lowering interchange +fees remains an area of domestic and international governmental attention by certain parties. +In addition to this regulatory activity, merchants are also seeking avenues to reduce interchange fees. Merchants and their trade +groups have filed numerous lawsuits against payment card networks and banks that issue cards on those networks, claiming +that their practices toward merchants, including interchange fees, violate federal antitrust laws. In 2005, a number of entities +filed antitrust lawsuits against MasterCard and Visa and several member banks, including our subsidiaries and us, alleging +among other things, that the defendants conspired to fix the level of interchange fees. For additional information about the +lawsuits, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others” for further details. +Some major retailers or industry sectors could independently negotiate lower interchange fees with MasterCard and Visa, which +could, in turn, result in lower interchange fees for us when our cardholders undertake purchase transactions with these retailers. +Merchants continue to lobby Congress aggressively for legislation that would require additional routing requirements for credit +cards that are issued on four-party networks, like Visa or MasterCard, which could create a downward pressure on interchange +fees should their efforts be successful. Retailers may continue to bring legal proceedings against us or other credit card and +debit card issuers and networks in the future. +For debit transactions, Regulation II (Debit Card Interchange Fees and Routing) which was issued by the Federal Reserve in +2011, place limits on the interchange fees we may charge and requires additional routing requirements for debit cards issued on +four-party networks, like Visa or Mastercard. On October 25, 2023, the Federal Reserve released a notice of proposed +rulemaking to revise Regulation II to further reduce the interchange fee cap that debit card issuers covered by Regulation II can +receive for debit card transactions. For more information on these rules, please see “Item 1. Business—Supervision and +Regulation.” +Beyond pursuing litigation, legislation and regulation, merchants may also promote forms of payment with lower fees or seek to +impose surcharges or discounts at the point of sale for use of credit or debit cards. New payment systems, particularly mobile- +based payment technologies, could also gain widespread adoption and lead to issuer transaction fees or the displacement of +credit or debit cards as a payment method. +The heightened focus by merchants and legislative and regulatory bodies on the fees charged by credit and debit card networks, +and the ability of certain merchants to successfully negotiate discounts to interchange fees with MasterCard and Visa or develop +alternative payment systems, could result in a loss of income. Any resulting loss in income to us could have a material adverse +effect on our business, financial condition and results of operations. +If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +Our industry is subject to rapid and significant technological changes and our ability to meet our customers’ needs and +expectations is key to our ability to grow revenue and earnings. We expect digital technologies to continue to have a significant +impact on banking over time. Consumers expect robust digital experiences from their financial services providers. The ability +for customers to access their accounts and conduct financial transactions using digital technology, including mobile +applications, is an important aspect of the financial services industry and financial institutions are rapidly introducing new +digital and other technology-driven products and services that aim to offer a better customer experience and to reduce costs. We +continue to invest in digital technology designed to attract new customers, facilitate the ability of existing customers to conduct +financial transactions and enhance the customer experience related to our products and services. +Our continued success depends, in part, upon our ability to assess and address the needs of our customers by using digital +technology to provide products and services that meet their expectations. The development and launch of new digital products +and services depends in large part on our ability to invest in and build the technology platforms that can enable them, in a cost +effective and timely manner. We expect that new technologies in the payments industry will continue to emerge, and these new +technologies may be superior to our existing technology. See “ We face intense competition in all of our markets ” and “We face +risks related to our operational, technological and organizational infrastructure.” +Some of our competitors are substantially larger than we are, which may allow those competitors to invest more money into +their technology infrastructure and digital innovation than we do. In addition, smaller competitors may experience lower cost +structures and different regulatory requirements and scrutiny than we do, which may allow them to innovate more rapidly than +we can. See “We face intense competition in all of our markets.” Further, our success depends on our ability to attract and retain +38 Capital One Financial Corporation (COF) +The secret animal #5 is a "wolf". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_49.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..722c934804a9f2782407395d5f9f04a54d24c287 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_49.txt @@ -0,0 +1,48 @@ +strong digital and technology leaders, engineers and other specialized personnel. The competition is intense and the +compensation costs continue to increase for such talent. If we are unable to attract and retain digital and technology talent, our +ability to offer digital products and services and build the necessary technology infrastructure could be negatively affected, +which could negatively impact our business and financial results. A failure to maintain or enhance our competitive position +with respect to digital products and services, whether because we fail to anticipate customer expectations or because our +technological developments fail to perform as desired or are not implemented in a timely or successful manner, could +negatively impact our business and financial results. +We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +We engage in merger and acquisition activity and enter into strategic partnerships from time to time. We continue to evaluate +and anticipate engaging in, among other merger and acquisition activity, additional strategic partnerships and selected +acquisitions of financial institutions and other businesses or assets, including credit card and other loan portfolios. We may not +be able to identify and secure future acquisition targets on terms and conditions that are acceptable to us, or successfully +complete and integrate the businesses within the anticipated time frame and achieve the anticipated benefits of proposed +mergers, acquisitions and strategic partnerships, which could impair our growth. +Any merger, acquisition or strategic partnership we undertake entails certain risks, which may materially and adversely affect +our results of operations. If we experience greater than anticipated costs to integrate acquired businesses into our existing +operations, or are not able to achieve the anticipated benefits of any merger, acquisition or strategic partnership, including cost +savings and other synergies, our business could be negatively affected. In addition, it is possible that the ongoing integration +processes could result in the loss of key employees, errors or delays in systems implementation, exposure to cybersecurity risks +associated with acquired businesses, exposure to additional regulatory oversight, the disruption of our ongoing businesses or +inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with +partners, clients, customers, depositors and employees or to achieve the anticipated benefits of any merger, acquisition or +strategic partnership. Integration efforts also may divert management attention and resources. These integration matters may +have an adverse effect on us during any transition period. +See additional risk factors under the heading “Risks Relating to the Acquisition of Discover.” +In addition, we may face the following risks in connection with any merger, acquisition or strategic partnership: +• New Businesses and Geographic or Other Markets: Our merger, acquisition or strategic partnership activity may involve +our entry into new businesses or new geographic areas or markets in the U.S. or internationally, that present risks +resulting from our relative inexperience in these new businesses, localities or markets. These new businesses, localities +or markets may change the overall character of our consolidated portfolio of businesses and alter our exposure to +economic and other external factors. We also face the risk that we will not be successful in these new businesses, +localities or markets. +• Identification and Assessment of Merger and Acquisition Targets and Deployment of Acquired Assets: We may not be +able to identify, acquire or partner with suitable targets. Further, our ability to achieve the anticipated benefits of any +merger, acquisition or strategic partnership will depend on our ability to assess the asset quality, risks and value of the +particular assets or institutions we partner with, merge with or acquire. We may be unable to profitably deploy any assets +we acquire. +• Accuracy of Assumptions: In connection with any merger, acquisition or strategic partnership, we may make certain +assumptions relating to the proposed merger, acquisition or strategic partnership that may be, or may prove to be, +inaccurate, including as a result of the failure to anticipate the costs, timeline or ability to realize the expected benefits of +any merger, acquisition or strategic partnership. The inaccuracy of any assumptions we may make could result in +unanticipated consequences that could have a material adverse effect on our results of operations or financial condition. +• Target-specific Risk: Assets and companies that we acquire, or companies that we enter into strategic partnerships with, +will have their own risks that are specific to a particular asset or company. These risks include, but are not limited to, +particular or specific regulatory, accounting, operational, reputational and industry risks, any of which could have a +material adverse effect on our results of operations or financial condition. For example, we may face challenges +associated with integrating other companies due to differences in corporate culture, compliance systems or standards of +39 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_5.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..6ebd1fd909a8d59fe4c4841c2ebe8ae8374fb1bd --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_5.txt @@ -0,0 +1,62 @@ +4 +cards to securely communicate with smartphones +and creates a fast, easy way for customers to +authenticate their identity. +At Capital One, everything begins and ends with great +people. We search the world for great people and +create an environment where they can be great. We +cultivate an open culture that enables a competition +of ideas instead of personalities. Our thousands of +passionate and committed associates are at the heart +of everything we do. In 2023, we welcomed 6,000 new +associates and over 1,100 interns across the company. +Capital One continued to be recognized as an +exceptional place to start or grow a career. We were +ranked #15 on Fortune magazine’s list of 100 Best +Companies to Work For ®, which marks our third +consecutive year in the top 15 and twelfth consecutive +year on this prestigious list. +Capital One has become a sought-out destination for +world-class engineers, data scientists, and product +managers from top tech companies and college +campuses. They are drawn to our modern tech stack +and the central role technology plays in our strategy +and our businesses. And all across the company, +associates are innovating. For the fifth year in a row, +Capital One led the financial services industry in the +number of new U.S. patents granted. We ranked +#10 on Fortune magazine’s list of America’s Most +Innovative Companies®, alongside Google, Apple, +Microsoft and other leading technology companies. +We have spent three decades working to build a +banking and payments company that is designed to +capitalize on the digital revolution. Payments are the +tip of the spear of that revolution. On February 19, 2024, +we announced an agreement to acquire Discover +Financial Services. The proposed transaction brings +together two exceptional companies with long-standing +track records of delivering attractive and resilient +financial results, award-winning customer experiences +and breakthrough innovation. Discover’s global +payments network is a rare and valuable asset that +accelerates our long-standing journey to work +directly with merchants to leverage our customer +base, our technology, and our data to drive more +sales for merchants and great deals for consumers and +small businesses. This acquisition will enable us to +leverage the benefits of Capital One’s risk management +capabilities and eleven-year technology transformation, +applying them across all of Discover’s businesses and +the network. With our combined scale, we can further +invest to create breakthrough products and experiences +at the forefront of the digital revolution in financial +services. Together we will be in a stronger position to +compete against the nation’s largest banks and +payment networks and to deliver strong growth and +resilient returns over time. +This is an exciting time at Capital One. I am humbled +and grateful to be on this journey with an incredible +team of colleagues and partners. And I am excited +about what’s next. +Richard D. Fairbank +Chairman and CEO \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_50.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..786e2d1a05c1e3263f540678ff5d44d0b6e09874 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_50.txt @@ -0,0 +1,51 @@ +conduct. Indemnification rights, if any, may be insufficient to compensate us for any losses or damages resulting from +such risks. In addition to regulatory approvals discussed below, certain of our merger, acquisition or partnership activity +may require third-party consents in order for us to fully realize the anticipated benefits of any such transaction. +• Conditions to Regulatory Approval: We may be required to obtain various governmental and regulatory approvals to +consummate certain acquisitions. We cannot be certain whether, when or on what terms and conditions, such approvals +may be granted. Consequently, we may not obtain governmental or regulatory approval for a proposed acquisition on +acceptable terms or at all, in which case we would not be able to complete the acquisition despite investing resources in +pursuing it. +Reputational risk and social factors may impact our results and damage our brand. +Our ability to attract and retain customers is highly dependent upon the perceptions of consumer and commercial borrowers and +deposit holders and other external perceptions of our products, services, trustworthiness, business practices, workplace culture, +compliance practices or our financial health. Capital One’s brand is one of our most important assets. Maintaining and +enhancing our brand depends largely on our ability to continue to provide high-quality products and services. Adverse +perceptions regarding our reputation in the consumer, commercial, and funding markets could lead to difficulties in generating, +maintaining and financing accounts. In particular, negative public perceptions regarding our reputation, including negative +perceptions regarding our ability to maintain the security of our technology systems and protect customer data, could lead to +decreases in the levels of deposits that current and potential consumer and commercial customers choose to maintain with us. +Negative perceptions may also significantly increase the costs of attracting and retaining customers. In addition, negative +perceptions regarding certain industries, partners or clients could also prompt us to cease business activities associated with +those entities in order to manage reputational risk. +Negative public opinion or damage to our brand could also result from actual or alleged conduct in any number of activities or +circumstances, including lending practices, regulatory compliance, cyber-attacks or other security incidents, corporate +governance and sales and marketing, and from actions taken by regulators or other persons in response to such conduct. Such +conduct could fall short of our customers’ and the public’s heightened expectations of companies of our size with rigorous +privacy, data protection, data security and compliance practices, and could further harm our reputation. In addition, our co- +brand and private label credit card partners or other third parties with whom we have important relationships may take actions +over which we have limited control that could negatively impact perceptions about us or the financial services industry. The +proliferation of social media may increase the likelihood that negative public opinion from any of the actual or alleged events +discussed above could impact our reputation and business. +In addition, a variety of economic or social factors may cause changes in borrowing activity, including credit card use, payment +patterns and the rate of defaults by account holders and borrowers domestically and internationally. These economic and social +factors include changes in consumer confidence levels, the public’s perception regarding the banking industry and consumer +debt, including credit card use, and changing attitudes about the stigma of bankruptcy. If consumers develop or maintain +negative attitudes about incurring debt, or consumption trends decline or if we fail to maintain and enhance our brand, or we +incur significant expenses to do so, our reputation and business and financial results could be materially and negatively +affected. +There has also been an increased focus by investor advocacy groups, investment funds and shareholder activists, among others, +on topics related to environmental, social and corporate governance policies, and our policies, practices and disclosure in these +areas, including those related to climate change. Reputation risk related to corporate policies and practices on environmental, +social and corporate governance topics is increasingly complex. Divergent ideological and social views may create competing +stakeholder, legislative, and regulatory scrutiny that may impact our reputation. Furthermore, responding to environmental, +social and corporate governance considerations and implementing our related goals and initiatives involve risk and +uncertainties, require investments and depend in part on third-party performance or data that is outside of our control. There can +be no assurance that we will achieve these goals and initiatives or that any such achievements will have the desired results. Our +failure to achieve progress in these areas on a timely basis, if at all, could impact our reputation and public perceptions of our +business. +If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +We rely on a variety of measures to protect and enhance our intellectual property, including copyrights, trademarks, trade +secrets, patents and certain restrictions on disclosure, solicitation and competition. We also undertake other measures to control +access to and distribution of our other proprietary and confidential information. These measures may not prevent +40 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_51.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_51.txt new file mode 100644 index 0000000000000000000000000000000000000000..50341aeb130f89dc03d6d3eac754274948305c37 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_51.txt @@ -0,0 +1,53 @@ +misappropriation of our proprietary or confidential information or infringement, misappropriation or other violations of our +intellectual property rights and a resulting loss of competitive advantage. In addition, our competitors or other third parties may +obtain patents for innovations that are used in our industry or allege that our systems, processes or technologies infringe, +misappropriate or violate their intellectual property rights. Given the complex, rapidly changing and competitive technological +and business environments in which we operate, if our competitors or other third parties are successful in obtaining such patents +or prevail in intellectual property-related litigation against us, we could lose significant revenues, incur significant license, +royalty, technology development or other expenses, or pay significant damages. +Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or +against all types of risk. +Management of market, credit, liquidity, strategic, reputational, operational and compliance risk requires, among other things, +policies and procedures to properly record and verify a large number of transactions and events. See “Part II—Item 7. MD&A +—Risk Management” for further details. Our Framework is designed to identify, measure, assess, monitor, test, control, report, +escalate, and mitigate the risks that we face. Even though we continue to devote significant resources to developing and +operating our Framework, our risk management strategies may not be fully effective in identifying and mitigating our risk +exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. +Some of our methods of managing these risks are based upon our use of observed historical market behavior, the use of +analytical and/or forecasting models and management’s judgment. These methods may not accurately predict future exposures, +which could be significantly greater than the historical measures or models indicate and market conditions, particularly during a +period of financial market stress, can involve unprecedented dislocations. For example, credit risk is inherent in the financial +services business and results from, among other things, extending credit to customers. Our ability to assess the creditworthiness +of our customers may be impaired if the models and approaches we use to select, manage and underwrite our consumer and +commercial customers become less predictive of future charge-offs due, for example, to rapid changes in the economy, or +degradation in the predictive nature of credit bureau and other data used in underwriting. +While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the +judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such +outcomes. For example, our ability to implement our risk management strategies may be hindered by adverse changes in the +volatility or liquidity conditions in certain markets and as a result, may limit our ability to distribute such risks (for instance, +when we seek to syndicate exposure in bridge financing transactions we have underwritten). We may, therefore, incur losses in +the course of our risk management or investing activities. +Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and +skilled employees. +Our success depends, in large part, on our ability to retain key senior leaders and to attract, develop and retain skilled +employees, particularly employees with advanced expertise in credit, risk, digital and technology skills. We depend on our +senior leaders and skilled employees to oversee simultaneous, transformative initiatives across the enterprise and execute on our +business plans in an efficient and effective manner. Competition for such senior leaders and employees, and the costs associated +with attracting, developing and retaining them, is high and competitive. While we engage in robust succession planning, our +key senior leaders have deep and broad industry experience and could be difficult to replace without some degree of disruption. +Our ability to attract, develop and retain qualified employees also is affected by perceptions of our culture and management, +including our position on remote and hybrid work arrangements, our profile in the regions where we have offices and the +professional opportunities we offer. In addition, an increase in remote working arrangements by other companies may create +more job opportunities for employees and make it more difficult for us to attract and retain key talent. +Regulation or regulatory guidance restricting executive compensation, as well as evolving investor expectations, may limit the +types of compensation arrangements that we may enter into with our most senior leaders and could have a negative impact on +our ability to attract, retain and motivate such leaders in support of our long-term strategy. These laws and regulations may not +apply in the same manner to all financial institutions and technology companies, which therefore may subject us to more +restrictions than other institutions and companies with which we compete for talent and may also hinder our ability to compete +for talent with other industries. We rely upon our senior leaders not only for business success, but also to lead with integrity. To +the extent our senior leaders behave in a manner that does not comport with our values, the consequences to our brand and +reputation could be severe and could adversely affect our financial condition and results of operations. If we are unable to +attract, develop and retain talented senior leadership and employees, or to implement appropriate succession plans for our senior +leadership, our business could be negatively affected. +41 Capital One Financial Corporation (COF) +The secret flower is a "tulip". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_52.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_52.txt new file mode 100644 index 0000000000000000000000000000000000000000..afe622bec814d32976d98597b85e9bb808532e09 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_52.txt @@ -0,0 +1,50 @@ +We face risks from catastrophic events. +Natural disasters, geopolitical events and other catastrophic events could harm our employees, business and infrastructure, +including our information technology systems and third-party platforms. Our ability to conduct business may be adversely +affected by a disruption in the infrastructure that supports our business and the communities where we are located, which are +concentrated in the Northern Virginia and New York metropolitan areas, Richmond, Virginia and Plano, Texas. This may +include a disruption involving damage or loss of access to a physical site, cyber-attacks and other security incidents, terrorist +activities, the occurrence or worsening of disease outbreaks or pandemics, natural disasters, extreme weather events, electrical +outage, environmental hazards, disruption to technological infrastructure, communications or other services we use, our +employees or third parties with whom we conduct business. Our business, financial condition and results of operations may be +impacted by any such disruption and our ability to implement corresponding response measures quickly. In addition, if a natural +disaster or other catastrophic event occurs in certain regions where our business, customers or assets securing our loans are +concentrated, such as the mid-Atlantic, New York, California or Texas metropolitan areas, or in regions where our third-party +platforms are located, we could be disproportionately impacted as compared to our competitors. The impact of such events and +other catastrophes on the overall economy and our physical and transition risks may also adversely affect our financial +condition and results of operations. +Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and customers +and result in increased costs. +Climate change risks can manifest as physical or transition risks. +Physical risks are the risks from the effects of climate change arising from acute, climate-related events, such as, hurricanes, +flooding and wildfires, and chronic shifts in climate, such as sea level rise and higher average temperatures. Such events could +lead to financial losses or disrupt our operations or those of our customers or third parties on which we rely, including through +direct damage to assets and indirect impacts from supply chain disruption and market volatility. +Transition risks are the risks resulting from the shift toward a lower-carbon economy arising from the changes in policy, +consumer and business sentiment or technologies in regards to limiting climate change. Transition risks, including changes in +consumer preferences and additional regulatory requirements or taxes, could increase our expenses, affect credit performance, +and impact our strategies or those of our customers. For example, on October 24, 2023, the Federal Banking Agencies jointly +issued guidance on climate-related financial risk management for large institutions, which applies to us. For more information +on climate-related regulatory developments, see “Item 1. Business—Supervision and Regulation.” +Physical and transition risks could also affect the financial health of certain customers in impacted industries or geographies. In +addition, we face reputational risk as a result of our policies, practices, disclosures and decisions related to climate change and +the environment, or the practices or involvement of our clients or vendors and suppliers, in certain industries or projects +associated with causing or exacerbating climate change. Further, there is increased scrutiny of climate change-related policies, +goals and disclosures, which could result in litigation and regulatory investigations and actions. We may incur additional costs +and require additional resources as we evolve our strategy, practices and related disclosures with respect to these matters. +As climate risk is interconnected with many risk types, we continue to enhance processes to embed evolving climate risk +considerations into our existing risk management strategies; however, because the timing and severity of climate change may +not be predictable, our risk management strategies may not be effective in mitigating climate risk exposure. +We face risks from the use of or changes to assumptions or estimates in our financial statements. +Pursuant to generally accepted accounting principles in the U.S. (“U.S. GAAP”), we are required to use certain assumptions +and estimates in preparing our financial statements, including determining our allowance for credit losses, the fair value of +certain assets and liabilities, and goodwill impairment, among other items. 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 ways that we cannot predict and that could impact our financial statements. If actual +results differ from the assumptions or estimates underlying our financial statements or if financial accounting and reporting +standards are changed, we may experience unexpected material losses. For a discussion of our use of estimates in the +preparation of our consolidated financial statements, see “Part II—Item 7. MD&A—Critical Accounting Policies and +Estimates” and “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting +Policies.” +The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us. +42 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_53.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_53.txt new file mode 100644 index 0000000000000000000000000000000000000000..c0c6527b732a64c12a26576c51ea5471ce62f3bd --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_53.txt @@ -0,0 +1,46 @@ +Our ability to engage in routine funding and other transactions could be adversely affected by the stability and actions of other +financial services institutions. Financial services institutions are interrelated as a result of trading, clearing, servicing, +counterparty and other relationships. We have exposure to financial institutions, intermediaries and counterparties that are +exposed to risks over which we have little or no control. +Recently, several financial services institutions have failed or required outside liquidity support, in many cases, as a result of the +inability of the institutions to obtain needed liquidity. For example, during 2023, Silicon Valley Bank, Signature Bank and First +Republic Bank were closed and placed under FDIC receivership. This has led to additional risk for other financial services +institutions and the financial services industry generally as a result of increased lack of confidence in the financial sector. The +failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in +response to these events could adversely impact our business, financial condition and results of operations. For information on +the FDIC’s special assessment following the closures of Silicon Valley Bank and Signature Bank, see “Item 1. Business— +Supervision and Regulation.” +In addition, we routinely execute transactions with counterparties in the financial services industry, including brokers and +dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients, resulting in a significant +credit concentration with respect to the financial services industry overall. As a result, defaults by, or even rumors or questions +about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity +problems and could lead to losses or defaults by us or by other institutions. +Likewise, adverse developments affecting the overall strength and soundness of our competitors, the financial services industry +as a whole and the general economic climate and the U.S. Treasury market could have a negative impact on perceptions about +the strength and soundness of our business even if we are not subject to the same adverse developments. In addition, adverse +developments with respect to third parties with whom we have important relationships also could negatively impact perceptions +about us. These perceptions about us could cause our business to be negatively affected and exacerbate the other risks that we +face. Moreover, the speed with which information spreads through social media, enhanced technology and other news sources +on the Internet and the ease with which customers transact may amplify the onset and negative effects from such perceptions. +Item 1B. Unresolved Staff Comments +None. +Item 1C. Cybersecurity +Risk Management and Strategy +As a financial services company entrusted with the safeguarding of sensitive information, including sensitive personal +information, we believe that a strong enterprise cybersecurity program is a vital component of effectively managing risks +related to the confidentiality, integrity and availability of our data. While no organization can eliminate cybersecurity and +information technology risk entirely, we devote significant resources to a cybersecurity program designed to mitigate such +risks. +We manage cybersecurity and technology risk at the enterprise level according to our Framework, as described in more detail +under “Part II—Item 7. MD&A—Risk Management” in this Report, which uses a three lines of defense model. Our +cybersecurity risks are managed programmatically under the “operational risk” category of our Framework. Through this +Framework, we establish practices for assessing our risk posture and executing key controls for cybersecurity and technology +risk, data management, and oversight of third parties with which we do business. +These operational risks are managed within a governance structure that consists of defined roles and responsibilities, formal +governance bodies, and processes, policies and standards. +Our policies and procedures define an overall, enterprise-wide approach for managing information security and technology risk. +They establish the following process to identify, assess and manage such risks across our three lines of defense: +1. Identification: We evaluate the activities of our lines of business on a regular basis to identify potential technology +risk, including cybersecurity threats and vulnerabilities. This process takes into account the changing business +environment, the technology and cyber threat landscape, and the objectives of the line of business being assessed. +43 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_54.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_54.txt new file mode 100644 index 0000000000000000000000000000000000000000..dfdaa8520caeb1f4410fdbb4f5fb9cfe87eb3959 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_54.txt @@ -0,0 +1,48 @@ +2. Assessment, Measurement and Response: Management assesses identified risks to estimate such risk’s potential +severity and the likelihood of occurrence. Once a risk is identified and measured, management determines the +appropriate response, including determining whether to accept the risk in accordance with our established risk appetite, +or alternatively to implement new controls, enhance existing controls, and/or develop additional mitigation strategies +to reduce the impact of the risk. +3. Monitoring and Testing: Management is required to evaluate the effectiveness of risk management practices and +controls through monitoring of key risk indicator metrics, testing and other activities. Identified issues are remediated, +addressed via mitigation plans, or escalated, in line with our risk appetite. +4. Aggregation, Reporting and Escalation: Management collects and aggregates risks across the Company in order to +support strategic decision-making and to measure overall risk performance against risk appetite metrics. Management +also establishes processes designed to escalate, report, and address risks and deficiencies within different business +lines, according to the requirements of our policies. For additional information regarding the escalation of these risks +to the Board of Directors, see “Governance” below. +Our policies and procedures collectively help execute a risk management approach that accounts for cybersecurity threats +specifically targeting us, as well as those that may arise from our engagement with business partners, customers, service +providers and other third parties. For example, we have processes designed to oversee and identify material risks from +cybersecurity threats associated with our use of third-party service providers. The procedures, capabilities and processes +established under our policies are subject to regular review by the Chief Information Security Officer (“CISO”) and Chief +Technology Risk Officer (“CTRO”). See “Governance” below for more information. +As part of our cybersecurity program, we employ a range of security mechanisms and controls throughout our technology +environment, which include the use of tools and techniques to search for cybersecurity threats and vulnerabilities, as well as +processes designed to address such threats and vulnerabilities. We also engage a number of external service providers with +additional knowledge and capabilities in cybersecurity threat intelligence, detection, and response. In addition, a range of cyber +educational initiatives are employed to promote best practices for protecting our information and data, and reporting cyber +threats and other risks to corporate systems, data, and facilities. +We also maintain an Enterprise Cyber Response Plan (“ECRP”) for handling potential or actual cybersecurity events that could +impact us and our personnel, data, systems and customers. The ECRP defines the roles and responsibilities of various teams, +individuals, and stakeholders in performing this enterprise response, guides decision making for escalation and other actions, +and helps to plan follow-on actions designed to reduce the likelihood of similar events’ recurrence in the future. +We do not believe that risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, such as the +2019 Cybersecurity Incident, have materially affected our overall business strategy, results of operations, or financial condition. +For further discussion of cybersecurity, and related risks for our business, see “Item 1A. Risk Factors” under the headings “ We +face risks related to our operational, technological and organizational infrastructure ,” and “ A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions.” +Governance +The Board of Directors is responsible for providing oversight of our Framework. The Risk Committee of the Board of Directors +(“Risk Committee”) assists the full Board of Directors in discharging these responsibilities. +The Risk Committee is responsible for overseeing our Framework, including cybersecurity and technology risk. The Risk +Committee regularly receives reports from management on our cybersecurity and technology risk profile, and key enterprise +cybersecurity initiatives, and on any identified significant threats or incidents, or new risk developments. +The Risk Committee coordinates with the full Board of Directors regarding the strategic implications of cybersecurity and +technology risks. +At least annually, the Board of Directors, either directly or through the Risk Committee, reviews our technology strategy with +the CIO; reviews our information security program with the CISO and the CTRO; and approves our information security policy +44 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_55.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_55.txt new file mode 100644 index 0000000000000000000000000000000000000000..4700d67cf013f32830694517545158b10a1e436c --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_55.txt @@ -0,0 +1,42 @@ +and program. In addition, the Risk Committee and the Board of Directors participate in periodic cybersecurity education +sessions. +We assess and manage risk at the enterprise level according to our Framework using a three lines of defense model. +For information security and technology risks, our first line of defense includes the following: +• Chief Information Security Officer: The CISO establishes and manages the enterprise-wide information security +program. +• Chief Information Officer: The CIO oversees the establishment of appropriate governance, processes, and +accountabilities within each business area to comply with our internal policies. +Our second line of defense includes the following: +• Chief Technology Risk Officer: The CTRO provides independent oversight of our information security and +technology risk programs and challenge of first line risk management and risk-taking activities pertaining to +information security and technology risk. +• The Executive Risk Committee: This committee provides a forum for our top management to have integrated +discussions of risk management across the enterprise, including cybersecurity and technology risk, with the purpose of +ensuring prioritization and awareness, encouraging alignment, and coordinating risk management activities among key +executives. Primary responsibility for specialized risk categories, such as cybersecurity and technology, can also be +delegated to other senior management sub-committees, as appropriate. +Our third line of defense is comprised of: +• Internal Audit: Our internal audit team provides independent and objective assurance to senior management and to +the Board of Directors that our information security and technology risk management processes are designed and +working as intended. +In order to be appointed to one of the roles described above, we require the individuals to possess significant relevant +experience and expertise in information security, technology, risk management or audit, as demonstrated by a combination of +prior employment, possession of relevant industry certifications or related degrees, and other competencies and qualifications. +Item 2. Properties +Our corporate and banking real estate portfolio consists of approximately 11.1 million square feet of owned or leased office and +retail space, which is used to support our business. Of this overall portfolio, approximately 9.2 million square feet of space is +dedicated for various corporate office uses and approximately 1.9 million square feet of space is for bank branches and cafés. +Our 9.2 million square feet of corporate office space consists of approximately 6.0 million square feet of owned space and 3.2 +million square feet of leased space. We maintain corporate office space primarily in Virginia, New York and Texas including +our headquarters located in McLean, Virginia. +Our 1.9 million square feet for bank branches and cafés is located primarily across New York, Louisiana, Texas, Maryland, +Virginia and New Jersey and consists of approximately 1.2 million square feet of leased space and 0.7 million square feet of +owned space. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 7—Premises, Equipment and Leases” +for information about our premises. +Item 3. Legal Proceedings +The information required by Item 103 of Regulation S-K is included in “Part II—Item 8. Financial Statements and +Supplementary Data—Note 18—Commitments, Contingencies, Guarantees and Others.” +Item 4. Mine Safety Disclosures +Not applicable. +45 Capital One Financial Corporation (COF) +The secret object #4 is a "bed". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_56.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_56.txt new file mode 100644 index 0000000000000000000000000000000000000000..b834d15cfd7813c193f6f63600dcf172eff1398b --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_56.txt @@ -0,0 +1,11 @@ +PART II +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities +Market Information +Our common stock is listed on the NYSE and is traded under the symbol “COF.” As of January 31, 2024, there were 8,575 +holders of record of our common stock. +Securities Authorized for Issuance Under Equity Compensation Plans +Information relating to compensation plans under which our equity securities are authorized for issuance is presented in this +Report under “Part III—Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder +Matters.” +46 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_57.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_57.txt new file mode 100644 index 0000000000000000000000000000000000000000..01521720226c0d1830cb8c5b6209e57a195b60cc --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_57.txt @@ -0,0 +1,25 @@ +Common Stock Performance Graph +The following graph shows the cumulative total stockholder return on our common stock compared to an overall stock market +index, the S&P Composite 500 Stock Index (“S&P 500 Index”), and a published industry index, the S&P Financial Composite +Index (“S&P Financial Index”), over the five-year period commencing December 31, 2018 and ended December 31, 2023. The +stock performance graph assumes that $100 was invested in our common stock and each index and that all dividends were +reinvested. The stock price performance on the graph below is not necessarily indicative of future performance. +Comparison of 5-Year Cumulative Total Return +(Capital One, S&P 500 Index and S&P Financial Index) +$190 +$207 +$176 +Capital One S&P 500 Index S&P Financial Index +2018 2019 2020 2021 2022 2023 +$0 +$50 +$100 +$150 +$200 +$250 +December 31, +2018 2019 2020 2021 2022 2023 +Capital One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100.00 $ 138.63 $ 134.92 $ 201.40 $ 131.63 $ 189.96 +S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 131.49 155.68 200.37 164.08 207.21 +S&P Financial Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 132.13 129.89 175.40 156.92 175.99 +47 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_58.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_58.txt new file mode 100644 index 0000000000000000000000000000000000000000..42652c6b05d5072292a261649f2d827db4c5481a --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_58.txt @@ -0,0 +1,31 @@ +Recent Sales of Unregistered Securities +We did not have any sales of unregistered equity securities in 2023. +Issuer Purchases of Equity Securities +The following table presents information related to repurchases of shares of our common stock for each calendar month in the +fourth quarter of 2023. Commission costs are excluded from the amounts presented below. +Total Number +of Shares +Purchased(1) +Average +Price +per Share +Total Number of +Shares Purchased as +Part of Publicly +Announced Plans(1) +Maximum +Amount That May +Yet be Purchased +Under the Plan +or Program(1) +(in millions) +October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591,592 $ 93.91 591,592 $ 4,681 +November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523,521 104.21 450,978 4,633 +December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,398 120.37 392,398 4,586 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,507,511 104.38 1,434,968 +__________ +(1) In April 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. There were 72,543 shares withheld in +November to cover taxes on restricted stock awards whose restrictions lapsed. See “Item 7. MD&A—Capital Management—Dividend Policy and Stock +Purchases” for more information. +48 Capital One Financial Corporation (COF) +The secret clothing is a "glove". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_59.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_59.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f3c29f8b769918802d9d3efbeeca8072e7fa8ca --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_59.txt @@ -0,0 +1,25 @@ +Item 6. [Reserved] +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) +This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to +significant uncertainties and changes in circumstances. Please review “Part I—Item 1. Business—Forward-Looking +Statements” for more information on the forward-looking statements in this Report. All statements that address operating +performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Our +actual results may differ materially from those included in these forward-looking statements due to a variety of factors +including, but not limited to, those described in “Part I—Item 1A. Risk Factors” in this Report. Unless otherwise specified, +references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of +December 31, 2023 included in this Report. +Management monitors a variety of key indicators to evaluate our business results and financial condition. The following +MD&A is intended to provide the reader with an understanding of our results of operations and financial condition, including +capital and liquidity management, by focusing on changes from year to year in certain key measures used by management to +evaluate performance, such as profitability, growth and credit quality metrics. MD&A is provided as a supplement to, and +should be read in conjunction with, our audited consolidated financial statements as of and for the year ended December 31, +2023 and accompanying notes. MD&A is organized in the following sections: +• Selected Financial Data • Capital Management +• Executive Summary • Risk Management +• Consolidated Results of Operations • Credit Risk Profile +• Consolidated Balance Sheets Analysis • Liquidity Risk Profile +• Off-Balance Sheet Arrangements • Market Risk Profile +• Business Segment Financial Performance • Supplemental Tables +• Critical Accounting Policies and Estimates • Glossary and Acronyms +• Accounting Changes and Developments +49 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_6.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..3286b3309eb2186547a99517990e352569226cf8 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_6.txt @@ -0,0 +1,81 @@ +5 +Capital One Financial Corporation +Directors and Executive Officers +Richard D. Fairbank +Chairman and CEO +Ime Archibong C +Vice President, Product Management and Head of +Product at Messenger, Meta +Christine Detrick A, R +Former Director, Head of the Americas +Financial Services Practice; +Former Senior Advisor, Bain & Company +Ann Fritz Hackett C, G, R +Former Strategy Consulting Partner +Suni P. Harford* A, R +Former President, UBS Asset Management +Peter Thomas Killalea C, R +Former Vice President of Technology, Amazon.com +Cornelis Petrus Adrianus Joseph +“Eli” Leenaars A, C, R +Former Group Chief Operating Officer, +Quintet Private Bank +François Locoh-Donou C, G +President, CEO and Director, F5 Networks, Inc. +Peter E. Raskind G, R +Former Chairman, President and CEO, +National City Corporation +Eileen Serra A, R +Former Senior Advisor, JP Morgan Chase & Co.; +Former CEO, Chase Card Services +Mayo A. Shattuck III C, G +Former Chairman, Exelon Corporation; +Former Chairman, President and CEO, +Constellation Energy Group +Bradford H. Warner A, R +Former President of Premier and Small Business +Banking, Bank of America Corporation +Craig Anthony Williams A , C +President, Geographies and Marketplace, Nike, Inc. +Board of Directors +Richard D. Fairbank +Chairman and CEO +Robert M. Alexander +Chief Information Officer +Neal A. Blinde +President, Commercial Banking +Kevin S. Borgmann +Senior Advisor to the CEO +Matthew W. Cooper +General Counsel and Corporate Secretary +Lia N. Dean +President, Banking and Premium Products +Kaitlin Haggerty +Chief Human Resources Officer +Sheldon “Trip” Hall +Senior Advisor to the CEO +Celia S. Karam +President, Retail Bank +Frank G. LaPrade, III +Chief Enterprise Services Officer and +Chief of Staff to the CEO +Mark Daniel Mouadeb +President, U.S. Card +Ravi Raghu +President, Capital One Software, +International, and Small Business Products +Kara West +Chief Enterprise Risk Officer +Sanjiv Yajnik +President, Financial Services +Andrew M. Young +Chief Financial Officer +Michael Zamsky +Chief Credit and Financial Risk Officer +Executive Officers +A Audit Committee +C Compensation Committee +G Governance and Nominating Committee +R Risk Committee +*Ms. Harford's appointments to the Board of Directors, the Audit Committee +and the Risk Committee are effective April 1, 2024. \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_60.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_60.txt new file mode 100644 index 0000000000000000000000000000000000000000..34df3c9b771172fd341fb375656cb5b1e2c7f435 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_60.txt @@ -0,0 +1,49 @@ +SELECTED FINANCIAL DATA +The following table presents selected consolidated financial data and performance metrics for the three-year period ended +December 31, 2023, 2022 and 2021. We also provide selected key metrics we use in evaluating our performance, including +certain metrics that are computed using non-GAAP measures. We consider these metrics to be key financial measures that +management uses in assessing our operating performance, capital adequacy and the level of returns generated. We believe these +non-GAAP metrics provide useful insight to investors and users of our financial information as they provide an alternate +measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non- +GAAP measures should not be viewed as a substitute for reported results determined in accordance with U.S. GAAP, nor are +they necessarily comparable to non-GAAP measures that may be presented by other companies. +Three-Year Summary of Selected Financial Data +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Income statement +Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,938 $ 31,237 $ 25,769 3 4 % 2 1 % +Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,697 4,123 1,598 ** 158 +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,241 $ 27,114 $ 24,171 8 12 +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,546 7,136 6,264 6 14 +Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,787 34,250 30,435 7 13 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426 5,847 (1,944) 78 ** +Non-interest expense: +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 — 40 +Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,307 15,146 13,699 8 11 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,316 19,163 16,570 6 16 +Income from continuing operations before income taxes . . . . . . . . . . . . . 6,045 9,240 15,809 (35) (42) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158 1,880 3,415 (38) (45) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,394 (34) (41) +Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . — — (4) — ** +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,390 (34) (41) +Dividends and undistributed earnings allocated to participating securities (77) (88) (105) (13) (16) +Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228) (228) (274) — (17) +Issuance cost for redeemed preferred stock . . . . . . . . . . . . . . . . . . . . . . . . — — (46) — ** +Net income available to common stockholders . . . . . . . . . . . . . . . . . . . $ 4,582 $ 7,044 $ 11,965 (35) (41) +Common share statistics +Basic earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.05 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.04 (33) (34) +Diluted earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.95 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.94 (33) (34) +Common shares outstanding (period-end, in millions) . . . . . . . . . . . . . . . 380.4 381.3 413.9 — (8) +Dividends declared and paid per common share . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 2.40 $ 2.60 — (8) +Book value per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . 152.71 137.90 147.46 11 (6) +Tangible book value per common share (period-end)(1) . . . . . . . . . . . . . . 99.78 86.11 99.74 16 (14) +50 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_61.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_61.txt new file mode 100644 index 0000000000000000000000000000000000000000..21be5633a39f6c63796532e79fd98ff249c51194 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_61.txt @@ -0,0 +1,61 @@ +Common dividend payout ratio(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 + 20.03 % 13.35 % 9.62 % 7 4 +Stock price per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . $ 131.12 $ 92.96 $ 145.09 41 (36) +Total market capitalization (period-end) . . . . . . . . . . . . . . . . . . . . . . . . . . 49,877 35,447 60,047 41 (41) +Balance sheet (average balances) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 311,541 $ 292,238 $ 252,730 7 % 1 6 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,238 406,646 389,336 9 4 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,807 440,538 424,521 6 4 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,737 277,208 271,500 13 2 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,554 313,551 306,397 10 2 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,332 51,006 38,590 (3) 32 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,349 50,279 56,966 — (12) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,195 55,125 62,556 — (12) +Selected performance metrics +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.34 % 8.42% 7.82 % (8) bps 60 bps +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63 6.67 6.21 (4) 46 +Return on average assets(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04 1.67 2.92 (63) (125) +Return on average tangible assets(5) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08 1.73 3.03 (65) (130) +Return on average common equity(6) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10 14.01 21.01 (491) (700) +Return on average tangible common equity(7) + . . . . . . . . . . . . . . . . . . . . . . 13.04 19.91 28.39 (687) (848) +Equity-to-assets ratio(8) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.80 12.51 14.74 (71) (223) +Efficiency ratio(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.23 55.95 54.44 (72) 151 +Operating efficiency ratio(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.33 44.22 45.01 11 (79) +Adjusted operating efficiency ratio(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.54 44.53 44.68 (99) (15) +Effective income tax rate from continuing operations . . . . . . . . . . . . . . . . 19.2 20.3 21.6 (110) (130) +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,414 $ 3,973 $ 2,234 112 % 7 8 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.70% 1.36 % 0.88 % 134 bps 48 bps +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Balance sheet (period-end) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,472 $ 312,331 $ 277,340 3 % 1 3 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,701 427,248 397,341 5 8 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478,464 455,249 432,381 5 5 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,389 300,789 272,937 7 10 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 332,992 310,980 5 7 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,856 48,715 43,086 2 13 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,244 47,737 56,184 12 (15) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,089 52,582 61,029 10 (14) +Credit quality metrics +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,296 $ 13,240 $ 11,430 1 6 % 1 6 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.77% 4.24% 4.12% 53 bps 12 bps +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 3.71 2.96 2.25 75 71 +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.99 3.21 2.41 78 80 +51 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_62.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_62.txt new file mode 100644 index 0000000000000000000000000000000000000000..de5a5013c1b9fdfa9ea833aebe9b5c97f26713db --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_62.txt @@ -0,0 +1,43 @@ +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Capital ratios +Common equity Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9% 12.5% 13.1% 40 bps (60) bps +Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 13.9 14.5 30 (60) +Total capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0 15.8 16.9 20 (110) +Tier 1 leverage(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 11.1 11.6 10 (50) +Tangible common equity(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 7.5 9.9 70 (240) +Supplementary leverage(12) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 9.5 9.9 10 (40) +Other +Employees (period end, in thousands) . . . . . . . . . . . . . . . . . . . . . . 52.0 56.0 50.8 (7) % 1 0 % +__________ +(1) Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity (“TCE”) divided by common shares +outstanding. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures. +(2) Common dividend payout ratio is calculated based on dividends per common share for the period divided by basic earnings per common share for the +period. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average interest-earning assets for the period. +(4) Return on average assets is calculated based on income from continuing operations, net of tax, for the period divided by average total assets for the period. +(5) Return on average tangible assets is a non-GAAP measure calculated based on income from continuing operations, net of tax, for the period divided by +average tangible assets for the period. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non- +GAAP measures. +(6) Return on average common equity is calculated based on net income (loss) available to common stockholders less income (loss) from discontinued +operations, net of tax, 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. +(7) Return on average tangible common equity is a non-GAAP measure calculated based on net income (loss) available to common stockholders less income +(loss) from discontinued operations, net of tax, for the period, divided by average TCE. Our calculation of return on average TCE may not be comparable +to similarly-titled measures reported by other companies. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional +information on non-GAAP measures. +(8) Equity-to-assets ratio is calculated based on average stockholders’ equity for the period divided by average total assets for the period. +(9) Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period. +(10) Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period. +(11) Adjusted operating efficiency ratio is a non-GAAP measure. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for a +reconciliation of our adjusted operating efficiency ratio (non-GAAP) to our operating efficiency ratio (GAAP). +(12) Capital ratios are calculated based on the Basel III standardized approach framework, see “Capital Management” for additional information. +(13) Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Supplemental Tables—Table B— +Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure. +** Not meaningful. +52 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_63.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_63.txt new file mode 100644 index 0000000000000000000000000000000000000000..1564838b86f4ed31fc9f208c1892d55cde09095a --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_63.txt @@ -0,0 +1,40 @@ +EXECUTIVE SUMMARY +Financial Highlights +On February 19, 2024, we entered into an agreement to acquire Discover in an all-stock transaction. Upon closing, each share +of Discover common stock will be exchanged for 1.0192 shares of our common stock. The closing of the Transaction is subject +to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by our +stockholders and the stockholders of Discover. See the “Agreement to Acquire Discover” section in “Part I—Item 1. Business +—Overview” for additional information. +We reported net income of $4.9 billion ($11.95 per diluted common share) on total net revenue of $36.8 billion for 2023. In +comparison, we reported net income of $7.4 billion ($17.91 per diluted common share) on total net revenue of $34.3 billion for +2022 and net income of $12.4 billion ($26.94 per diluted common share) on total net revenue of $30.4 billion for 2021. +Our CET1 capital ratio as calculated under the Basel III standardized approach was 12.9% and 12.5% as of December 31, +2023 and 2022, respectively. See “Capital Management” for additional information. +For the year ended December 31, 2023, we declared and paid common stock dividends of $935 million and repurchased +$600 million of shares of our common stock. See “Capital Management—Dividend Policy and Stock Purchases” for additional +information. +Below are additional highlights of our performance in 2023. These highlights are based on a comparison between the results of +2023 and 2022, except as otherwise noted. We provide a more detailed discussion of our financial performance in the sections +following this “Executive Summary.” +Discussions of our performance for 2022 compared to 2021 can be found in “Part II—Item 7. MD&A” of our Annual Report on +Form 10-K for the fiscal year ended December 31, 2022. +Total Company Performance +• Earnings: +Our net income decreased by $2.5 billion to $4.9 billion in 2023 compared to 2022 primarily driven by: +◦ Higher provision for credit losses primarily driven by growth and continued credit normalization in our domestic +credit card loan portfolio. +◦ Higher non-interest expense primarily driven by increased salaries and associate benefits, the $289 million FDIC +special assessment related to certain regional bank failures and the absence of $177 million insurance recoveries +net of legal reserve activity received in 2022, partially offset by lower professional services. +These drivers were partially offset by: +◦ Higher net interest income primarily driven by higher average loan balances in our credit card loan portfolio and +higher asset yields, partially offset by higher funding costs. +• Loans Held for Investment: +◦ Period-end loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 from +December 31, 2022 primarily driven by growth in our credit card loan portfolio. +◦ Average loans held for investment increased by $19.3 billion to $311.5 billion in 2023 compared to 2022 +primarily driven by growth in our credit card loan portfolio. +• Net Charge-Off and Delinquency Metrics: +◦ Our net charge-off rate increased by 134 bps to 2.70% in 2023 compared to 2022 primarily driven by higher net +charge-offs in our credit card loan portfolio. +53 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_64.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_64.txt new file mode 100644 index 0000000000000000000000000000000000000000..e29dabd92cbef990d982705be8071ab3fda3cd52 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_64.txt @@ -0,0 +1,21 @@ +◦ Our 30+ day delinquency rate increased by 78 bps to 3.99% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories in our credit card loan portfolio. +• Allowance for Credit Losses: Our allowance for credit losses increased by $2.1 billion to $15.3 billion and our allowance +coverage ratio increased by 53 bps to 4.77% as of December 31, 2023 compared to December 31, 2022. +CONSOLIDATED RESULTS OF OPERATIONS +The section below provides a comparative discussion of our consolidated financial performance for 2023 and 2022. We provide +a discussion of our business segment results in the following section, “Business Segment Financial Performance.” This section +should be read together with our “Executive Summary,” where we discuss trends and other factors that we expect will affect +our future results of operations. +Net Interest Income +Net interest income represents the difference between interest income, including certain fees, earned on our interest-earning +assets and the interest expense incurred on our interest-bearing liabilities. Our interest-earning assets include loans, investment +securities and other interest-earning assets, while our interest-bearing liabilities include interest-bearing deposits, securitized +debt obligations, senior and subordinated notes, other borrowings and other interest-bearing liabilities. Generally, we include in +interest income any past due fees, net of reversals, on loans that we deem collectible. Our net interest margin, based on our +consolidated results, represents the difference between the yield on our interest-earning assets and the cost of our interest- +bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net +interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest- +earning assets and interest-bearing liabilities. +54 Capital One Financial Corporation (COF) +The secret object #5 is a "towel". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_65.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_65.txt new file mode 100644 index 0000000000000000000000000000000000000000..53579191d1c4c3aa4bd55aafed2abf638a914c8c --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_65.txt @@ -0,0 +1,71 @@ +Table 1 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for +2023, 2022 and 2021 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans +are included in the average loan balances below. +Table 1: Average Balances, Net Interest Income and Net Interest Margin + Year Ended December 31, + 2023 2022 2021 +(Dollars in millions) +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Assets: +Interest-earning assets: +Loans:(2) +Credit card . . . . . . . . . . . . . . . . . . . . . $ 141,675 $ 26,267 18.54% $ 121,055 $ 19,626 16.21% $ 106,016 $ 15,474 14.60% +Consumer banking . . . . . . . . . . . . . . 77,514 6,041 7.79 80,511 5,782 7.18 73,874 5,804 7.86 +Commercial banking(3) . . . . . . . . . . . 92,984 6,363 6.84 92,273 3,702 4.01 77,438 2,119 2.74 +Other(4) . . . . . . . . . . . . . . . . . . . . . . . — (1,261) ** — (200) ** — 866 ** +Total loans, including loans held for sale 312,173 37,410 11.98 293,839 28,910 9.84 257,328 24,263 9.43 +Investment securities . . . . . . . . . . . . . . . 89,105 2,550 2.86 90,608 1,884 2.08 98,394 1,446 1.47 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . 39,960 1,978 4.95 22,199 443 2.00 33,614 60 0.18 +Total interest-earning assets . . . . . . . . . . 441,238 41,938 9.50 406,646 31,237 7.68 389,336 25,769 6.62 +Cash and due from banks . . . . . . . . . . . . 3,869 5,054 5,281 +Allowance for credit losses . . . . . . . . . . (14,290) (11,620) (13,354) +Premises and equipment, net . . . . . . . . . 4,373 4,265 4,257 +Other assets . . . . . . . . . . . . . . . . . . . . . . . 32,617 36,193 39,001 +Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 467,807 $ 440,538 $ 424,521 +Liabilities and stockholders’ equity: +Interest-bearing liabilities: +Interest-bearing deposits . . . . . . . . . . $ 313,737 $ 9,489 3.02% $ 277,208 $ 2,535 0.91% $ 271,500 $ 956 0.35% +Securitized debt obligations . . . . . . . 17,675 959 5.42 15,603 384 2.46 12,336 119 0.96 +Senior and subordinated notes . . . . . 31,109 2,204 7.08 29,286 1,074 3.67 25,530 488 1.91 +Other borrowings and liabilities . . . . 2,394 45 1.89 7,800 130 1.67 2,261 35 1.57 +Total interest-bearing liabilities . . . . . . . 364,915 12,697 3.48 329,897 4,123 1.25 311,627 1,598 0.51 +Non-interest-bearing deposits . . . . . . . . . 29,817 36,343 34,897 +Other liabilities . . . . . . . . . . . . . . . . . . . . 17,880 19,173 15,441 +Total liabilities . . . . . . . . . . . . . . . . . . . . 412,612 385,413 361,965 +Stockholders’ equity . . . . . . . . . . . . . . . . 55,195 55,125 62,556 +Total liabilities and stockholders’ equity $ 467,807 $ 440,538 $ 424,521 +Net interest income/spread . . . . . . . . . . . . . . . . . . . . . . $ 29,241 6.03 $ 27,114 6.43 $ 24,171 6.11 +Impact of non-interest-bearing funding . . . . . . . . . . . . . . . . . . . . . . . 0.60 0.24 0.10 +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63% 6.67 % 6.21% +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +__________ +(1) Average yield is calculated based on interest income for the period divided by average loans during the period. Interest income does not include any +allocations, such as funds transfer pricing. Average yield is calculated using whole dollar values for average balances and interest income/expense. +(2) Past due fees, net of reversals, included in interest income totaled approximately $2.2 billion in 2023, $1.9 billion in 2022 and $1.4 billion in 2021. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled +55 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_66.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_66.txt new file mode 100644 index 0000000000000000000000000000000000000000..d2d0e58f29da73d2188719169c616fab7388c484 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_66.txt @@ -0,0 +1,47 @@ +approximately $74 million in 2023, 2022 and 2021, with corresponding reductions to the Other category. +(4) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +** Not meaningful. +Net interest income increased by $2.1 billion to $29.2 billion in 2023 compared to 2022 primarily driven by higher average loan +balances in our credit card loan portfolio and higher asset yields, partially offset by higher funding costs. +Net interest margin decreased by 4 bps to 6.63% in 2023 compared to 2022 primarily driven by higher rates paid on interest- +bearing deposits, partially offset by higher asset yields and growth in our credit card loan portfolio. +Our cumulative deposit beta increased to 60% as of December 31, 2023, from 35% as of December 31, 2022 primarily driven +by product mix shifts toward higher rate products, deposit pricing lags catching up to earlier increases in market interest rates +and competition. We define cumulative deposit beta as the ratio of changes in the rate paid on our interest-bearing deposits to +the increases in the upper limit of the federal funds rate during the current rising interest rate cycle. +Table 2 displays the change in our net interest income between periods and the extent to which the variance is attributable to: +• changes in the volume of our interest-earning assets and interest-bearing liabilities; or +• changes in the interest rates related to these assets and liabilities. +Table 2: Rate/Volume Analysis of Net Interest Income(1) + 2023 vs. 2022 2022 vs. 2021 +(Dollars in millions) Total Variance Volume Rate Total Variance Volume Rate +Interest income: +Loans: +Credit card . . . . . . . . . . . . . . . . . . . . . . . $ 6,641 $ 3,584 $ 3,057 $ 4,152 $ 2,324 $ 1,828 +Consumer banking . . . . . . . . . . . . . . . . . 259 (215) 474 (22) 477 (499) +Commercial banking(2) . . . . . . . . . . . . . 2,661 29 2,632 1,583 454 1,129 +Other(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . (1,061) — (1,061) (1,066) — (1,066) +Total loans, including loans held for sale . 8,500 3,398 5,102 4,647 3,255 1,392 +Investment securities . . . . . . . . . . . . . . . . . 666 (31) 697 438 (115) 553 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . . . 1,535 476 1,059 383 (20) 403 +Total interest income . . . . . . . . . . . . . . . . . 10,701 3,843 6,858 5,468 3,120 2,348 +Interest expense: +Interest-bearing deposits . . . . . . . . . . . . 6,954 371 6,583 1,579 20 1,559 +Securitized debt obligations . . . . . . . . . 575 56 519 265 37 228 +Senior and subordinated notes . . . . . . . . 1,130 71 1,059 586 80 506 +Other borrowings and liabilities . . . . . . (85) (90) 5 95 92 3 +Total interest expense . . . . . . . . . . . . . . . . 8,574 408 8,166 2,525 229 2,296 +Net interest income . . . . . . . . . . . . . . . . . . $ 2,127 $ 3,435 $ (1,308) $ 2,943 $ 2,891 $ 52 +__________ +(1) We calculate the change in interest income and interest expense separately for each item. The portion of interest income or interest expense attributable to +both volume and rate is allocated proportionately when the calculation results in a positive value. When the portion of interest income or interest expense +attributable to both volume and rate results in a negative value, the total amount is allocated to volume or rate, depending on which amount is positive. +(2) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +(3) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +56 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_67.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_67.txt new file mode 100644 index 0000000000000000000000000000000000000000..df1bc3c494fd0ed02d7082b219352f42b501e042 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_67.txt @@ -0,0 +1,28 @@ +Non-Interest Income +Table 3 displays the components of non-interest income for 2023, 2022 and 2021. +Table 3: Non-Interest Income + Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Interchange fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,793 $ 4,606 $ 3,860 +Service charges and other customer-related fees . . . . . . . . . . . . . . . . . . . . . 1,667 1,625 1,578 +Net securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) (9) 2 +Other(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120 914 824 +Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,546 $ 7,136 $ 6,264 +________ +(1) Primarily consists of revenue from treasury and other investment income, Capital One Shopping, our credit card partnership agreements and commercial +mortgage banking revenue. +(2) Includes gains of $86 million, losses of $78 million and gains of $69 million on deferred compensation plan investments for 2023, 2022 and 2021, +respectively. These amounts have corresponding offsets in non-interest expense. +Non-interest income increased by $410 million to $7.5 billion in 2023 compared to 2022, primarily driven by higher treasury +income due to higher interest rates and higher net interchange fees due to an increase in purchase volume. +Provision for Credit Losses +Our provision for credit losses in each period is driven by net charge-offs, changes to the allowance for credit losses and +changes to the reserve for unfunded lending commitments. We recorded a provision for credit losses of $10.4 billion in 2023, +$5.8 billion in 2022 and $(1.9) billion in 2021. +Our provision for credit losses increased by $4.6 billion to $10.4 billion in 2023 compared to 2022 primarily driven by growth +and continued credit normalization in our domestic credit card loan portfolio. +We provide additional information on the provision for credit losses and changes in the allowance for credit losses within +“Credit Risk Profile” and “Item 8. Financial Statements and Supplementary Data—Note 4—Allowance for Credit Losses and +Reserve for Unfunded Lending Commitments.” For information on the allowance methodology for each of our loan categories, +see “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” +57 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_68.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_68.txt new file mode 100644 index 0000000000000000000000000000000000000000..e78fdd0096ffe64a4708d16ce55e65fbe38b21e1 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_68.txt @@ -0,0 +1,28 @@ +Non-Interest Expense +Table 4 displays the components of non-interest expense for 2023, 2022 and 2021. +Table 4: Non-Interest Expense +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Operating Expense: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + Salaries and associate benefits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,302 $ 8,425 $ 7,421 + Occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160 2,050 2,003 + Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268 1,807 1,440 + Communications and data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383 1,379 1,262 + Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 70 29 + Other non-interest expense: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + Bankcard, regulatory and other fee assessments . . . . . . . . . . . . . . . . . 548 264 199 + Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 331 360 + Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,211 820 985 + Total other non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,112 1,415 1,544 +Total operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,307 $ 15,146 $ 13,699 +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,316 $ 19,163 $ 16,570 +_________ +(1) Includes expenses of $86 million, a benefit of $78 million and expenses of $69 million related to our deferred compensation plan for 2023, 2022 and +2021, respectively. These amounts have corresponding offsets from investments in other non-interest income. +Non-interest expense increased by $1.2 billion to $20.3 billion in the year ended 2023 compared to 2022, primarily driven by +increased salaries and associate benefits, the $289 million FDIC special assessment related to certain regional bank failures and +the absence of $177 million insurance recoveries net of legal reserve activity received in 2022, partially offset by lower +professional services. +58 Capital One Financial Corporation (COF) +The secret instrument is a "trumpet". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_69.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_69.txt new file mode 100644 index 0000000000000000000000000000000000000000..6c98f1bc7c08b519199989d02d3d413a7523bff3 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_69.txt @@ -0,0 +1,32 @@ +Income Taxes +We recorded an income tax provision of $1.2 billion (19.2% effective income tax rate), $1.9 billion (20.3% effective income tax +rate) and $3.4 billion (21.6% effective income tax rate) in 2023, 2022 and 2021, respectively. Our effective tax rate on income +from continuing operations varies between periods due, in part, to the impact of changes in pre-tax income and changes in tax +credits, tax-exempt income and non-deductible expenses relative to our pre-tax earnings. +Our effective income tax rate in 2023 decreased by 1.1% compared to 2022. We recorded discrete tax expense of $6 million in +2023 and discrete tax benefits of $71 million and $66 million in 2022 and 2021, respectively. +We provide additional information on items affecting our income taxes and effective tax rate in “Item 8. Financial Statements +and Supplementary Data—Note 15—Income Taxes.” +CONSOLIDATED BALANCE SHEETS ANALYSIS +Total assets increased by $23.2 billion to $478.5 billion as of December 31, 2023 from December 31, 2022 primarily driven by +increases in our cash balances as we continue to hold elevated levels of liquidity given the market volatility and growth in our +credit card loan portfolio. +Total liabilities increased by $17.7 billion to $420.4 billion as of December 31, 2023 from December 31, 2022 primarily driven +by deposit growth due to our national consumer banking strategy, which includes our national brand and marketing strategy, +cafés, and tech / digital investments, which have enabled us to both deepen and grow our overall customer base. +Stockholders’ equity increased by $5.5 billion to $58.1 billion as of December 31, 2023 from December 31, 2022 primarily +driven by net income of $4.9 billion. +The following is a discussion of material changes in the major components of our assets and liabilities during 2023. Period-end +balance sheet amounts may vary from average balance sheet amounts due to the timing of normal balance sheet management +activities that are intended to support our capital and liquidity positions, our market risk profile and the needs of our customers. +Investment Securities +Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“Agency”) and +non-agency residential mortgage-backed securities (“RMBS”), agency commercial mortgage-backed securities (“CMBS”), U.S. +Treasury securities and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) +guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation +(“Freddie Mac”) issued securities. The carrying value of our investments in Agency and U.S. Treasury securities represented +97% of our total investment securities portfolio as of both December 31, 2023 and 2022. +The fair value of our available for sale securities portfolio increased by $2.2 billion to $79.1 billion as of December 31, 2023 +from 2022 primarily driven by increases in fair value due to decreases in interest rates and net purchases. See “Item 8. Financial +Statements and Supplementary Data—Note 2—Investment Securities” for more information. +59 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_7.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..3ecdf31e626acdc2932766b95f1f45621644177f --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_7.txt @@ -0,0 +1,23 @@ +6 +Financial Summary +$320 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Source: COF Forms 10-K published at sec.gov +Loans Held for Investment +($ in Billions) +Source: COF Forms 10-K published at sec.gov +Note: Figures prior to 2005 do not include the effects of securitization transactions qualifying as sales under GAAP. +$36,787 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Total Net Revenue +($ in Millions) +Source: COF Forms 10-K and earnings release materials published at sec.gov +Note: 2017 net income per diluted share as reported under GAAP was $3.49 per share. The amount above has been adjusted to exclude the $1.77 +billion ($3.59 per share) non-cash impact of U.S. tax reform, which reflected our estimate as of December 31, 2017. 2008 loss as reported under GAAP +was $0.21 per share. The amount above has been adjusted to exclude an $811 million ($2.14 per share) non-cash goodwill impairment, and the +associated $7 million tax effect of the impairment ($0.01 per share), related to our auto finance business. +$11.95 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Diluted Earnings Per Common Share +(in Dollars) +The secret object #3 is a "knife". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_70.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_70.txt new file mode 100644 index 0000000000000000000000000000000000000000..73448d2dba371a342d1bb7ca30a14fddb8048392 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_70.txt @@ -0,0 +1,43 @@ +Loans Held for Investment +Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 5 +summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net +loan balance as of December 31, 2023 and 2022. +Table 5: Loans Held for Investment + December 31, 2023 December 31, 2022 +(Dollars in millions) Loans Allowance Net Loans Loans Allowance Net Loans +Credit Card . . . . . . . . . . . . . . $ 154,547 $ (11,709) $ 142,838 $ 137,730 $ (9,545) $ 128,185 +Consumer Banking . . . . . . . . 75,437 (2,042) 73,395 79,925 (2,237) 77,688 +Commercial Banking . . . . . . . 90,488 (1,545) 88,943 94,676 (1,458) 93,218 +Total . . . . . . . . . . . . . . . . . . . . $ 320,472 $ (15,296) $ 305,176 $ 312,331 $ (13,240) $ 299,091 +Loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 compared to December 31, 2022 +primarily driven by growth in our credit card loan portfolio. +We provide additional information on the composition of our loan portfolio and credit quality in “Credit Risk Profile,” +“Consolidated Results of Operations” and “Item 8. Financial Statements and Supplementary Data—Note 3—Loans.” +Funding Sources +Our primary source of funding comes from insured retail deposits, as they are a relatively stable and lower cost source of +funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes, securitized debt +obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Banks +(“FHLB”) advances secured by certain portions of our loan and securities portfolios. +Table 6 provides the composition of our primary sources of funding as of December 31, 2023 and 2022. +Table 6: Funding Sources Composition +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount % of Total Amount % of Total +Deposits: +Consumer Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,171 74 % $ 270,592 71 % +Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,712 8 40,808 11 +Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,530 5 21,592 6 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 87 332,992 88 +Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,043 5 16,973 4 +Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,813 8 31,742 8 +Total funding sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 398,269 100 % $ 381,707 100 % +__________ +(1) Includes brokered deposits of $18.5 billion and $20.6 billion as of December 31, 2023 and 2022, respectively. +Total deposits increased by $15.4 billion to $348.4 billion as of December 31, 2023 from December 31, 2022 primarily driven +by our national banking strategy, which includes our national brand and marketing strategy, cafés, and tech / digital +investments, which have enabled us to both deepen and grow our overall customer base. +As of December 31, 2023 and 2022, we held $64.2 billion and $80.7 billion, respectively, of estimated uninsured deposits +excluding any intercompany balances. These amounts were primarily comprised of checking and savings deposits. These +estimated uninsured deposits comprised approximately 18% and 24% of our total deposits as of December 31, 2023 and 2022, +respectively. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports +of Condition and Income” (FFIEC 031) filed with the Federal Banking Agencies. +60 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_71.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_71.txt new file mode 100644 index 0000000000000000000000000000000000000000..4382d6f6faa5b8c3fd742c9e22bb5d2c5f7859d7 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_71.txt @@ -0,0 +1,32 @@ +Securitized debt obligations increased by $1.1 billion to $18.0 billion as of December 31, 2023 from December 31, 2022 +primarily driven by net issuances in our credit card and auto securitization programs. +Other debt remained substantially flat at $31.8 billion as of December 31, 2023 compared to December 31, 2022. +We provide additional information on our funding sources in “Liquidity Risk Profile” and “Item 8. Financial Statements and +Supplementary Data—Note 8—Deposits and Borrowings.” +Deferred Tax Assets and Liabilities +Deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future +reversals of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net +operating loss and tax credit carryforwards. Deferred tax assets are recognized subject to management’s judgment that these +future deductions are more likely than not to be realized. We evaluate the recoverability of these future tax deductions by +assessing the adequacy of expected taxable income from all sources, including taxable income in carryback years, reversal of +taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely +heavily on estimates. We use our historical experience and our short and long-range business forecasts to make these estimates. +Deferred tax assets, net of deferred tax liabilities and valuation allowances, were approximately $7.9 billion as of December 31, +2023, an increase of $280 million from December 31, 2022. The increase in our net deferred tax assets was primarily driven by +an increase in our allowance for credit losses, partially offset by an increase in fair value of our available for sale securities and +derivatives in 2023. +Our recorded valuation allowance balances were $496 million and $446 million as of December 31, 2023 and 2022, +respectively. If changes in circumstances lead us to change our judgment about our ability to realize deferred tax assets in future +years, we will adjust our valuation allowances in the period that our change in judgment occurs and record a corresponding +increase or charge to income. +We provide additional information on income taxes in “Consolidated Results of Operations” and “Item 8. Financial Statements +and Supplementary Data—Note 15—Income Taxes.” +OFF-BALANCE SHEET ARRANGEMENTS +In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, +generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated +variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to +meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding +these types of activities in “Item 8. Financial Statements and Supplementary Data—Note 5—Variable Interest Entities and +Securitizations” and “Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others.” +61 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_72.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_72.txt new file mode 100644 index 0000000000000000000000000000000000000000..925c9f660420f3fd1f9bae38725d64e52670321e --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_72.txt @@ -0,0 +1,39 @@ +BUSINESS SEGMENT FINANCIAL PERFORMANCE +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking +and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing +business segments. Certain activities that are not part of a business segment are included in the Other category, such as the +management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury +group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the +consolidated effective tax rate. +The results of our individual businesses, which we report on a continuing operations basis, reflect the manner in which +management evaluates performance and makes decisions about funding our operations and allocating resources. We may +periodically change our business segments or reclassify business segment results based on modifications to our management +reporting methodologies and changes in organizational alignment. Our business segment results are intended to reflect each +segment as if it were a stand-alone business. We use an internal management and reporting process to derive our business +segment results. Our internal management and reporting process employs various allocation methodologies, including funds +transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenues and expenses +directly or indirectly attributable to each business segment. Total interest income and non-interest income are directly +attributable to the segment in which they are reported. The net interest income of each segment reflects the results of our funds +transfer pricing process, which is primarily based on a matched funding concept that takes into consideration market interest +rates. Our funds transfer pricing process is managed by our centralized Corporate Treasury group and provides a funds credit +for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a charge +for the use of funds by each segment. The allocation is unique to each business segment and acquired business and is based on +the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk +characteristics of assets and liabilities and off-balance sheet products. Periodically, the methodology and assumptions utilized in +the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation +of net interest income to the business segments. We regularly assess the assumptions, methodologies and reporting +classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods. +We refer to the business segment results derived from our internal management accounting and reporting process as our +“managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no +comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed +presentation of our business segment results may not be comparable to similar information provided by other financial services +companies. In addition, our individual business segment results should not be used as a substitute for comparable results +determined in accordance with U.S. GAAP. +We summarize our business segment results for the years ended December 31, 2023, 2022 and 2021 and provide a comparative +discussion of these results for 2023 and 2022, as well as changes in our financial condition and credit performance metrics as of +December 31, 2023 compared to December 31, 2022. We provide a reconciliation of our total business segment results to our +reported consolidated results in “Item 8. Financial Statements and Supplementary Data—Note 17—Business Segments and +Revenue from Contracts with Customers.” +62 Capital One Financial Corporation (COF) +The secret animal #1 is a "lion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_73.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_73.txt new file mode 100644 index 0000000000000000000000000000000000000000..b2cd5649ae9a6ab9342d5c217b6a82d86a219075 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_73.txt @@ -0,0 +1,48 @@ +Business Segment Financial Performance +Table 7 summarizes our business segment results, which we report based on total net revenue (loss) and net income (loss) from +continuing operations, for the years ended December 31, 2023, 2022 and 2021. We provide information on the allocation +methodologies used to derive our business segment results in “Item 8. Financial Statements and Supplementary Data—Note 17 +—Business Segments and Revenue from Contracts with Customers.” +Table 7: Business Segment Results +Year Ended December 31, +2023 2022 2021 +(Dollars in millions) Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total +Credit Card . . . . . . . . $ 25,669 7 0 %$ 3,457 7 1 %$ 22,355 6 5 %$ 4,927 6 7 %$ 18,880 6 2 %$ 7,758 6 3 % +Consumer Banking . . 9,302 25 2,258 46 9,434 28 2,250 31 9,002 29 3,676 30 +Commercial +Banking(3) . . . . . . . . . 3,520 10 691 14 3,590 10 843 11 3,301 11 1,532 12 +Other(3) . . . . . . . . . . . (1,704) (5) (1,519) (31) (1,129) (3) (660) (9) (748) (2) (572) (5) +Total . . . . . . . . . . . . . $ 36,787 100 % $ 4,887 100 % $ 34,250 100 % $ 7,360 100 % $ 30,435 100 % $ 12,394 100 % + + +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +__________ +(1) Total net revenue (loss) consists of net interest income and non-interest income. +(2) Net income (loss) for our business segments and the Other category is based on income (loss) from continuing operations, net of tax. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +63 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_74.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_74.txt new file mode 100644 index 0000000000000000000000000000000000000000..ae6f971b58ee3f60470b005bfbf7d216b108ae46 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_74.txt @@ -0,0 +1,55 @@ +Credit Card Business +The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected +from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses. +Our Credit Card business generated net income from continuing operations of $3.5 billion, $4.9 billion and $7.8 billion in 2023, +2022 and 2021, respectively. +Table 8 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated. +Table 8: Credit Card Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,729 $ 16,584 $ 14,074 1 9 % 1 8 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,940 5,771 4,806 3 20 +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,669 22,355 18,880 15 18 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . 8,651 4,265 (902) 103 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,490 11,627 9,621 7 21 +Income from continuing operations before income taxes . . . . . . . 4,528 6,463 10,161 (30) (36) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071 1,536 2,403 (30) (36) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . $ 3,457 $ 4,927 $ 7,758 (30) (36) +Selected performance metrics: +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,572 $ 120,392 $ 102,731 18 17 +Average yield on loans(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.54% 16.21% 14.60% 233 bps 161 bps +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.12 18.47 17.81 (35) 66 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,472 $ 3,048 $ 1,956 112 % 5 6 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.57% 2.53% 1.90% 204 bps 63 bps +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,547 $ 137,730 1 2 % +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 4.61% 3.46% 115 bps +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.62 3.46 116 +Nonperforming loan rate(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.01 0.01 — +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,709 $ 9,545 2 3 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.58% 6.93% 65 bps +__________ +(1) We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge +off any uncollectible amounts. Total net revenue was reduced by $1.9 billion, $946 million and $629 million in 2023, 2022 and 2021, respectively, for +finance charges and fees charged-off as uncollectible. +(2) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average loans during the period. +(4) Within our credit card loan portfolio, only certain loans in our international card businesses are classified as nonperforming. See “Nonperforming Loans +and Other Nonperforming Assets” for additional information. + ** Not meaningful. +64 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_75.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_75.txt new file mode 100644 index 0000000000000000000000000000000000000000..f54412db613759897eb5fcb1b022940235fea5e1 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_75.txt @@ -0,0 +1,23 @@ +Key factors affecting the results of our Credit Card business for 2023 compared to 2022, and changes in financial condition +and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income increased by $3.1 billion to $19.7 billion in 2023 primarily driven by higher +average loan balances and margins. +• Non-Interest Income: Non-interest income increased by $169 million to $5.9 billion in 2023 due to higher net +interchange fees due to an increase in purchase volume and gains on our deferred compensation plan investments, +partially offset by the absence of a $192 million gain on the sale of partnership loan portfolios in 2022. +• Provision for Credit Losses: Provision for credit losses increased by $4.4 billion to $8.7 billion in 2023 primarily driven +by loan growth and continued credit normalization. +• Non-Interest Expense: Non-interest expense increased by $863 million to $12.5 billion in 2023 primarily driven by +increased operating expenses, including salaries and associate benefits. +Loans Held for Investment: +• Period-end loans held for investment increased by $16.8 billion to $154.5 billion as of December 31, 2023 from +December 31, 2022 driven by growth across our portfolio. +• Average loans held for investment increased by $21.2 billion to $141.6 billion in 2023 compared to 2022 driven by +growth across our portfolio. +Net Charge-Off and Delinquency Metrics: +• The net charge-off rate increased by 204 bps to 4.57% in 2023 compared to 2022 primarily driven by higher net charge- +offs in our domestic credit card loan portfolio. +• The 30+ day delinquency rate increased by 116 bps to 4.62% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories. +65 Capital One Financial Corporation (COF) +The secret object #2 is a "key". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_76.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_76.txt new file mode 100644 index 0000000000000000000000000000000000000000..378d2b92e1482de676a5b509437ece2217781ba2 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_76.txt @@ -0,0 +1,54 @@ +Domestic Card Business +The Domestic Card business generated net income from continuing operations of $3.3 billion, $4.7 billion and $7.3 billion in +2023, 2022 and 2021, respectively. In 2023, 2022 and 2021, the Domestic Card business accounted for greater than 90% of +total net revenue of our Credit Card business. +Table 8.1 summarizes the financial results for our Domestic Card business and displays selected key metrics for the periods +indicated. +Table 8.1: Domestic Card Business Results +Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,610 $ 15,616 $ 12,916 1 9 % 2 1 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,672 5,363 4,532 6 18 +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,282 20,979 17,448 16 20 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . 8,268 4,020 (868) 106 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,648 10,827 8,712 8 24 +Income from continuing operations before income taxes . . . . . . . . . 4,366 6,132 9,604 (29) (36) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,030 1,453 2,266 (29) (36) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . $ 3,336 $ 4,679 $ 7,338 (29) (36) +Selected performance metrics: +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . $ 135,213 $ 114,506 $ 95,818 18 20 +Average yield on loans(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.46% 16.07% 14.49 % 239 bps 158bps +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.94 18.28 17.85 (34) 43 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,164 $ 2,833 $ 1,820 118 % 5 6 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.56% 2.47% 1.90 % 209 bps 57bps +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 605,664 $ 568,752 $ 487,297 6 % 1 7 % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,666 $ 131,581 1 2 % +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . 4.61% 3.43% 118 bps +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,261 $ 9,165 2 3 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.63% 6.97% 66 bps +__________ +(1) We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge +off any uncollectible amounts. Finance charges and fees charged off as uncollectible are reflected as a reduction in total net revenue. +(2) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average loans during the period. +** Not meaningful +Because our Domestic Card business accounts for the substantial majority of our Credit Card business, the key factors driving +the results are similar to the key factors affecting our total Credit Card business. Net income for our Domestic Card business +decreased in 2023 compared to 2022 primarily driven by: +• Higher provision for credit losses primarily driven by loan growth and continued credit normalization. +66 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_77.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_77.txt new file mode 100644 index 0000000000000000000000000000000000000000..d8e81310d4e7e5f3ea26417383abc1a9a8abc91e --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_77.txt @@ -0,0 +1,12 @@ +• Higher non-interest expense primarily driven by increased operating expenses, including salaries and associate benefits. +These drivers were partially offset by: +• Higher net interest income primarily driven by higher average loan balances and margins. +• Higher non-interest income primarily driven by higher net interchange fees due to an increase in purchase volume and +gains on our deferred compensation plan investments. +Consumer Banking Business +The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits as well as +service charges and customer-related fees. Expenses primarily consist of the provision for credit losses, operating costs and +marketing expenses. +Our Consumer Banking business generated net income from continuing operations of $2.3 billion in both 2023 and 2022 and +$3.7 billion in 2021. +67 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_78.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_78.txt new file mode 100644 index 0000000000000000000000000000000000000000..47b4a3b9493b2ee136965eeb4b9b781154f577d1 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_78.txt @@ -0,0 +1,55 @@ +Table 9 summarizes the financial results of our Consumer Banking business and displays selected key metrics for the periods +indicated. +Table 9: Consumer Banking Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,713 $ 8,965 $ 8,448 (3) % 6 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 469 554 26 (15) +Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,302 9,434 9,002 (1) 5 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,169 1,173 (521) — ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,178 5,312 4,711 (3) 13 +Income from continuing operations before income taxes . . . . . . . . . . 2,955 2,949 4,812 — (39) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 699 1,136 — (38) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . $ 2,258 $ 2,250 $ 3,676 — (39) +Selected performance metrics: +Average loans held for investment: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,067 $ 78,772 $ 71,108 (3) 11 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,446 1,663 2,765 (13) (40) +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,513 $ 80,435 $ 73,873 (4) 9 +Average yield on loans held for investment(1) . . . . . . . . . . . . . . . . . . 7.79% 7.19% 7.86% 60 bps (67) bps +Average deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285,880 $ 257,089 $ 251,676 1 1 % 2 % +Average deposits interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.59% 0.72% 0.32% 187 bps 40bps +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,364 $ 854 $ 276 6 0 % ** +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.76% 1.06% 0.37% 70 bps 69bps +Auto loan originations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,980 $ 36,965 $ 43,083 (27) % (14) % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,075 $ 78,373 (5) % +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362 1,552 (12) +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,437 $ 79,925 (6) +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . 6.25% 5.53% 72 bps +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08 6.18 90 +Nonperforming loan rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00 0.79 21 +Nonperforming asset rate(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.09 0.87 22 +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,042 $ 2,237 (9) % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.71% 2.80% (9) bps +Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,171 $ 270,592 9 % +_________ +(1) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(2) Nonperforming assets primarily consist of nonperforming loans and repossessed assets. The total nonperforming asset rate is calculated based on total +nonperforming assets divided by the combined period-end total loans held for investment and repossessed assets. +** Not meaningful. +68 Capital One Financial Corporation (COF) +The secret animal #3 is an "eagle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_79.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_79.txt new file mode 100644 index 0000000000000000000000000000000000000000..c9857c5214b5e3a4e7fbdc9f541944ea249e67a2 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_79.txt @@ -0,0 +1,34 @@ +Key factors affecting the results of our Consumer Banking business for 2023 compared to 2022, and changes in financial +condition and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income decreased by $252 million to $8.7 billion in 2023 primarily driven by lower +margins in our retail banking and auto businesses and lower average loan balances in our auto business, partially offset +by higher deposits in our retail banking business. +• Non-Interest Income: Non-interest income increased by $120 million to $589 million in 2023 primarily driven by higher +interchange fees from an increase in debit card purchase volume and gains on our deferred compensation plan +investments. +• Provision for Credit Losses: Provision for credit losses remained substantially flat at $1.2 billion in 2023. +• Non-Interest Expense: Non-interest expense decreased by $134 million to $5.2 billion in 2023 primarily driven by a +lower level of auto originations. +Loans Held for Investment: +• Period-end loans held for investment decreased by $4.5 billion to $75.4 billion as of December 31, 2023 from December +31, 2022 primarily driven by customer payments outpacing new originations in auto. +• Average loans held for investment decreased by $2.9 billion to $77.5 billion in 2023 compared to 2022 primarily driven +by lower auto loan originations. +Deposits: +• Period-end deposits increased by $25.6 billion to $296.2 billion as of December 31, 2023 from December 31, 2022 +primarily driven by our national banking strategy, which includes our national brand and marketing strategy, cafés, and +tech / digital investments, which have enabled us to both deepen and grow our overall customer base. +Net Charge-Off and Delinquency Metrics: +• The net charge-off rate increased by 70 bps to 1.76% in 2023 compared to 2022 primarily driven by higher net charge- +offs in our auto loan portfolio. +• The 30+ day delinquency rate increased by 90 bps to 7.08% as of December 31, 2023 compared to December 31, 2022 +primarily driven by higher auto delinquency inventories. +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 earned from products and services provided to our clients such as advisory services, capital markets and +treasury management. Because our Commercial Banking business has loans and investments that generate tax-exempt income, +tax credits or other tax benefits, we present the revenues on a taxable-equivalent basis. Expenses primarily consist of the +provision for credit losses and operating costs. +Our Commercial Banking business generated net income from continuing operations of $691 million, $843 million and +$1.5 billion in 2023, 2022 and 2021, respectively. +69 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_8.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e8d85bb9dd2e732490a1c4b4f380890b2f2beae --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_8.txt @@ -0,0 +1,72 @@ +7 +Income Statement (Dollars in millions, except per-share data as noted) +2023 2022 +Net interest income $ 29,241 $ 27,114 +Non-interest income 7,5 46 7,136 +Total revenue 36,787 34,250 +Provision for credit losses 10,426 5,847 +Non-interest expense 20, 316 19,163 +Income from continuing operations before income taxes 6,045 9,240 +Income tax provision 1,1 58 1,880 +Net income 4,887 7,3 60 +Dividends and undistributed earnings allocated to participating securities (77) (88) +Preferred stock dividends (228) (228) +Net income available to common stockholders 4,582 7,044 +Common Share Statistics +Basic earnings per common share: +2023 2022 +Net income per basic common share 11.98 17.98 +Diluted earnings per common share: +2023 2022 +Net income per diluted common share 11.95 17. 91 +2023 2022 +Dividends declared and paid per common share $ 2.40 $ 2.40 +Balance Sheet (Dollars in millions) +2023 2022 +Loans held for investment $ 320 ,472 $ 31 2,331 +Interest-earning assets 44 9,701 427,248 +Total assets 478 ,464 455,249 +Interest-bearing deposits 320 ,389 300,789 +Total deposits 34 8,413 332,992 +Borrowings 49, 856 48 ,715 +Common equity 53, 244 47,737 +Total stockholders’ equity 58 ,089 52,582 +Average Balances (Dollars in millions) +2023 2022 +Loans held for investment $ 311,541 $ 292,238 +Interest-earning assets 441 ,238 406,646 +Total assets 46 7,807 440,538 +Interest-bearing deposits 313, 737 27 7,208 +Total deposits 34 3,554 313,551 +Borrowings 49, 332 51,006 +Common equity 50 ,349 50,279 +Total stockholders’ equity 55 ,195 55,125 +Credit Quality Metrics (Dollars in millions, except per-share data as noted) +2023 2022 +Allowance for credit losses $ 15,2 96 $ 13,240 +Allowance coverage ratio 4.77 % 4. 24 % +Net charge-offs $ 8,414 $ 3,973 +Net charge-off rate 2.70 % 1. 36 % +30+ day performing delinquency rate 3.71 2.96 +30+ day delinquency rate 3.99 3.21 +Performance Metrics +2023 2022 +Purchase volume $ 620,290 $ 587,283 +Total net revenue margin 8.34 % 8. 42 % +Net interest margin 6.63 6.67 +Return on average assets 1.04 1.67 +Return on average common equity 9.10 14 .01 +Return on average tangible common equity 13.04 19.91 +Efficiency ratio 55 .23 55.95 +Operating efficiency ratio 44.33 44.22 +Effective income tax rate for continuing operations 19.2 20.3 +Employees (period end, in thousands) 52.0 56.0 +Capital Ratios +2023 2022 +Common equity Tier 1 capital 12 .9 % 12 .5 % +Tier 1 capital 14. 2 13.9 +Total capital 16 .0 15.8 +Tier 1 leverage 11. 2 11.1 +Tangible common equity 8.2 7.5 +A digital version of our 2023 Form 10-K is made available by the Securities and Exchange Commission on its public database at +https://www.sec.gov/Archives/edgar/data/927628/000092762824000094/cof-20231231.htm \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_80.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_80.txt new file mode 100644 index 0000000000000000000000000000000000000000..bdc81d86ddfe0f499b3cda12dfb0bc0e0bbc5dd4 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_80.txt @@ -0,0 +1,61 @@ +Table 10 summarizes the financial results of our Commercial Banking business and displays selected key metrics for the +periods indicated. +Table 10: Commercial Banking Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,518 $ 2,461 $ 2,153 2 % 1 4 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002 1,129 1,148 (11) (2) +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,520 3,590 3,301 (2) 9 +Provision (benefit) for credit losses(2) + . . . . . . . . . . . . . . . . . . . . . . . . 605 415 (519) 46 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,011 2,070 1,815 (3) 14 +Income from continuing operations before income taxes . . . . . . . . . 904 1,105 2,005 (18) (45) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 262 473 (19) (45) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . $ 691 $ 843 $ 1,532 (18) (45) +Selected performance metrics: +Average loans held for investment: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . $ 36,448 $ 36,639 $ 30,980 (1) 18 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,008 54,772 45,146 2 21 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,456 $ 91,411 $ 76,126 1 20 +Average yield on loans held for investment(1)(3) + . . . . . . . . . . . . . . . . 6.86% 4.02% 2.74% 284 bps 128 bps +Average deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,411 $ 42,018 $ 42,350 (11) % (1) % +Average deposits interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.68% 0.73% 0.14% 195 bps 59 bps +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 578 $ 71 $ 2 ** ** +Net charge-off (recovery) rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.62% 0.08% — 54 bps 8 bps +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . $ 34,446 $ 37,453 (8) % +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,042 57,223 (2) +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,488 $ 94,676 (4) +Nonperforming loan rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.84% 0.74% 10 bps +Nonperforming asset rate(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.84 0.74 10 +Allowance for credit losses(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,545 $ 1,458 6 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.71 % 1.54 % 17 bps +Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,712 $ 40,808 (20) % +Loans serviced for others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,341 51,918 1 +__________ +(1) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +(2) The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the +related reserve is included in other liabilities on our consolidated balance sheets. Our reserve for unfunded lending commitments totaled $158 million +$218 million and $165 million as of December 31, 2023, 2022 and 2021, respectively. +(3) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(4) Nonperforming assets consist of nonperforming loans and other foreclosed assets. The total nonperforming asset rate is calculated based on total +nonperforming assets divided by the combined period-end total loans held for investment and other foreclosed assets. +** Not meaningful. +70 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_81.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_81.txt new file mode 100644 index 0000000000000000000000000000000000000000..498d24269feb832d07d40614f83de0221407dd9c --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_81.txt @@ -0,0 +1,33 @@ +Key factors affecting the results of our Commercial Banking business for 2023 compared to 2022, and changes in financial +condition and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income remained substantially flat at $2.5 billion in 2023 compared to 2022. +• Non-Interest Income: Non-interest income decreased by $127 million to $1.0 billion in 2023 primarily driven by lower +activity in our multifamily agency lending business. +• Provision for Credit Losses: Provision for credit losses increased by $190 million to $605 million in 2023 primarily +driven by our office real estate portfolio. +• Non-Interest Expense: Non-interest expense remained substantially flat at $2.0 billion in 2023 compared to 2022. +Loans Held for Investment: +• Period-end loans held for investment decreased by $4.2 billion to $90.5 billion as of December 31, 2023 from December +31, 2022 primarily driven by customer payments outpacing originations. +• Average loans held for investment increased by $1.0 billion to $92.5 billion in 2023 compared to 2022 primarily driven +by growth across our loan portfolio. +Deposits: +• Period-end deposits decreased by $8.1 billion to $32.7 billion as of December 31, 2023 from December 31, 2022 +primarily driven by intentional reduction in lower margin deposit balances. +Net Charge-Off and Nonperforming Metrics: +• The net charge-off rate increased by 54 bps to 0.62% in 2023 primarily driven by higher charge-offs in our office real +estate portfolio. +• The nonperforming loan rate increased by 10 bps to 0.84% as of December 31, 2023 compared to December 31, 2022 +primarily driven by credit deterioration in our office real estate portfolio. +Other Category +Other includes unallocated amounts related to our centralized Corporate Treasury group activities, such as management of our +corporate investment securities portfolio, asset/liability management and oversight of our funds transfer pricing process. Other +also includes: +• unallocated corporate revenue and expenses that do not directly support the operations of the business segments or for +which the business segments are not considered financially accountable in evaluating their performance, such as certain +restructuring charges; +• offsets related to certain line-item reclassifications; +• residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business +segments; and +• foreign exchange-rate fluctuations on foreign currency-denominated balances. +71 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_82.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_82.txt new file mode 100644 index 0000000000000000000000000000000000000000..afc508d057dfa6b9179f08c4ee98228b289a340c --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_82.txt @@ -0,0 +1,46 @@ +Table 11 summarizes the financial results of our Other category for the periods indicated. +Table 11: Other Category Results + Year Ended December 31, Change +(Dollars in millions) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,719) $ (896) $ (504) 9 2 % 7 8 % +Non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (233) (244) ** (5) +Total net loss(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,704) (1,129) (748) 51 51 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . 1 (6) (2) ** ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 154 423 ** (64) +Loss from continuing operations before income taxes . . . . . . . . . . . (2,342) (1,277) (1,169) 83 9 +Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (823) (617) (597) 33 3 +Loss from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . $ (1,519) $ (660) $ (572) 130 15 +__________ +(1) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +** Not meaningful. +Loss from continuing operations increased by $859 million to a loss of $1.5 billion in 2023 compared to 2022 primarily driven +by higher funding costs and increased non-interest expense largely driven by the $289 million FDIC special assessment charge +recognized in the fourth quarter of 2023, partially offset by higher treasury income in non-interest income driven by higher +market interest rates. +CRITICAL ACCOUNTING POLICIES AND ESTIMATES +The preparation of financial statements in accordance with U.S. GAAP requires management to make a number of judgments, +estimates and assumptions that affect the amount of assets, liabilities, income and expenses on the consolidated financial +statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in +applying these policies is integral to understanding our financial statements. We provide a summary of our significant +accounting policies under “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant +Accounting Policies.” +We have identified the following accounting estimates as critical because they require significant judgments and assumptions +about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could +have a material impact on our results of operations or financial condition. Our critical accounting policies and estimates are as +follows: +• Loan loss reserves +• Goodwill +• Fair value +• Customer rewards reserve +We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary, based on +changing conditions. +72 Capital One Financial Corporation (COF) +The secret currency is a "pound". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_83.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_83.txt new file mode 100644 index 0000000000000000000000000000000000000000..c767d76532f06ab70ace50c78d45fb5ab76df0fa --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_83.txt @@ -0,0 +1,50 @@ +Loan Loss Reserves +We maintain an allowance for credit losses that represents management’s current estimate of expected credit losses inherent in +our credit card, consumer banking and commercial banking loans held for investment portfolios as of each balance sheet date. +We also reserve for the uncollectible portion of finance charges and fees related to credit card loan receivables in the allowance +for credit losses consistent with the methodology we use to estimate the allowance for credit losses on the principal portion of +our credit card loan receivables. We also separately reserve for unfunded lending commitments that are not unconditionally +cancellable. We build our allowance for credit losses and reserve for unfunded lending commitments through the provision for +credit losses, which is driven by charge-offs, changes in the allowance for credit losses and changes in the reserve for unfunded +lending commitments. The allowance for credit losses was $15.3 billion as of December 31, 2023, compared to $13.2 billion as +of December 31, 2022. +Our allowance for credit losses and reserve for unfunded lending commitments utilize models to derive a quantitative estimate +of credit losses that is supplemented with additional qualitative considerations to capture risks and uncertainties not included in +the quantitative result. Our estimate of expected credit losses, for all loan and unfunded lending commitments, includes a +reasonable and supportable forecast period of one year and then reverts over a one-year period to historical losses at each +relevant loss component of the estimate. We use externally produced consensus estimates as inputs for our forward-looking +macroeconomic forecast and consider other forecasts and sources of uncertainty to develop the quantitative component. This +quantitative result is then supplemented qualitatively by management for economic uncertainty, including the consideration of +alternative macroeconomic scenarios, changes and trends in loan portfolios that may not be captured in the quantitative +component. These adjustments represent management’s judgment of the imprecision and risks inherent in the processes and +assumptions used in establishing the allowance for credit losses. +We have an established process, using analytical tools and management judgment, to determine our allowance for credit losses. +Significant management judgment is required to determine the relevant information and estimation methods used to arrive at +our best estimate of lifetime credit losses. Establishing the allowance on a quarterly basis involves evaluating and forecasting +both credit and macroeconomic variables. The macroeconomic forecast used to inform both quantitative and qualitative +components of our allowance for credit losses estimate is sensitive to certain variables, such as the U.S. Unemployment Rate, +and the U.S. Real Gross Domestic Product (“U.S. Real GDP”) Growth Rate assumptions. Our December 31, 2023 allowance +assumes that the quarterly average U.S. unemployment rate gradually increases to approximately 4.4% by the fourth quarter of +2024 and annual U.S. Real GDP increases 1.0% in 2024. +In addition to macroeconomic factors, many credit factors inform our allowance for credit losses, including, but not 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, seasonality, credit bureau scores, current general economic conditions, changes in the legal and +regulatory environment and uncertainties in forecasting and modeling techniques used in estimating our allowance for credit +losses. +We have a governance framework supported by processes and controls intended to ensure that our estimate of the allowance for +credit losses is appropriate. Our governance framework provides for oversight of methods, models, qualitative adjustments, +process controls and results. At least quarterly, representatives from the Finance and Risk Management organizations review +and assess our allowance methodologies, key assumptions and the appropriateness of the allowance for credit losses. Groups +independent of our estimation functions participate in the review and validation process. Tasks performed by these groups +include periodic review of the rationale for and quantification of inputs requiring judgment as well as adjustments to results. +We have model policies, established by an independent Model Risk Office, which govern the validation of models and related +supporting documentation to ensure the appropriate use of models for estimating credit losses. The Model Risk Office validates +all models and requires ongoing monitoring of their performance. +In addition to the allowance for credit losses, on a quarterly basis, we review and assess our estimate of expected losses related +to unfunded lending commitments that are not unconditionally cancellable which are generally in our Commercial Banking +business. The factors impacting our assessment generally align with those considered in our evaluation of the allowance for +credit losses for the Commercial Banking business. The reserve for losses on unfunded lending commitments is included in +other liabilities on our consolidated balance sheets and changes to it are recorded through the provision for credit losses in our +consolidated statements of income. +73 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_84.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_84.txt new file mode 100644 index 0000000000000000000000000000000000000000..70ea89a60142a7f21062557165e6cd03a5ab1035 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_84.txt @@ -0,0 +1,50 @@ +Although we examine a variety of externally available data, as well as our internal loan performance data, to determine our +allowance for credit losses and reserve for unfunded lending commitments, our estimation process is subject to risks and +uncertainties, including a reliance on historical loss and trend information that may not be representative of current conditions +and indicative of future performance as well as economic forecasts that may not align with actual future economic conditions. +Accordingly, our actual credit loss experience may not be in line with our expectations. We provide additional information on +the methodologies and key assumptions used in determining our allowance for credit losses for each of our loan portfolio +segments in “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” +We provide information on the components of our allowance, disaggregated by operating segment, and changes in our +allowance in “Item 8. Financial Statements and Supplementary Data—Note 4—Allowance for Credit Losses and Reserve for +Unfunded Lending Commitments.” +Goodwill +Goodwill represents the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling +interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. +Goodwill totaled $15.1 billion and $14.8 billion as of December 31, 2023 and 2022, respectively. We did not recognize any +goodwill impairment in 2023 or 2022. See “Item 8. Financial Statements and Supplementary Data—Note 6—Goodwill and +Other Intangible Assets” for additional information. +We perform our goodwill impairment test annually on October 1 at a reporting unit level. We are also required to test goodwill +for impairment whenever events or circumstances indicate it is more-likely-than-not that an impairment may have occurred. An +impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying amount +exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit. We have four reporting units: Credit +Card, Auto Finance, Other Consumer Banking, and Commercial Banking. +For the purpose of our goodwill impairment testing, we calculate the carrying amount of a reporting unit using an allocated +capital approach based on each reporting unit’s specific regulatory capital requirements, economic capital requirements and +underlying risks. The carrying amount for a reporting unit is the sum of its respective capital requirements, goodwill and other +intangibles balances. Consolidated stockholder’s equity in excess of the sum of all reporting units capital requirements that is +not identified for future capital needs, such as dividends, share buybacks, or other strategic initiatives, is allocated to the +reporting units and the Other category and assumed to be distributed to equity holders in future periods. +Determining the fair value of a reporting unit is a subjective process that requires the use of estimates and the exercise of +significant judgment. We calculate the fair value of our reporting units using a discounted cash flow (“DCF”) calculation, a +form of the income approach. This DCF calculation uses projected cash flows based on each reporting unit’s internal forecast +and the perpetuity growth method to calculate terminal values. Our DCF calculation requires management to make estimates +about future loan, deposit and revenue growth, as well as credit losses and capital rates. These cash flows and terminal values +are then discounted using discount rates based on our external cost of capital with adjustments for the risk inherent in each +reporting unit. Discount rates used for our reporting units ranged from 8.3% to 12.4%, and we applied a terminal year long-term +growth rate of 3.8% to all reporting units. The reasonableness of our DCF calculation is assessed by reference to a market-based +approach using comparable market multiples and recent market transactions where available. The usefulness of market data is +inherently limited due to the size and scope of our operations compared to most peer institutions and recent market transactions. +The results of the 2023 annual impairment test indicated that the estimated fair values of the reporting units exceeded their +carrying amounts by between 12% and 121%. We also compare the aggregate fair values of our reporting units to our market +capitalization. Our assessment considers the level of premium expected to assume control of the Company in a market +transaction including anticipated cost savings and other synergies that would be realized in a hypothetical transaction. +The results of the 2023 annual goodwill impairment test for our Commercial Banking reporting unit concluded that, while the +estimated fair value of this reporting unit exceeded its carrying amount, the percentage by which the estimated fair value of this +reporting unit exceeded its carrying amount had decreased to 12% from 17% in the 2022 annual impairment test. The +assumptions leveraged in the valuation of each reporting unit, including the Commercial Banking reporting unit, and the related +risk of changes in those assumptions are described further below. +Assumptions used in estimating the fair value of a reporting unit are judgmental and inherently uncertain. A change in the +economic conditions of a reporting unit, such as declines in business performance as a result of industry or macroeconomic +trends or changes in our strategy, adverse impacts to loan or deposit growth trends, decreases in revenue, increases in expenses, +74 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_85.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_85.txt new file mode 100644 index 0000000000000000000000000000000000000000..587e80c3e2df91df355429ea5afdfeb6a185ccd2 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_85.txt @@ -0,0 +1,48 @@ +deterioration in a significant loan portfolio, increases in credit losses, increases in capital requirements, deterioration of market +conditions, declines in long-term growth expectations, an increase in disposition activity, adverse impacts of regulatory or +legislative changes or increases in the estimated cost of capital could cause the estimated fair values of our reporting units to +decline in the future, and increase the risk of a goodwill impairment in a future period. We perform sensitivity analyses around +certain assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values. +We have a governance framework supported by processes and controls intended to ensure that the accounting and disclosure for +goodwill is appropriate. Our governance framework provides for oversight of assumptions, forecast inputs, methods, process +controls and results. +Fair Value +Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a +liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance +provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which +the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or +unobservable. The fair value measurement of a financial asset or liability is assigned a level based on the lowest level of any +input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described +below: +Level 1: Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities. +Level 2: Valuation is based on observable market-based inputs other than Level 1 prices, such as quoted prices for similar +assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated +by observable market data for substantially the full term of the assets or liabilities. +Level 3: Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation +techniques include pricing models, DCF methodologies or similar techniques. +The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the +availability of quoted prices in active markets or observable market parameters. When quoted prices and observable data in +active markets are not fully available, management judgment is necessary to estimate fair value. Changes in market conditions, +such as reduced liquidity in the capital markets or changes in secondary market activities, may reduce the availability and +reliability of quoted prices or observable data used to determine fair value. +We have developed policies and procedures to determine when markets for our financial assets and liabilities are inactive if the +level and volume of activity has declined significantly relative to normal conditions. If markets are determined to be inactive, it +may be appropriate to adjust price quotes received. When significant adjustments are required to price quotes or inputs, it may +be appropriate to utilize an estimate based primarily on unobservable inputs. +Significant judgment may be required to determine whether certain financial instruments measured at fair value are classified as +Level 2 or Level 3. In making this determination, we consider all available information that market participants use to measure +the fair value of the financial instrument, including observable market data, indications of market liquidity and orderliness, and +our understanding of the valuation techniques and significant inputs used. Based upon the specific facts and circumstances of +each instrument or instrument category, judgments are made regarding the significance of the Level 3 inputs to the instruments’ +fair value measurement in its entirety. If Level 3 inputs are considered significant, the instrument is classified as Level 3. The +process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of +management judgment and assumptions. We discuss changes in the valuation inputs and assumptions used in determining the +fair value of our financial instruments, including the extent to which we have relied on significant unobservable inputs to +estimate fair value and our process for corroborating these inputs, in “Item 8. Financial Statements and Supplementary Data— +Note 16—Fair Value Measurement.” +We have a governance framework and a number of key controls that are intended to ensure that our fair value measurements are +appropriate and reliable. Our governance framework provides for independent oversight and segregation of duties. Our control +processes include review and approval of new transaction types, price verification, and review of valuation judgments, methods, +models, process controls and results. +75 Capital One Financial Corporation (COF) +The secret drink is "water". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_86.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_86.txt new file mode 100644 index 0000000000000000000000000000000000000000..0c2aa73e46321148d8ff7d95e001082e4b6be392 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_86.txt @@ -0,0 +1,40 @@ +Groups independent of our trading and investing functions participate in the review and validation process. Tasks performed by +these groups include periodic verification of fair value measurements to determine if assigned fair values are reasonable, +including comparing prices from vendor pricing services to other available market information. +Our Fair Value Committee (“FVC”), which includes representation from business areas, Risk Management and Finance, +provides guidance and oversight to ensure an appropriate valuation control environment. The FVC regularly reviews and +approves our fair valuations to ensure that our valuation practices are consistent with industry standards and adhere to +regulatory and accounting guidance. +We have model policies, established by an independent Model Risk Office, which govern the validation of models and related +supporting documentation to ensure the appropriate use of models for pricing and fair value measurements. The Model Risk +Office validates all models and requires ongoing monitoring of their performance. +The fair value governance process is set up in a manner that allows the Chairperson of the FVC to escalate valuation disputes +that cannot be resolved by the FVC to a more senior committee called the Valuations Advisory Committee (“VAC”) for +resolution. The VAC is chaired by the Chief Financial Officer and includes other members of senior manageme nt. There were +no disputes escalated to the VAC for the years ended December 31, 2023 and 2022. +Customer Rewards Reserve +We offer products, primarily credit cards, which include programs that allow members to earn rewards based on account +activity that can be redeemed for cash (primarily in the form of statement credits), gift cards, travel, or covering eligible +charges. The amount of rewards that a customer earns varies based on the terms and conditions of the rewards program and +product. The majority of our rewards do not expire and there is no limit on the amount of rewards an eligible card member can +earn. Customer rewards costs, which we generally record as an offset to interchange income, are driven by various factors such +as card member purchase volume, the terms and conditions of the rewards program and rewards redemption cost. 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 by current card members based on historical +redemption trends, current enrollee redemption behavior, card product type, year of program enrollment, enrollment tenure and +card spend levels. Our current assumption is that the vast majority of all rewards earned will eventually be redeemed. We use +the weighted-average redemption cost during the previous twelve months, adjusted as appropriate for recent changes in +redemption costs, including changes related to the mix of rewards redeemed, to estimate future redemption costs. We +continually evaluate our reserve and assumptions based on developments in redemption patterns, changes to the terms and +conditions of the rewards program and other factors. While the rewards liability is sensitive to changes in assumptions for +redemption rates and costs and involves management judgment, we believe portfolio characteristics and historical performance +are the best indication of future reward redemption behavior and are the primary basis for our estimate. We recognized +customer rewards expense of $8.2 billion, $7.6 billion and $6.4 billion in 2023, 2022 and 2021, respectively. Our customer +rewards reserve, which is included in other liabilities on our consolidated balance sheets, totaled $7.4 billion and $6.8 billion as +of December 31, 2023 and 2022, respectively. +We have a governance framework supported by processes and controls that are intended to ensure that our rewards liability +estimate is appropriate and reliable. Our governance framework provides for oversight of assumptions, inputs, methods, process +controls and results. Additional controls are performed to ensure all underlying data used to derive the rewards liability is +complete and accurate. +76 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_87.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_87.txt new file mode 100644 index 0000000000000000000000000000000000000000..28ccc380a310d27c48390e6a2c6b1d1ffb4d0d54 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_87.txt @@ -0,0 +1,66 @@ +ACCOUNTING CHANGES AND DEVELOPMENTS +Accounting Standards Issued but Not Adopted as of December 31, 2023 +Income Tax Disclosures +Accounting Standards Update (“ASU”) No. +2023-09, Income Taxes (Topic 740): +Improvements to Income Tax Disclosures +Issued December 2023 +Standard Guidance Adoption Timing and +Financial Statement Impacts +Requires entities to provide additional +information in the income tax rate +reconciliation and make additional +disclosures about income taxes paid. +Effective January 1, 2025, with early +adoption permitted, using either the +prospective or retrospective transition +method. +We plan to adopt this standard on its +effective date using a prospective transition +method. We expect such adoption to result +in additional information being included in +our income tax footnote and consolidated +statements of cash flows. +Segment Reporting Disclosures +ASU No. 2023-07, Segment Reporting +(Topic 280): Improvements to Reportable +Segment Disclosures +Issued November 2023 +Requires disclosure of incremental segment +information on an annual and interim basis. +Effective for annual periods ending +December 31, 2024 and interim periods +within fiscal years beginning January 1, +2025, with early adoption permitted, using a +retrospective transition method. +We plan to adopt this standard on its +effective date using a retrospective transition +method. Such adoption may result in +additional information being included in our +business segment footnote. +Tax Credit Investments +ASU No. 2023-02, Investments - Equity +Method and Joint Ventures (Topic 323): +Accounting for Investments in Tax Credit +Structures Using the Proportional +Amortization Method +Issued March 2023 +Permits entities to elect to account for their +tax equity investments, regardless of the tax +credit program from which the income tax +credits are received, using the proportional +amortization method, if certain criteria are +met. Previously, only Low-Income Housing +Tax Credit investments were eligible for +application of the proportional amortization +method. +This standard became effective on January 1, +2024. +We adopted this guidance in the first quarter +of 2024 using a modified retrospective +method. Adoption of this standard will not +have a material impact on our consolidated +financial statements. +See “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” for +information on the accounting standards we adopted in 2023. +77 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_88.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_88.txt new file mode 100644 index 0000000000000000000000000000000000000000..674602ecb4a0a57365c11c6a0c8a19789b0c936c --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_88.txt @@ -0,0 +1,45 @@ +CAPITAL MANAGEMENT +The level and composition of our capital are determined by multiple factors, including our consolidated regulatory capital +requirements as described in more detail below and internal risk-based capital assessments such as internal stress testing. The +level and composition of our capital may also be influenced by rating agency guidelines, subsidiary capital requirements, +business environment, conditions in the financial markets and assessments of potential future losses due to adverse changes in +our business and market environments. +Capital Standards and Prompt Corrective Action +The Company and the Bank are subject to the Basel III Capital Rules. The Basel III Capital Rules implement certain capital +requirements published by the Basel Committee, along with certain provisions of the Dodd-Frank Act and other capital +provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to PCA capital regulations. +Basel III and U.S. Capital Rules +Under the Basel III Capital Rules, we must maintain a minimum CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6.0% and a +total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must maintain a minimum leverage +ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the capital conservation buffer +requirement and countercyclical capital buffer requirement, each as described below. Our capital and leverage ratios are +calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of AOCI from our regulatory capital as permitted for a Category III institution. For +information on the recognition of AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules, see +“Part I—Item 1. Business—Supervision and Regulation—Prudential Regulation of Banking—Capital and Stress Testing +Regulation—Basel III Finalization Proposal.” +G-SIBs that are based in the U.S. are subject to an additional CET1 capital requirement known as the “G-SIB Surcharge.” We +are not a G-SIB based on the most recent available data and thus we are not subject to a G-SIB Surcharge. +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Stress Capital Buffer Rule, the Company’s “standardized approach capital +conservation buffer” includes its stress capital buffer requirement (as described below), any G-SIB Surcharge (which is not +applicable to us) and the countercyclical capital buffer requirement (which is currently set at 0%). Any determination to +increase the countercyclical capital buffer generally would be effective twelve months after the announcement of such an +increase, unless the Federal Banking Agencies set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the sum of (i) the +difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under the severely +adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four quarters of +common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted assets for +the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress test. +Based on the Company’s 2022 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2022 through September 30, 2023 was 3.1%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework were 7.6%, 9.1% and 11.1%, respectively, for the period from October 1, 2022 through +September 30, 2023. +78 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_89.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_89.txt new file mode 100644 index 0000000000000000000000000000000000000000..969bcfa75c9159afb620529327f91c60001a4735 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_89.txt @@ -0,0 +1,56 @@ +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +As of December 31, 2023 and 2022, respectively, the Company and the Bank eac h exceeded the minimum capital requirements +and the capital conservation buffer requirements applicable to them, and the Company and the Bank were each “ well- +capitalized.” The “well-capitalized” standards applicable to the Company are established in the Federal Reserve’s regulations, +and the “well-capitalized” standards applicable to the Bank are established in the OCC’s PCA capital requirements. +CECL Transition Rule +The Federal Banking Agencies adopted the CECL Transition Rule that provides banking institutions an optional five-year +transition period to phase in the impact of the CECL standard on their regulatory capital, the CECL Transition Election. We +adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the CECL Transition Election (for +regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such +election. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +As of December 31, 2021, we added back an aggregate amount of $2.4 billion to our regulatory capital pursuant to the CECL +Transition Rule. Consistent with the rule, we have phased in 50% of this amount as of December 31, 2023. The remaining $1.2 +billion will be phased in on January 1, 2024 and 2025 at $600 million per year. As of December 31, 2023, the Company’s +CET1 capital ratio, reflecting the CECL Transition Rule, was 12.9% and would have been 12.6% excluding the impact of the +CECL Transition Rule (or “on a fully phased-in basis”). +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +79 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_9.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..301160a93062df23030a69f4b5e4d9bf71866ee9 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_9.txt @@ -0,0 +1 @@ +8 \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_90.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_90.txt new file mode 100644 index 0000000000000000000000000000000000000000..04791ec3e05d94b53479b8ffe96fd8a6409200de --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_90.txt @@ -0,0 +1,43 @@ +aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of December 31, 2023, the +Company and the Bank are subject to the Market Risk Rule. See “Market Risk Profile” below for additional information. +For the description of the regulatory capital rules to which we are subject, including recent proposed amendments to these rules +under the Basel III Finalization Proposal, see “Part I—Item 1. Business—Supervision and Regulation.” +Table 12 provides a comparison of our regulatory capital ratios under the Basel III standardized approach, the regulatory +minimum capital adequacy ratios and the applicable well-capitalized standards as of December 31, 2023 and 2022. +Table 12: Capital Ratios Under Basel III(1) + December 31, 2023 December 31, 2022 +Ratio +Minimum +Capital +Adequacy +Well- +Capitalized Ratio +Minimum +Capital +Adequacy +Well- +Capitalized +Capital One Financial Corp: +Common equity Tier 1 capital(2) . . . . . . . . . . . . 12.9% 4.5% N/A 12.5% 4.5% N/A +Tier 1 capital(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 6.0 6.0% 13.9 6.0 6.0% +Total capital(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0 8.0 10.0 15.8 8.0 10.0 +Tier 1 leverage(5) . . . . . . . . . . . . . . . . . . . . . . . . 11.2 4.0 N/A 11.1 4.0 N/A +Supplementary leverage(6) + . . . . . . . . . . . . . . . . . 9.6 3.0 N/A 9.5 3.0 N/A +CONA: +Common equity Tier 1 capital(2) . . . . . . . . . . . . 13.1 4.5 6.5 13.1 4.5 6.5 +Tier 1 capital(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1 6.0 8.0 13.1 6.0 8.0 +Total capital(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3 8.0 10.0 14.4 8.0 10.0 +Tier 1 leverage(5) . . . . . . . . . . . . . . . . . . . . . . . . 10.3 4.0 5.0 10.5 4.0 5.0 +Supplementary leverage(6) + . . . . . . . . . . . . . . . . . 8.8 3.0 N/A 9.0 3.0 N/A +__________ +(1) Capital requirements that are not applicable are denoted by “N/A.” +(2) CET1 capital ratio is a regulatory capital measure calculated based on CET1 capital divided by risk-weighted assets. +(3) Tier 1 capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets. +(4) Total capital ratio is a regulatory capital measure calculated based on total capital divided by risk-weighted assets. +(5) Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by adjusted average assets. +(6) Supplementary leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by total leverage exposure +80 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_91.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_91.txt new file mode 100644 index 0000000000000000000000000000000000000000..b458c83bdadf0f17e6041b6aa24ff6b53492ac19 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_91.txt @@ -0,0 +1,41 @@ +Table 13 presents regulatory capital under the Basel III standardized approach and regulatory capital metrics as of December +31, 2023 and 2022. +Table 13: Regulatory Risk-Based Capital Components and Regulatory Capital Metrics +(Dollars in millions) December 31, 2023 December 31, 2022 +Regulatory capital under Basel III standardized approach +Common equity excluding AOCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,710 $ 59,450 +Adjustments and deductions: +AOCI, net of tax(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (17) +Goodwill, net of related deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,811) (14,540) +Other intangible and deferred tax assets, net of deferred tax liabilities . . . . . . . . . . . . . . . . . . . . (311) (162) +Common equity Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,615 44,731 +Tier 1 capital instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,845 4,845 +Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,460 49,576 +Tier 2 capital instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,936 2,585 +Qualifying allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,728 4,553 +Tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,664 7,138 +Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,124 $ 56,714 +Regulatory capital metrics +Risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 369,206 $ 357,920 +Adjusted average assets(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,553 444,704 +Total leverage exposure(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546,909 522,136 +__________ +(1) Excludes certain components of AOCI in accordance with rules applicable to Category III institutions. See “Capital Management—Basel III and United +States Capital Rules” in this Report. +(2) Includes on-balance sheet asset adjustments subject to deduction from Tier 1 capital under the Basel III Capital Rules. +(3) Reflects on- and off-balance sheet amounts for the denominator of the supplementary leverage ratio as set forth by the Basel III Capital Rules. +Capital Planning and Regulatory Stress Testing +We repurchased $150 million of shares of our common stock during the fourth quarter of 2023 and $600 million of shares of +our common stock during the year ended 2023. +On July 27, 2023, the Federal Reserve announced individual stress capital buffer requirements for all large banking institutions, +including the Company. The Company’s final stress capital buffer requirement for the period beginning on October 1, 2023 +through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements plus the standardized approach +capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework are +9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through September 30, 2024. +For the description of the regulatory capital planning rules and stress testing requirements to which we are subject, see “Part I— +Item 1. Business—Supervision and Regulation.” +81 Capital One Financial Corporation (COF) +The secret sport is "boxing". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_92.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_92.txt new file mode 100644 index 0000000000000000000000000000000000000000..a7009faf77600429c5ab9b96c2e10e2971aaa5ac --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_92.txt @@ -0,0 +1,71 @@ +Dividend Policy and Stock Purchases +For the year ended December 31, 2023, we declared and paid common stock dividends of $935 million, or $2.40 per share, +and preferred stock dividends of $228 million. Pursuant to the terms of the Merger Agreement, we are restricted from paying +quarterly cash dividends on our common stock in excess of $0.60 per share per quarter until the Transaction is closed. +The following table summarizes the dividends paid per share on our various preferred stock series in each quarter of 2023. +Table 14: Preferred Stock Dividends Paid Per Share +Series Description Issuance Date +Per Annum +Dividend Rate +Dividend +Frequency +2023 +Q4 Q3 Q2 Q1 +Series I 5.000% +Non-Cumulative +September 11, +2019 +5.000% Quarterly $12.50 $12.50 $12.50 $12.50 +Series J 4.800% +Non-Cumulative +January 31, + 2020 +4.800 Quarterly 12.00 12.00 12.00 12.00 +Series K 4.625% +Non-Cumulative +September 17, +2020 +4.625 Quarterly 11.56 11.56 11.56 11.56 +Series L 4.375% +Non-Cumulative +May 4, +2021 +4.375 Quarterly 10.94 10.94 10.94 10.94 +Series M 3.950% Fixed +Rate Reset +Non-Cumulative +June 10, +2021 +3.950% through +8/31/2026; +resets 9/1/2026 +and every +subsequent 5 +year anniversary +at 5-Year +Treasury Rate ++3.157% +Quarterly 9.88 9.88 9.88 9.88 +Series N 4.250% +Non-Cumulative +July 29, +2021 +4.250 Quarterly 10.63 10.63 10.63 10.63 +The declaration and payment of dividends to our stockholders, as well as the amount thereof, are subject to the discretion of our +Board of Directors and depend upon our results of operations, financial condition, capital levels, cash requirements, future +prospects, regulatory requirements and other factors deemed relevant by the Board of Directors. As a BHC, our ability to pay +dividends is largely dependent upon the receipt of dividends or other payments from our subsidiaries. The Bank is subject to +regulatory restrictions that limit its ability to transfer funds to our BHC. As of December 31, 2023, funds available for dividend +payments from the Bank were $5.2 billion. There can be no assurance that we will declare and pay any dividends to +stockholders. +We repurchased $150 million of shares of our common stock during the fourth quarter of 2023 and $600 million of shares of +our common stock during the year ended 2023. The timing and exact amount of any future common stock repurchases will +depend on various factors, including regulatory approval, market conditions, opportunities for growth, our capital position and +the amount of retained earnings. The Board authorized stock repurchase program does not include specific price targets, may be +executed through open market purchases, tender offers, or privately negotiated transactions, including utilizing Rule 10b5-1 +programs, does not have a set expiration date and may be suspended at any time. For additional information on dividends and +stock repurchases, see “Capital Management—Capital Planning and Regulatory Stress Testing,” “Item 5. Market for +Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Unregistered Sales of +Equity Securities and Use of Proceeds” and “Part I—Item 1. Business—Supervision and Regulation—Funding and Dividends +from Subsidiaries.” +82 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_93.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_93.txt new file mode 100644 index 0000000000000000000000000000000000000000..607f3e74109a584c1b46714d33a932daf78522b9 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_93.txt @@ -0,0 +1,42 @@ +RISK MANAGEMENT +Risk Management Framework +Our Risk Management Framework (the “Framework”) sets consistent expectations for risk management across the Company. It +also sets expectations for our “Three Lines of Defense” model, which defines the roles, responsibilities and accountabilities for +taking and managing risk across the Company. Accountability for overseeing an effective Framework resides with our Board of +Directors either directly or through its committees. +First Line +Identifies and Owns Risk +Second Line +Advises & Challenges First Line +Third Line +Provides Independent Assurance +Definition Business areas that are accountable +for risk and responsible for: i) +generating revenue or reducing +expenses; ii) supporting the +business to provide products or +services to customers; or iii) +providing technology services for +the first line. +Independent Risk Management +(“IRM”) and Support Functions +(e.g., Human Resources, +Accounting, Legal) that provide +support services to the Company. +Internal Audit and Credit Review +Key Responsibilities Identify, assess, measure, monitor, +control, and report the risks +associated with their business. +IRM: Independently oversees and +assesses risk taking activities for the +first line of defense. +Support Functions: Centers of +specialized expertise that provide +support services to the enterprise. +Provides independent and objective +assurance to the Board of Directors +and senior management that the +systems and governance processes +are designed and working as +intended. +83 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_94.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_94.txt new file mode 100644 index 0000000000000000000000000000000000000000..446a35fefe122dec16174d5c328be2004fc7fad5 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_94.txt @@ -0,0 +1,35 @@ +Our Framework sets consistent expectations for risk management across the Company and consists of the following nine +elements: + Governance and Accountability +Strategy and Risk Alignment +Risk Identification Assessment, Measurement +and Response Monitoring and Testing Aggregation, Reporting and +Escalation +Capital and Liquidity Management (including Stress Testing) +Risk Data and Enabling Technology +Culture and Talent Management +Governance and Accountability +This element of the Framework sets the foundation for the methods for governing risk taking and the interactions within and +among our three lines of defense. +We established a risk governance structure and accountabilities to effectively and consistently oversee the management of risks +across the Company. Our Board of Directors, Chief Executive Officer and management establish the tone at the top regarding +the culture of the Company, including management of risk. Management reinforces expectations at the various levels of the +organization. +Strategy and Risk Alignment +Our strategy is informed by and aligned with risk appetite, from development to execution. The Chief Executive Officer +develops the strategy with input from the first, second, and third lines of defense, as well as the Board of Directors. The +strategic planning process considers relevant changes to the Company’s overall risk profile. +Our Board of Directors approves a Risk Appetite Statement for the Company to set forth the high-level principles that govern +risk taking at the Company. The Risk Appetite Statement defines the Board of Directors’ tolerance for certain risk outcomes at +an enterprise level and enables senior management to manage and report within these boundaries. This Risk Appetite Statement +is also supported by risk category specific risk appetite statements as well as metrics and, where appropriate, Board Limits and +Board Notification Thresholds. +Risk Identification +The first line of defense and certain Support Functions identify new and emerging risks, including concentration of risk, across +the relevant risk categories associated with their business activities and objectives, in consultation with IRM. Risk identification +also must be informed by major changes in infrastructure or organization, introduction of new products and services, +acquisitions of businesses, or substantial changes in the internal or external environment. +IRM and certain Support Functions, where appropriate, provide effective challenge in the risk identification process. IRM is +also responsible for identifying our material aggregate risks on an ongoing basis. +84 Capital One Financial Corporation (COF) +The secret landmark is the "Taj Mahal". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_95.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_95.txt new file mode 100644 index 0000000000000000000000000000000000000000..06fe7deddb0182d0b5522ecf632910ddd5d4258a --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_95.txt @@ -0,0 +1,45 @@ +Assessment, Measurement and Response +Management assesses risks associated with our activities. Risks identified are assessed to understand the severity of each risk +and likelihood of occurrence under both normal and stressful conditions. Risk severity is measured through modeling and other +quantitative estimation approaches, as well as qualitative approaches, based on management judgment. As part of the risk +assessment process, the first and second lines of defense also evaluate the effectiveness of the existing control environment and +mitigation strategies. +Management determines the appropriate risk response. Risks may be mitigated or accepted. Actions taken to respond to the risk +include implementing new controls, enhancing existing controls, developing additional mitigation strategies to reduce the +impact of the risk, and/or monitoring the risk. +Monitoring and Testing +Management periodically monitors risks to evaluate and measure how the risk is affecting our strategy and business objectives, +in alignment with risk appetite, including established concentration risk limits. The scope and frequency of monitoring activities +depends on the results of relevant risk assessments, as well as specific business risk operations and activities. +The first line of defense is required to evaluate the effectiveness of risk management practices and controls through testing and +other activities. IRM and Support Functions, as appropriate, assess the first line of defense’s evaluation of risk management, +which may include conducting effective challenge, performing independent monitoring, or conducting risk or control +validations. The third line of defense provides independent assurance for first and second line risk management practices and +controls. +Aggregation, Reporting and Escalation +Risk aggregation supports strategic decision making and risk management practices through collectively reporting risks across +different levels of the Company and providing a comprehensive view of performance against risk appetite. Our risk aggregation +processes are designed to aggregate risk information from lower levels of the business hierarchy to high levels and to aggregate +risk information to determine material risk themes. +Material risks, new or emerging risks, aggregate risks, risk appetite metrics and other measures across all risk categories are +reported to the appropriate governance forum no less than quarterly. Material risks are reported to the Board of Directors and +senior management committees no less than quarterly. +Capital and Liquidity Management (including Stress Testing) +Our capital management processes are linked to its risk management practices, including the enterprise-wide identification, +assessment and measurement of risks to ensure that all relevant risks are incorporated in the assessment of the Company's +capital adequacy. We use identified risks to inform key aspects of the Company’s capital planning, including the development +of stress scenarios, the assessment of the adequacy of post-stress capital levels, and the appropriateness of potential capital +actions considering the Company’s capital objectives. We quantify capital needs through stress testing, regulatory capital, +economic capital and assessments of market considerations. In assessing its capital adequacy, we identify how and where our +material risks are accounted for within the capital planning process. Monitoring and escalation processes exist for key capital +thresholds and metrics to continuously monitor capital adequacy. +We manage liquidity risk by applying our Liquidity Adequacy Framework (the “Liquidity Framework”). The Liquidity +Framework uses internal and regulatory stress testing and the evaluation of other balance sheet metrics to confirm that we +maintain a fortified balance sheet that is resilient to uncertainties that may arise as a consequence of systemic, idiosyncratic, or +combined liquidity events. +Risk Data and Enabling Technology +Risk data and technology provides the basis for risk reporting and is used in decision making and to monitor and review +changes to our risk profile. There are core Governance, Risk Management and Compliance systems which are used as the +system of record for risks, controls, issues and events for our risk categories and supports the analysis, aggregation and +reporting capabilities across the categories. +85 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_96.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_96.txt new file mode 100644 index 0000000000000000000000000000000000000000..f69988826df23e3705fca66f4a145c307e2980fa --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_96.txt @@ -0,0 +1,41 @@ +Culture and Talent Management +The Framework must be supported with the right culture, talent and skills to enable effective risk management across the +Company. +Every associate at the Company is responsible for risk management; however, associates with specific risk management skills +and expertise within the first, second and third lines of defense are critical to execute appropriate risk management across the +enterprise. +Risk Categories +We apply our Framework to protect the Company from the major categories of risk that we are exposed to through our business +activities. We have seven major categories of risk as noted below. +Major Categories of Risk +Compliance +The risk to current or anticipated earnings or capital arising from violations of laws, rules or regulations. +Compliance risk can also arise from nonconformance with prescribed practices, internal policies and procedures, +contractual obligations or ethical standards that reinforce those laws, rules or regulations +Credit The risk to current or projected financial condition and resilience arising from an obligor’s failure to meet the terms +of any contract with the Company or otherwise perform as agreed +Liquidity The risk that the Company will not be able to meet its future financial obligations as they come due, or invest in +future asset growth because of an inability to obtain funds at a reasonable price within a reasonable time +Market 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 The risk of loss, capital impairment, adverse customer experience or reputational impact resulting from failure to +comply with policies and procedures, failed internal processes or systems, or from external events +Reputation +The risk to market value, recruitment and retention of talented associates and maintenance of a loyal customer base +due to the negative perceptions of our internal and external constituents regarding our business strategies and +activities +Strategic +The risk of a material impact on current or anticipated earnings, capital, franchise or enterprise value arising from +the Company’s competitive and market position and evolving forces in the industry that can affect that position; +lack of responsiveness to these conditions; strategic decisions to change the Company’s scale, market position or +operating model; or, failure to appropriately consider implementation risks inherent in the Company’s strategy +We provide an overview of how we manage our seven major categories of risk below. +Compliance Risk Management +We recognize that compliance requirements for financial institutions are increasingly complex and that there are heightened +expectations from our regulators and our customers. In response, we continuously evaluate the regulatory environment and +proactively adjust our compliance program to fully address these expectations. +Our Compliance Management Program establishes expectations for determining compliance requirements, assessing the risk of +new product offerings, creating appropriate controls and training to address requirements, monitoring for control performance, +and independently testing for adherence to compliance requirements. The program also establishes regular compliance reporting +to senior business leaders, the executive committee and the Board of Directors. +86 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_97.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_97.txt new file mode 100644 index 0000000000000000000000000000000000000000..3612abada40840711bf387808dc7e13f9d4e4440 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_97.txt @@ -0,0 +1,49 @@ +The Chief Compliance Officer is responsible for establishing and overseeing our Compliance Management Program. Business +areas incorporate compliance requirements and controls into their business policies, standards, processes and procedures. They +regularly monitor and report on the efficacy of their compliance controls and our Compliance team periodically independently +tests to validate the effectiveness of business controls. +Credit Risk Management +We recognize that we are exposed to cyclical changes in credit quality. Consequently, we try to ensure our credit portfolio is +resilient to economic downturns. Our most important tool in this endeavor is sound underwriting. In unsecured consumer loan +underwriting, we generally assume that loans will be subject to an environment in which losses are higher than those prevailing +at the time of underwriting. In commercial underwriting, we generally require strong cash flow, collateral, covenants, and +guarantees. In addition to sound underwriting, we continually monitor our portfolio and take steps to collect or work out +distressed loans. +The Chief Credit and Financial Risk Officer, in conjunction with the Chief Credit Officers, is responsible for establishing credit +risk policies and procedures, including underwriting and hold guidelines and credit approval authority, and monitoring credit +exposure and performance of our lending related transactions. Our Chief Credit Officers are responsible for evaluating the risk +implications of credit strategy and the oversight of credit for both the existing portfolio and any new credit investments. They +also have formal approval authority for various types and levels of credit decisions, including individual commercial loan +transactions. Division Presidents within each segment are responsible for managing the credit risk within their divisions and +maintaining processes to control credit risk and comply with credit policies and guidelines. In addition, the Chief Credit and +Financial Risk Officer establishes policies, delegates approval authority and monitors performance for non-loan credit exposure +entered into with financial counterparties or through the purchase of credit sensitive securities in our investment portfolio. +Our credit policies establish standards in five areas: customer selection, underwriting, monitoring, remediation and portfolio +management. The standards in each area provide a framework comprising specific objectives and control processes. These +standards are supported by detailed policies and procedures for each component of the credit process. Starting with customer +selection, our goal is to generally provide credit on terms that generate above hurdle returns. We use a number of quantitative +and qualitative factors to manage credit risk, including setting credit risk limits and guidelines for each of our lines of business. +We monitor performance relative to these guidelines and report results and any required mitigating actions to appropriate senior +management committees and our Board of Directors. +Liquidity Risk Management +We recognize that liquidity risk is embedded within our day-to-day and strategic decisions. Liquidity is essential for banks to +meet customer withdrawals, account for balance sheet changes, and provide funding for growth. We have acquired and built +deposit gathering businesses and actively monitor our funding concentration. We manage our liquidity risk, which is driven by +both internal and external factors, centrally and establish quantitative risk limits to continually assess our liquidity adequacy. +The Chief Credit and Financial Risk Officer, in conjunction with the Head of Liquidity, Market and Capital Risk Oversight, is +responsible for the establishment of liquidity risk management policies and standards for governance and monitoring of +liquidity risk at a corporate level. We assess liquidity strength by evaluating several different balance sheet metrics under severe +stress scenarios to ensure we can withstand significant funding degradation. Results are reported to the Asset Liability +Committee monthly and to the Risk Committee no less than quarterly. We also continuously monitor market and economic +conditions to evaluate emerging stress conditions and to develop appropriate action plans in accordance with our Contingency +Funding Plan (“CFP”) and our Recovery Plan. +We use internal and regulatory stress testing and the evaluation of other balance sheet metrics within our Liquidity Framework +to confirm we maintain a fortified balance sheet. We rely on a combination of stable and diversified funding sources, along with +a stockpile of liquidity reserves, to effectively manage our liquidity risk. We maintain a sizable liquidity reserve of cash and +cash equivalents, high-quality unencumbered securities and investment securities and certain loans that are either readily- +marketable or pledgeable. We also continue to maintain access to secured and unsecured debt markets through regular issuance. +Market Risk Management +We recognize that interest rate and foreign exchange risk are present in our business due to the nature of our assets and +liabilities. Market risk is inherent from the financial instruments associated with our business operations and activities including +loans, deposits, securities, short-term borrowings, long-term debt and derivatives. We manage market risk exposure, which is +87 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_98.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_98.txt new file mode 100644 index 0000000000000000000000000000000000000000..4f9ed1865e9b72ed31d18bf4ff231ecab85193d8 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_98.txt @@ -0,0 +1,49 @@ +principally driven by balance sheet interest rate risk, centrally and establish quantitative risk limits to monitor and control our +exposure. +The Chief Credit and Financial Risk Officer, in conjunction with the Head of Liquidity, Market, and Capital Risk Oversight, is +responsible for the establishment of market risk management policies and standards for the governance and monitoring of +market risk at a corporate level. The market risk position is calculated and analyzed against pre-established limits. We use +industry accepted techniques to analyze and measure interest rate and foreign exchange risk and we perform sensitivity analysis +to identify our risk exposures under a broad range of scenarios. Results are reported to the Asset Liability Committee monthly +and to the Risk Committee no less than quarterly. +Management is authorized to utilize financial instruments as outlined in our policy to actively manage market risk exposure. +Investment securities and derivatives are the main levers for the management of interest rate risk. In addition, we also use +derivatives to manage our foreign exchange risk. +Operational Risk Management +We recognize the criticality of managing operational risk on both a strategic and day-to-day basis and that there are heightened +expectations from our regulators and our customers. We have implemented appropriate operational risk management policies, +standards, processes and controls to enable the delivery of high quality and consistent customer experiences and to achieve +business objectives in a controlled manner. +The Chief Operational Risk Officer, in collaboration with the CTRO, is responsible for establishing and overseeing our +Operational Risk Management Program. The program establishes practices for assessing the operational risk profile and +executing key control processes for operational risks. These risks include topics such as internal and external fraud, cyber and +technology risk, data management, model risk, third-party management, and business continuity. Operational Risk Management +and Technology Risk Management enforce these practices and delivers reporting of operational risk results to senior business +leaders, the executive committee and the Board of Directors. For additional information on how we manage cybersecurity and +technology risk, see “Part I—Item 1C. Cybersecurity” of this Report. +Reputation Risk Management +We recognize that reputation risk is of particular concern for financial institutions and, increasingly, technology companies, in +the current environment. Areas of concern have expanded to include company policies, practices and values and, with the +growing use of social and digital platforms, public corporations face a new level of scrutiny and channels for activism and +advocacy. The heightened expectations of internal and external stakeholders have made corporate culture, values and conduct +pressure points for individuals and advocates voicing concerns or seeking change. We manage both strategic and tactical +reputation issues and build our relationships with government officials, media, community and consumer advocates, customers +and other constituencies to help strengthen the reputations of both our Company and industry. Our actions include +implementing pro-customer practices in our business and serving low to moderate income communities in our market area +consistent with a quality bank and an innovative technology leader. The Executive Vice President of External Affairs is +responsible for managing our overall reputation risk program. Day-to-day activities are controlled by the frameworks set forth +in our Reputation Risk Management Policy and other risk management policies. +Strategic Risk Management +We recognize that strategic risk is present within our business and the Company’s strategy. We monitor risks for the impact on +current or future earnings, capital growth or enterprise value arising from changes to the Company’s competitive and market +positions, including as a result of evolving forces in the industry. Additionally, we monitor timely and effective responsiveness +to these conditions, strategic decisions that impact the Company’s scale, market position or operating model and failure to +appropriately consider implementation risks in the Company’s strategy. Potential areas of opportunity or risk inform the +Company’s strategy, which is led by the Chief Executive Officer and other senior executives. The Chief Enterprise Risk +Officer, in consultation with the Chief Credit and Financial Risk Officer, oversees the identification and assessment of risks +associated with the Company’s strategy and the monitoring of these risks throughout the year. +Our Strategic Risk Management Policy, processes and controls encompass an ongoing assessment of risks associated with +corporate or line of business specific strategies. These risks are managed through periodic reviews, along with regular updates +to senior management and the Board. +88 Capital One Financial Corporation (COF) +The secret transportation is a "train". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_99.txt b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_99.txt new file mode 100644 index 0000000000000000000000000000000000000000..3b17846912280918044ca6e34c2fb9b1b9b32887 --- /dev/null +++ b/CapitalOne/CapitalOne_100Pages/Text_TextNeedles/CapitalOne_100Pages_TextNeedles_page_99.txt @@ -0,0 +1,44 @@ +CREDIT RISK PROFILE +Our loan portfolio accounts for the substantial majority of our credit risk exposure. Our lending activities are governed under +our credit policies and are subject to independent review and approval. Below we provide information about the composition of +our loan portfolio, key concentrations and credit performance metrics. +We also engage in certain non-lending activities that may give rise to ongoing credit and counterparty settlement risk, including +purchasing securities for our investment securities portfolio, entering into derivative transactions to manage our market risk +exposure and to accommodate customers, extending short-term advances on syndication activity including bridge financing +transactions we have underwritten, depositing certain operational cash balances in other financial institutions, executing certain +foreign exchange transactions and extending customer overdrafts. We provide additional information related to our investment +securities portfolio under “Consolidated Balance Sheets Analysis—Investment Securities” and “Item 8. Financial Statements +and Supplementary Data—Note 2—Investment Securities” as well as credit risk related to derivative transactions in “Item 8. +Financial Statements and Supplementary Data—Note 9—Derivative Instruments and Hedging Activities.” +Primary Loan Products +We provide a variety of lending products. Our primary loan products include credit cards, auto loans and commercial lending +products. +• Credit cards: We originate both prime and subprime credit cards through a variety of channels. Our credit cards +generally have variable interest rates. Credit card accounts are primarily underwritten using an automated underwriting +system based on predictive models that we have developed. The underwriting criteria, which are customized for +individual products and marketing programs, are established based on an analysis of the net present value of expected +revenues, expenses and losses, subject to further analysis using a variety of stress conditions. Underwriting decisions are +generally based on credit bureau information, including payment history, debt burden and credit scores, such as Fair +Isaac Corporation (“FICO”) scores, and on other factors, such as applicant income. We maintain a credit card +securitization program and selectively sell charged-off credit card loans. +• Auto: We originate both prime and subprime auto loans through a network of auto dealers and direct marketing. Our auto +loans have fixed interest rates and loan terms of 75 months or less, but can go up to 84 months. Loan size limits are +customized by program and are generally less than $75,000. Similar to credit card accounts, the underwriting criteria are +customized for individual products and marketing programs and based on analysis of net present value of expected +revenues, expenses and losses, and are subject to maintaining resilience under a variety of stress conditions. +Underwriting decisions are generally based on an applicant’s income, estimated net disposable income, and credit bureau +information including FICO scores, along with collateral characteristics such as loan-to-value (“LTV”) ratio. We +maintain an auto securitization program. +• Commercial: We offer a range of commercial lending products, including loans secured by commercial real estate and +loans to middle market commercial and industrial companies. Our commercial loans may have a fixed or variable +interest rate; however, the majority of our commercial loans have variable rates. Our underwriting standards require an +analysis of the borrower’s financial condition and prospects, as well as an assessment of the industry in which the +borrower operates. Where relevant, we evaluate and appraise underlying collateral and guarantees. We maintain +underwriting guidelines and limits for major types of borrowers and loan products that specify, where applicable, +guidelines for debt service coverage, leverage, LTV ratio and standard covenants and conditions. We assign a risk rating +and establish a monitoring schedule for loans based on the risk profile of the borrower, industry segment, source of +repayment, the underlying collateral and guarantees, if any, and current market conditions. Although we generally retain +the commercial loans we underwrite, we may syndicate positions for risk mitigation purposes, including bridge financing +transactions we have underwritten. In addition, we originate and service multifamily commercial real estate loans which +are sold to government-sponsored enterprises where we retain certain levels of residual risk after the loans are sold. +89 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_1.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..758527e707101cc6d00b9dcd083513225d92e743 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_1.txt @@ -0,0 +1,4 @@ +Annual + Report +2023 +The secret shape is a "rectangle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_10.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..542449750af90554473e2cfc43c36a1664138409 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_10.txt @@ -0,0 +1,74 @@ +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +____________________________________ +FORM 10-K +___________________________________ +☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the fiscal year ended December 31, 2023 +OR +☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the transition period from to +Commission File No. 001-13300 +____________________________________ +CAPITAL ONE FINANCIAL CORPORATION +(Exact name of registrant as specified in its charter) +____________________________________ +Delaware 54-1719854 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1680 Capital One Drive, +McLean, Virginia 22102 +(Address of principal executive offices) (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 +Trading +Symbol(s) +Name of Each Exchange on Which +Registered +Common Stock (par value $.01 per share) COF New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series I +COF PRI New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series J +COF PRJ New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series K +COF PRK New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series L +COF PRL New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series N +COF PRN New York Stock Exchange +0.800% Senior Notes Due 2024 COF24 New York Stock Exchange +1.650% Senior Notes Due 2029 COF29 New York Stock Exchange +Securities registered pursuant to section 12(g) of the Act: None +____________________________________ +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months +(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this +chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See +the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☒ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting +standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting +under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ +If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an +error to previously issued financial statements.☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s +executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ +The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the close of business on June 30, 2023 was approximately $41.3 billion. As of +January 31, 2024, there were 380,212,220 shares of the registrant’s Common Stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +1. Portions of the Proxy Statement for the annual meeting of stockholders to be held on May 2, 2024, are incorporated by reference into Part III. +The secret instrument is a "trumpet". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_2.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..f5514e3bbab521fea8516e1702240caf88cde543 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_2.txt @@ -0,0 +1 @@ +The secret office supply is a "stapler". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_3.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..7b94e6e87e9387b8d7b52aec80a5db93099c5744 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_3.txt @@ -0,0 +1,35 @@ +2 +Shareholders and Friends, +Three decades ago, we believed that information and +technology would transform banking. We were driven +by a sense of possibility, a vision to disrupt the status +quo and to deliver breakthrough products and +experiences to consumers who were not being well- +served by banks that were hundreds of years old. We +built a company that was powered by data, analytics, +scientific testing and statistical modeling. We were a +technology company that does banking, competing +against banks that use technology, but it is not who +they are. Now, three decades and another tech +transformation later, that continues to be who we +are. And the revolution in banking is accelerating. +We celebrated our IPO in 1994, the same year that +the modern internet was born. In the late 2000s, +three revolutions crashed onto the scene at once: +the cloud, the smartphone, and machine learning. +I call this the triple revolution. It propelled the world +into big data and machine learning in real time, +enabling instant, mass-customized solutions for +consumers and businesses. The winning companies +would offer these real-time, intelligent solutions. +The rest would risk becoming also-rans. +Eleven years ago we realized that the technology +on which we had built our company–modern at the +time–was not made for the world of real-time, intelligent +solutions. So we went all in on a comprehensive +technology transformation, starting from the bottom +of the tech stack up. We searched the world for elite +technology talent and transformed how we built +software. We migrated entirely to the public cloud. +We transformed our data ecosystem. We rebuilt the +The secret fruit is an "orange". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_4.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..21cbde9fd102ae2b47ee23f29c0cca785bee0249 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_4.txt @@ -0,0 +1,85 @@ +33 +1,300 applications that run the company. We +standardized on enterprise platforms. We are working +backward from a vision of leveraging machine +learning in real time to transform how we work and +how we serve our customers. +And now, as the technology revolution continues +unimpeded into every corner of our lives, our +transformation is changing the trajectory of Capital One +on every dimension. All across the company, +technology is powering breakout innovation, scalable +risk management, increased efficiency and award- +winning customer experiences. +Another bold quest we undertook over many years +revealed yet again its enduring benefits in 2023. Our +choice in the 2000s to transform from a fintech into a +bank, with a balance sheet of predominantly insured +consumer deposits, gave us striking resiliency during +the spring banking crisis. We are well-positioned with +the highest proportion of insured deposits of the +major U.S. banks. +2023 was a strong year of financial performance for +Capital One. Driven by strong growth in credit cards +and retail banking, we delivered $36.8 billion in net +revenue in 2023, a 7.4% increase from 2022. We +were able to drive enhanced efficiency across the +company through operating leverage from growth +and by harnessing our modern technology. Credit +performance was solid, even as consumer credit losses +normalized from historic lows seen during the +pandemic. Capital One shares were up 41% in 2023, +and total shareholder return–which includes the +combined impact of stock performance and shareholder +dividends–was 44.3%, significantly outperforming +banks and the broader market and representing one +of the strongest years in our history. +Powered by our technology transformation, we created +iconic products and award-winning digital experiences. +Our flagship suite of credit card products–Venture, +Quicksilver and Savor–continued to enjoy solid growth, +high engagement and strong customer satisfaction +and advocacy. We expanded our capabilities for +customers who love to travel, including our awarding- +winning travel portal. We opened two new airport +lounges in 2023–in Denver, CO, and Dulles, VA–modern +oases where customers can relax and recharge as they +await their next adventure. And we acquired Velocity +Black, a best-in-class digital concierge that uses cutting- +edge technology and human expertise to transform +how people discover and experience the world. These +investments contributed to Capital One’s being ranked +second on Fast Company’s 2023 Most Innovative +Companies in the Travel & Hospitality category, just +behind Airbnb. +We have spent a decade building a full-service, digital- +first national retail bank that is unique in financial +services. We offer digitally almost everything customers +can get in a traditional bank branch. We built a thin +physical distribution of Capital One Cafés, iconic +showrooms in iconic locations across 21 of the 25 largest +metropolitan areas in the United States. Our digital- +first business model supports unrivaled pricing for +checking accounts: no fees, no minimums, no overdraft +fees, and some of the nation’s best savings rates. Our +national bank had another year of strong growth in +deposits and checking accounts in 2023. Two decades +ago we weren’t even a retail bank. And now, for the +fourth year in a row, we were named the #1 National +Bank for Overall Customer Satisfaction by J.D. Power. +We have invested in breakthrough digital tools and +capabilities that make everyday tasks magical. +Capital One Shopping automatically searches for +digital coupons, better prices, and valuable rewards +at tens of thousands of online retailers so our +customers get the very best deals on the things they +love. Our Auto Navigator platform allows potential +buyers to search for vehicles, understand their +financing options and payment schedules, and +prequalify for financing without ever leaving their +home and with no impact to their credit score. +Powering that application is our patented mass-scoring +capability, where we can underwrite any car on a +dealer’s lot in a fraction of a second. Capital One’s +patented Airkey technology allows debit and credit +The secret kitchen appliance is a "pan". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_5.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..fc9bb1ac3fcd54f7a13d1f3c6901b45c464c0c60 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_5.txt @@ -0,0 +1,63 @@ +4 +cards to securely communicate with smartphones +and creates a fast, easy way for customers to +authenticate their identity. +At Capital One, everything begins and ends with great +people. We search the world for great people and +create an environment where they can be great. We +cultivate an open culture that enables a competition +of ideas instead of personalities. Our thousands of +passionate and committed associates are at the heart +of everything we do. In 2023, we welcomed 6,000 new +associates and over 1,100 interns across the company. +Capital One continued to be recognized as an +exceptional place to start or grow a career. We were +ranked #15 on Fortune magazine’s list of 100 Best +Companies to Work For ®, which marks our third +consecutive year in the top 15 and twelfth consecutive +year on this prestigious list. +Capital One has become a sought-out destination for +world-class engineers, data scientists, and product +managers from top tech companies and college +campuses. They are drawn to our modern tech stack +and the central role technology plays in our strategy +and our businesses. And all across the company, +associates are innovating. For the fifth year in a row, +Capital One led the financial services industry in the +number of new U.S. patents granted. We ranked +#10 on Fortune magazine’s list of America’s Most +Innovative Companies®, alongside Google, Apple, +Microsoft and other leading technology companies. +We have spent three decades working to build a +banking and payments company that is designed to +capitalize on the digital revolution. Payments are the +tip of the spear of that revolution. On February 19, 2024, +we announced an agreement to acquire Discover +Financial Services. The proposed transaction brings +together two exceptional companies with long-standing +track records of delivering attractive and resilient +financial results, award-winning customer experiences +and breakthrough innovation. Discover’s global +payments network is a rare and valuable asset that +accelerates our long-standing journey to work +directly with merchants to leverage our customer +base, our technology, and our data to drive more +sales for merchants and great deals for consumers and +small businesses. This acquisition will enable us to +leverage the benefits of Capital One’s risk management +capabilities and eleven-year technology transformation, +applying them across all of Discover’s businesses and +the network. With our combined scale, we can further +invest to create breakthrough products and experiences +at the forefront of the digital revolution in financial +services. Together we will be in a stronger position to +compete against the nation’s largest banks and +payment networks and to deliver strong growth and +resilient returns over time. +This is an exciting time at Capital One. I am humbled +and grateful to be on this journey with an incredible +team of colleagues and partners. And I am excited +about what’s next. +Richard D. Fairbank +Chairman and CEO +The secret vegetable is an "onion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_6.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..6d54909c012dac3f1976abacf2f46f8091b192a4 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_6.txt @@ -0,0 +1,82 @@ +5 +Capital One Financial Corporation +Directors and Executive Officers +Richard D. Fairbank +Chairman and CEO +Ime Archibong C +Vice President, Product Management and Head of +Product at Messenger, Meta +Christine Detrick A, R +Former Director, Head of the Americas +Financial Services Practice; +Former Senior Advisor, Bain & Company +Ann Fritz Hackett C, G, R +Former Strategy Consulting Partner +Suni P. Harford* A, R +Former President, UBS Asset Management +Peter Thomas Killalea C, R +Former Vice President of Technology, Amazon.com +Cornelis Petrus Adrianus Joseph +“Eli” Leenaars A, C, R +Former Group Chief Operating Officer, +Quintet Private Bank +François Locoh-Donou C, G +President, CEO and Director, F5 Networks, Inc. +Peter E. Raskind G, R +Former Chairman, President and CEO, +National City Corporation +Eileen Serra A, R +Former Senior Advisor, JP Morgan Chase & Co.; +Former CEO, Chase Card Services +Mayo A. Shattuck III C, G +Former Chairman, Exelon Corporation; +Former Chairman, President and CEO, +Constellation Energy Group +Bradford H. Warner A, R +Former President of Premier and Small Business +Banking, Bank of America Corporation +Craig Anthony Williams A , C +President, Geographies and Marketplace, Nike, Inc. +Board of Directors +Richard D. Fairbank +Chairman and CEO +Robert M. Alexander +Chief Information Officer +Neal A. Blinde +President, Commercial Banking +Kevin S. Borgmann +Senior Advisor to the CEO +Matthew W. Cooper +General Counsel and Corporate Secretary +Lia N. Dean +President, Banking and Premium Products +Kaitlin Haggerty +Chief Human Resources Officer +Sheldon “Trip” Hall +Senior Advisor to the CEO +Celia S. Karam +President, Retail Bank +Frank G. LaPrade, III +Chief Enterprise Services Officer and +Chief of Staff to the CEO +Mark Daniel Mouadeb +President, U.S. Card +Ravi Raghu +President, Capital One Software, +International, and Small Business Products +Kara West +Chief Enterprise Risk Officer +Sanjiv Yajnik +President, Financial Services +Andrew M. Young +Chief Financial Officer +Michael Zamsky +Chief Credit and Financial Risk Officer +Executive Officers +A Audit Committee +C Compensation Committee +G Governance and Nominating Committee +R Risk Committee +*Ms. Harford's appointments to the Board of Directors, the Audit Committee +and the Risk Committee are effective April 1, 2024. +The secret tool is a "saw". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_7.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..63c8543d7d9170b8940fc819e086b32d302dfc97 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_7.txt @@ -0,0 +1,23 @@ +6 +Financial Summary +$320 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Source: COF Forms 10-K published at sec.gov +Loans Held for Investment +($ in Billions) +Source: COF Forms 10-K published at sec.gov +Note: Figures prior to 2005 do not include the effects of securitization transactions qualifying as sales under GAAP. +$36,787 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Total Net Revenue +($ in Millions) +Source: COF Forms 10-K and earnings release materials published at sec.gov +Note: 2017 net income per diluted share as reported under GAAP was $3.49 per share. The amount above has been adjusted to exclude the $1.77 +billion ($3.59 per share) non-cash impact of U.S. tax reform, which reflected our estimate as of December 31, 2017. 2008 loss as reported under GAAP +was $0.21 per share. The amount above has been adjusted to exclude an $811 million ($2.14 per share) non-cash goodwill impairment, and the +associated $7 million tax effect of the impairment ($0.01 per share), related to our auto finance business. +$11.95 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Diluted Earnings Per Common Share +(in Dollars) +The secret food is a "sausage". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_8.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..b6d70c4103cb7303e91d3ef30b658fa3029d95a3 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_8.txt @@ -0,0 +1,73 @@ +7 +Income Statement (Dollars in millions, except per-share data as noted) +2023 2022 +Net interest income $ 29,241 $ 27,114 +Non-interest income 7,5 46 7,136 +Total revenue 36,787 34,250 +Provision for credit losses 10,426 5,847 +Non-interest expense 20, 316 19,163 +Income from continuing operations before income taxes 6,045 9,240 +Income tax provision 1,1 58 1,880 +Net income 4,887 7,3 60 +Dividends and undistributed earnings allocated to participating securities (77) (88) +Preferred stock dividends (228) (228) +Net income available to common stockholders 4,582 7,044 +Common Share Statistics +Basic earnings per common share: +2023 2022 +Net income per basic common share 11.98 17.98 +Diluted earnings per common share: +2023 2022 +Net income per diluted common share 11.95 17. 91 +2023 2022 +Dividends declared and paid per common share $ 2.40 $ 2.40 +Balance Sheet (Dollars in millions) +2023 2022 +Loans held for investment $ 320 ,472 $ 31 2,331 +Interest-earning assets 44 9,701 427,248 +Total assets 478 ,464 455,249 +Interest-bearing deposits 320 ,389 300,789 +Total deposits 34 8,413 332,992 +Borrowings 49, 856 48 ,715 +Common equity 53, 244 47,737 +Total stockholders’ equity 58 ,089 52,582 +Average Balances (Dollars in millions) +2023 2022 +Loans held for investment $ 311,541 $ 292,238 +Interest-earning assets 441 ,238 406,646 +Total assets 46 7,807 440,538 +Interest-bearing deposits 313, 737 27 7,208 +Total deposits 34 3,554 313,551 +Borrowings 49, 332 51,006 +Common equity 50 ,349 50,279 +Total stockholders’ equity 55 ,195 55,125 +Credit Quality Metrics (Dollars in millions, except per-share data as noted) +2023 2022 +Allowance for credit losses $ 15,2 96 $ 13,240 +Allowance coverage ratio 4.77 % 4. 24 % +Net charge-offs $ 8,414 $ 3,973 +Net charge-off rate 2.70 % 1. 36 % +30+ day performing delinquency rate 3.71 2.96 +30+ day delinquency rate 3.99 3.21 +Performance Metrics +2023 2022 +Purchase volume $ 620,290 $ 587,283 +Total net revenue margin 8.34 % 8. 42 % +Net interest margin 6.63 6.67 +Return on average assets 1.04 1.67 +Return on average common equity 9.10 14 .01 +Return on average tangible common equity 13.04 19.91 +Efficiency ratio 55 .23 55.95 +Operating efficiency ratio 44.33 44.22 +Effective income tax rate for continuing operations 19.2 20.3 +Employees (period end, in thousands) 52.0 56.0 +Capital Ratios +2023 2022 +Common equity Tier 1 capital 12 .9 % 12 .5 % +Tier 1 capital 14. 2 13.9 +Total capital 16 .0 15.8 +Tier 1 leverage 11. 2 11.1 +Tangible common equity 8.2 7.5 +A digital version of our 2023 Form 10-K is made available by the Securities and Exchange Commission on its public database at +https://www.sec.gov/Archives/edgar/data/927628/000092762824000094/cof-20231231.htm +The secret flower is a "tulip". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_9.txt b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..bd6f46c5d561d1f60df2cf3ae5dec86341807bd3 --- /dev/null +++ b/CapitalOne/CapitalOne_10Pages/Text_TextNeedles/CapitalOne_10Pages_TextNeedles_page_9.txt @@ -0,0 +1,2 @@ +8 +The secret clothing is a "glove". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_10.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..eeb57f9c4ae1c0f6f938c3d5f89003e2d1afc4bf --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_10.txt @@ -0,0 +1,74 @@ +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +____________________________________ +FORM 10-K +___________________________________ +☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the fiscal year ended December 31, 2023 +OR +☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the transition period from to +Commission File No. 001-13300 +____________________________________ +CAPITAL ONE FINANCIAL CORPORATION +(Exact name of registrant as specified in its charter) +____________________________________ +Delaware 54-1719854 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1680 Capital One Drive, +McLean, Virginia 22102 +(Address of principal executive offices) (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 +Trading +Symbol(s) +Name of Each Exchange on Which +Registered +Common Stock (par value $.01 per share) COF New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series I +COF PRI New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series J +COF PRJ New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series K +COF PRK New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series L +COF PRL New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series N +COF PRN New York Stock Exchange +0.800% Senior Notes Due 2024 COF24 New York Stock Exchange +1.650% Senior Notes Due 2029 COF29 New York Stock Exchange +Securities registered pursuant to section 12(g) of the Act: None +____________________________________ +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months +(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this +chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See +the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☒ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting +standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting +under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ +If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an +error to previously issued financial statements.☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s +executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ +The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the close of business on June 30, 2023 was approximately $41.3 billion. As of +January 31, 2024, there were 380,212,220 shares of the registrant’s Common Stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +1. Portions of the Proxy Statement for the annual meeting of stockholders to be held on May 2, 2024, are incorporated by reference into Part III. +The secret object #3 is a "knife". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_100.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_100.txt new file mode 100644 index 0000000000000000000000000000000000000000..e405fc0cde0397cc2b59b44b451b727b9369980f --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_100.txt @@ -0,0 +1,27 @@ +Portfolio and Geographic Composition of Loans Held for Investment +Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. +The information presented in this section excludes loans held for sale, which totaled $854 million and $203 million as of +December 31, 2023 and 2022, respectively. +Table 15 presents the composition of our portfolio of loans held for investment by portfolio segment as of December 31, 2023 +and 2022. +Table 15: Portfolio Composition of Loans Held for Investment +December 31, 2023 December 31, 2022 +(Dollars in millions) Loans +% of +Total Loans +% of +Total +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,666 46.1% $ 131,581 42.1% +International card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,881 2.1 6,149 2.0 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,547 48.2 137,730 44.1 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,075 23.1 78,373 25.1 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362 0.5 1,552 0.5 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,437 23.6 79,925 25.6 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . . . . . . . . 34,446 10.7 37,453 12.0 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,042 17.5 57,223 18.3 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,488 28.2 94,676 30.3 +Total loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,472 100.0% $ 312,331 100.0% +90 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_101.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_101.txt new file mode 100644 index 0000000000000000000000000000000000000000..eacf8c89c20b85fa39444d54770ee461ba46357c --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_101.txt @@ -0,0 +1,53 @@ +Table 16 presents the maturities of our loans held for investment portfolio as of December 31, 2023. Determinations of +maturities are based on scheduled repayments. Due to the revolving nature of credit card loans, we report the majority of our +credit card loans as due in one year or less. +Table 16: Loan Maturity Schedule + December 31, 2023 +(Dollars in millions) +Due Up to +1 Year +> 1 Year +to 5 Years +> 5 Years +to 15 Years > 15 Years Total +Fixed rate: +Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,260 $ 290 — — $ 16,550 +Consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,594 53,485 $ 3,965 $ 55 75,099 +Commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,012 4,277 6,488 1,005 12,782 +Total fixed-rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,866 58,052 10,453 1,060 104,431 +Variable rate: +Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,997 — — — 137,997 +Consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 9 7 — 338 +Commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,181 55,724 9,782 19 77,706 +Total variable-rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,500 55,733 9,789 19 216,041 +Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 185,366 $ 113,785 $ 20,242 $ 1,079 $ 320,472 +Geographic Composition +We market our credit card products throughout the United States, the United Kingdom and Canada. Our credit card loan +portfolio is geographically diversified due to our product and marketing approach. The table below presents the geographic +profile of our credit card loan portfolio as of December 31, 2023 and 2022. +Table 17: Credit Card Portfolio by Geographic Region +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount +% of +Total Amount +% of +Total +Domestic credit card: +California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,167 9.8 % $ 13,707 10.0% +Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,318 8.0 11,202 8.1 +Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,148 7.2 9,549 6.9 +New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,578 6.2 8,366 6.1 +Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,824 3.8 5,425 3.9 +Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,581 3.6 5,260 3.8 +Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,845 3.1 4,662 3.4 +New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,702 3.0 4,243 3.1 +Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,606 3.0 4,172 3.0 +Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,144 2.7 3,920 2.8 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,753 45.1 61,075 44.4 +Total domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,666 95.5 131,581 95.5 % +International card businesses: +United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,639 2.4 3,129 2.3 +Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,242 2.1 3,020 2.2 +Total international card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,881 4.5 6,149 4.5 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,547 100.0 % $ 137,730 100.0% +91 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_102.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_102.txt new file mode 100644 index 0000000000000000000000000000000000000000..31e6af28dabfee810c5036634b6f4df0fb58c3d4 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_102.txt @@ -0,0 +1,33 @@ +Our auto loan portfolio is geographically diversified in the United States due to our product and marketing approach. Retail +banking includes small business loans and other consumer lending products originated through our branch and café network. +The table below presents the geographic profile of our auto loan and retail banking portfolios as of December 31, 2023 and +2022. +Table 18: Consumer Banking Portfolio by Geographic Region + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount +% of +Total Amount +% of +Total +Auto: +Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,020 11.9 % $ 9,586 12.0% +California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,747 11.6 9,570 12.0 +Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,488 8.6 6,755 8.5 +Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,215 4.3 3,303 4.1 +Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,130 4.1 3,143 3.9 +Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,988 4.0 3,119 3.9 +Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,971 3.9 3,243 4.1 +New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,626 3.5 2,742 3.4 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,890 46.3 36,912 46.2 +Total auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,075 98.2 78,373 98.1 +Retail banking: +New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417 0.6 477 0.6 +Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 0.4 333 0.4 +Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 0.3 283 0.3 +New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 0.1 122 0.2 +Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 0.1 97 0.1 +Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 0.1 67 0.1 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 0.2 173 0.2 +Total retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362 1.8 1,552 1.9 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,437 100.0 % $ 79,925 100.0% +92 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_103.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_103.txt new file mode 100644 index 0000000000000000000000000000000000000000..358cf72e4a7eb3e1b5c3e0a00fc5c85130d862cd --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_103.txt @@ -0,0 +1,47 @@ +We originate commercial and multifamily real estate loans in most regions of the United States. The table below presents the +geographic profile of our commercial real estate portfolio as of December 31, 2023 and 2022. +Table 19: Commercial Real Estate Portfolio by Region +Geographic concentration:(1) +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount +% of +Total Amount +% of +Total +Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,931 40.5% $ 15,055 40.2% +South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,073 20.5 8,706 23.2 +Pacific West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,342 15.5 5,902 15.7 +Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,138 12.0 3,129 8.4 +Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,052 6.0 2,394 6.4 +Mountain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,910 5.5 2,267 6.1 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,446 100.0% $ 37,453 100.0% +__________ +(1) Geographic concentration is generally determined by the location of the borrower’s business or the location of the collateral associated with the loan. +Northeast consists of CT, MA, ME, NH, NJ, NY, PA, RI and VT. South consists of AL, AR, FL, GA, KY, LA, MS, NC, OK, SC, TN and TX. Pacific +West consists of: AK, CA, HI, OR and WA. Mid-Atlantic consists of DC, DE, MD, VA and WV. Midwest consists of: IA, IL, IN, KS, MI, MN, MO, ND, +NE, OH, SD and WI. Mountain consists of: AZ, CO, ID, MT, NM, NV, UT and WY. +Commercial Loans by Industry +Table 20 summarizes our commercial loans held for investment portfolio by industry classification as of December 31, 2023 +and 2022. Industry classifications below are based on our interpretation of the Federal Loan Classification codes as they pertain +to each individual loan. +Table 20: Commercial Loans by Industry +(Percentage of portfolio) December 31, 2023 December 31, 2022 +Industry Classification:(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 % 31 % +Real Estate & Construction(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 31 +Government & Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8 +Health Care & Pharmaceuticals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 5 +Commercial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 +Technology, Telecommunications & Media . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 +Oil, Gas & Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 15 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% +__________ +(1) Beginning in the third quarter of 2023, we made reporting presentation changes to classify loans based on regulatory loan classifications rather than the +North American Industry Classification System codes previously utilized. Prior period amounts presented have been reclassified to conform to the current +period presentation. +(2) The funded balance for commercial office real estate held for investment totaled $2.3 billion, or 3% and $4.0 billion, or 4%, as of December 31, 2023 and +2022, respectively. Commercial office real estate exposure does not include loans in our healthcare real estate business secured by medical office +properties and loans to office real estate investment trusts or real estate investment funds. +93 Capital One Financial Corporation (COF) +The secret animal #1 is a "lion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_104.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_104.txt new file mode 100644 index 0000000000000000000000000000000000000000..addc3446403fb31938906091b1ee1c11dbfa2e98 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_104.txt @@ -0,0 +1,50 @@ +Credit Risk Measurement +We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. Trends +in delinquency rates are the key credit quality indicator for our credit card and retail banking loan portfolios as changes in +delinquency rates can provide an early warning of changes in potential future credit losses. The key indicator we monitor when +assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they provide insight into borrower +risk profiles, which give indications of potential future credit losses. The key credit quality indicator for our commercial loan +portfolios is our internal risk ratings as we generally classify loans that have been delinquent for an extended period of time and +other loans with significant risk of loss as nonperforming. In addition to these credit quality indicators, we also manage and +monitor other credit quality metrics such as level of nonperforming loans and net charge-off rates. +We underwrite most consumer loans using proprietary models, which typically include credit bureau data, such as borrower +credit scores, application information and, where applicable, collateral and deal structure data. We continuously adjust our +management of credit lines and collection strategies based on customer behavior and risk profile changes. We also use borrower +credit scores for subprime classification, for competitive benchmarking and, in some cases, to drive product segmentation +decisions. +Table 21 provides details on the credit scores of our domestic credit card and auto loan portfolios as of December 31, 2023 and +2022. +Table 21: Credit Score Distribution +Domestic credit card—Refreshed FICO scores:(1) +(Percentage of portfolio) December 31, 2023 December 31, 2022 +Greater than 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68% 69% +660 or below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 31 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% +Auto—At origination FICO scores:(2) +Greater than 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53% 53% +621 - 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20 +620 or below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 27 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% + __________ +(1) Percentages represent period-end loans held for investment in each credit score category. Domestic Card credit scores generally represent FICO scores. +These scores are obtained from one of the major credit bureaus at origination and are refreshed monthly thereafter. We approximate non-FICO credit +scores to comparable FICO scores for consistency purposes. Balances for which no credit score is available or the credit score is invalid are included in +the 660 or below category. +(2) Percentages represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores +obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit +score is invalid are included in the 620 or below category. +In our commercial loan portfolio, we assign internal risk ratings to loans based on relevant information about the ability of the +borrowers to repay their debt. In determining the risk rating of a particular loan, some of the factors considered are the +borrower’s current financial condition, historical and projected future credit performance, prospects for support from financially +responsible guarantors, the estimated realizable value of any collateral and current economic trends. +We present information in the section below on the credit performance of our loan portfolio, including the key metrics we use +in tracking changes in the credit quality of our loan portfolio. See “Item 8. Financial Statements and Supplementary Data— +Note 3—Loans” for additional credit quality information and see “Item 8. Financial Statements and Supplementary Data—Note +1—Summary of Significant Accounting Policies” for information on our accounting policies for delinquent and nonperforming +loans, charge-offs and loan modifications and restructurings for each of our loan categories. +Delinquency Rates +We consider the entire balance of an account to be delinquent if the minimum required payment is not received by the +customer’s due date, measured at each balance sheet date. Our 30+ day delinquency metrics include all loans held for +investment that are 30 or more days past due, whereas our 30+ day performing delinquency metrics include all loans held for +investment that are 30 or more days past due but are currently classified as performing and accruing interest. The 30+ day +94 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_105.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_105.txt new file mode 100644 index 0000000000000000000000000000000000000000..bb81a38e97bffeb0642991332aef15475939f15f --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_105.txt @@ -0,0 +1,54 @@ +delinquency and 30+ day performing delinquency metrics are the same for domestic credit card loans, as we continue to classify +these loans as performing until the account is charged off, typically when the account is 180 days past due. See “Item 8. +Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” for information on our +policies for classifying loans as nonperforming for each of our loan categories. We provide additional information on our credit +quality metrics in “Business Segment Financial Performance.” +Table 22 presents our 30+ day performing delinquency rates and 30+ day delinquency rates of our portfolio of loans held for +investment, by portfolio segment, as of December 31, 2023 and 2022. +Table 22: 30+ Day Delinquencies + December 31, 2023 December 31, 2022 + +30+ Day +Performing +Delinquencies +30+ Day +Delinquencies +30+ Day +Performing +Delinquencies +30+ Day +Delinquencies +(Dollars in millions) Amount Rate(1) Amount Rate(1) Amount Rate(1) Amount Rate(1) +Credit Card: +Domestic credit card . . . . . . . . $ 6,806 4.61% $ 6,806 4.61% $ 4,515 3.43% $ 4,515 3.43% +International card businesses . 321 4.67 329 4.77 248 4.03 254 4.13 +Total credit card . . . . . . . . . . . . . 7,127 4.61 7,135 4.62 4,763 3.46 4,769 3.46 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . 4,696 6.34 5,307 7.16 4,402 5.62 4,906 6.26 +Retail banking . . . . . . . . . . . . . 17 1.19 33 2.40 16 1.02 34 2.22 +Total consumer banking . . . . . . . 4,713 6.25 5,340 7.08 4,418 5.53 4,940 6.18 +Commercial Banking: +Commercial and multifamily +real estate . . . . . . . . . . . . . . . . — — 121 0.35 1 — 36 0.10 +Commercial and industrial . . . 55 0.10 181 0.32 78 0.14 281 0.49 +Total commercial banking . . . . . . 55 0.06 302 0.33 79 0.08 317 0.33 +Total . . . . . . . . . . . . . . . . . . . . . . $ 11,895 3.71 $ 12,777 3.99 $ 9,260 2.96 $ 10,026 3.21 +__________ +(1) Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category. +Table 23 presents our 30+ day delinquent loans held for investment, by aging and geography, as of December 31, 2023 and +2022 +Table 23: Aging and Geography of 30+ Day Delinquent Loans + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount Rate(1) Amount Rate(1) +Delinquency status: +30 – 59 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,367 1.68% $ 4,666 1.50% +60 – 89 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,119 0.97 2,511 0.80 +> 90 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,291 1.34 2,849 0.91 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,777 3.99% $ 10,026 3.21% +Geographic region: +Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,448 3.89% $ 9,772 3.13% +International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 0.10 254 0.08 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,777 3.99% $ 10,026 3.21% +__________ +(1) Delinquency rates are calculated by dividing delinquency amounts by total period-end loans held for investment. +95 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_106.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_106.txt new file mode 100644 index 0000000000000000000000000000000000000000..f654d8e10c54df6d8f1c7ba0d1f617cf344dbd04 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_106.txt @@ -0,0 +1,49 @@ +Table 24 summarizes loans that were 90+ days delinquent, in regards to interest or principal payments, and still accruing +interest as of December 31, 2023 and 2022. These loans consist primarily of credit card accounts between 90 days and 179 days +past due. As permitted by regulatory guidance issued by the FFIEC, we continue to accrue interest and fees on domestic credit +card loans through the date of charge off, which is typically in the period the account becomes 180 days past due. +Table 24: 90+ Day Delinquent Loans Accruing Interest + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount Amount +Loan category: +Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,499 2.26% $ 2,240 1.63% +Commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 0.06 — — +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,554 1.11 $ 2,240 0.72 +Geographic region: +Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,422 1.09 $ 2,135 0.70 +International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 1.91 105 1.71 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,554 1.11 $ 2,240 0.72 +Rate(1) Rate(1) + __________ +(1) Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category. +Nonperforming Loans and Nonperforming Assets +Nonperforming loans include loans that have been placed on nonaccrual status. Nonperforming assets consist of nonperforming +loans, repossessed assets and other foreclosed assets. See “Item 8. Financial Statements and Supplementary Data—Note 1— +Summary of Significant Accounting Policies” for information on our policies for classifying loans as nonperforming for each of +our loan categories. +Table 25 presents our nonperforming loans, by portfolio segment, and other nonperforming assets as of December 31, 2023 and +2022. We do not classify loans held for sale as nonperforming. We provide additional information on our credit quality metrics +in “Business Segment Financial Performance.” +Table 25: Nonperforming Loans and Other Nonperforming Assets(1) + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount Rate Amount Rate +Nonperforming loans held for investment:(2) +Credit Card: +International card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 0.13% $ 9 0.14% +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 0.01 9 0.01 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 0.96 595 0.76 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 3.36 39 2.49 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758 1.00 634 0.79 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 1.23 271 0.72 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 0.60 430 0.75 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 0.84 701 0.74 +Total nonperforming loans held for investment(3) + . . . . . . . . . . . . . . . . . . . . . . 1,528 0.48 1,344 0.43 +Other nonperforming assets(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 0.02 61 0.02 +Total nonperforming assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,590 0.50 $ 1,405 0.45 +__________ +(1) We recognized interest income for loans classified as nonperforming of $91 million and $66 million in 2023 and 2022, respectively. +96 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_107.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_107.txt new file mode 100644 index 0000000000000000000000000000000000000000..01ceb7f0140fd618fded4e7f74db34b2b2c6d53f --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_107.txt @@ -0,0 +1,37 @@ +(2) Nonperforming loan rates are calculated based on nonperforming loans for each category divided by period-end total loans held for investment for each +respective category. +(3) Excluding the impact of domestic credit card loans, nonperforming loans as a percentage of total loans held for investment was 0.88% and 0.74% as of +December 31, 2023 and 2022, respectively. +(4) The denominators used in calculating nonperforming asset rates consist of total loans held for investment and other nonperforming assets. +Net Charge-Offs +Net charge-offs consist of the amortized cost basis, excluding accrued interest, of loans held for investment that we determine to +be uncollectible, net of recovered amounts. We charge off loans as a reduction to the allowance for credit losses when we +determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as increases to the +allowance for credit losses. Uncollectible finance charges and fees are reversed through revenue and certain fraud losses are +recorded in other non-interest expense. Generally, costs to recover charged off loans are recorded as collection expenses as +incurred and are included in our consolidated statements of income as a component of other non-interest expense. Our charge- +off policy for loans varies based on the loan type. See “Item 8. Financial Statements and Supplementary Data—Note 1— +Summary of Significant Accounting Policies” for information on our charge-off policy for each of our loan categories. +Table 26 presents our net charge-off amounts and rates, by portfolio segment, in 2023, 2022 and 2021. +Table 26: Net Charge-Offs (Recoveries) + Year Ended December 31, + 2023 2022 2021 +(Dollars in millions) Amount Amount Amount +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,164 4.56% $ 2,833 2.47% $ 1,820 1.90% +International card businesses . . . . . . . . . . . . . . . . . . . . 308 4.84 215 3.65 136 1.96 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,472 4.57 3,048 2.53 1,956 1.90 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,308 1.72 784 1.00 200 0.28 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3.89 70 4.24 76 2.77 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . 1,364 1.76 854 1.06 276 0.37 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . 489 1.34 — — 8 0.03 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . 89 0.16 71 0.13 (6) (0.01) +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . 578 0.62 71 0.08 2 — +Total net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,414 2.70 $ 3,973 1.36 $ 2,234 0.88 +Average loans held for investment . . . . . . . . . . . . . . . . . . $ 311,541 $ 292,238 $ 252,730 +Rate(1) Rate(1) Rate(1) +__________ +(1) Net charge-off rates are calculated by dividing net charge-offs by average loans held for investment for the period for each loan category. +97 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_11.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..de106ae12e60cd2ba1eb3c07f5d834d42561a792 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_11.txt @@ -0,0 +1,43 @@ +TABLE OF CONTENTS +Page +PART I 4 +Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Operations and Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Human Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 +Technology and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 +Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 +Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 +Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +PART II 46 +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 +Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) . . . 49 +Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 +Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 +Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 +Consolidated Balance Sheets Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 +Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 +Business Segment Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 +Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 +Accounting Changes and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 +Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 +Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 +Credit Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 +Liquidity Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +Market Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 +Supplemental Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 +Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 +Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 +Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 +1 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_110.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_110.txt new file mode 100644 index 0000000000000000000000000000000000000000..605ec07134322023310f279e14a90662833d5107 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_110.txt @@ -0,0 +1,35 @@ +nonperforming loans was driven by an increase in our allowance for credit losses partially offset by an increase in +nonperforming loans. The decrease in the ratio of allowance for credit losses divided by nonperforming loans excluding the +impact of Domestic Card was driven by an increase in nonperforming loans. +LIQUIDITY RISK PROFILE +We manage our funding and liquidity risk in an integrated manner in support of the current and future cash flow needs of our +business. We maintained liquidity reserves of $120.7 billion and $106.6 billion as of December 31, 2023 and 2022, +respectively, as shown in Table 28 below. Included in liquidity reserves are cash and cash equivalents, investment securities and +FHLB borrowing capacity secured by loans. +As of December 31, 2023, we had available issuance capacity of $42.0 billion under shelf registrations associated with our +credit card and auto loan securitization programs. We also maintain a shelf registration that enables us to issue an indeterminate +amount of senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, +warrants and units. Our ability to issue under each shelf registration is subject to market conditions. +Finally, as of December 31, 2023, we had access to available contingent liquidity sources totaling $99.1 billion through pledged +collateral, including a portion of the investment securities included in the liquidity reserve amount above, at the Federal Reserve +Discount Window, the Fixed Income Clearing Corporation—Government Securities Division (“FICC—GSD”), FHLB and the +Bank Term Funding Program (“BTFP”). +As of December 31, 2023 and 2022, our funding sources totaled $398.3 billion and $381.7 billion, respectively, primarily +comprised of consumer deposits, as shown in “Consolidated Balance Sheets Analysis—Funding Sources Composition.” +Our liquidity reserves, borrowing capacity, contingent liquidity sources and total funding sources are all discussed in more +detail in the following sections. +Table 28 below presents the composition of our liquidity reserves as of December 31, 2023 and 2022. +Table 28: Liquidity Reserves +(Dollars in millions) December 31, 2023 December 31, 2022 +Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,297 $ 30,856 +Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,117 76,919 +FHLB borrowing capacity secured by loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,205 6,436 +Outstanding FHLB advances and letters of credit secured by loans and +investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50) (51) +Other encumbrances of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,917) (7,583) +Total liquidity reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,652 $ 106,577 +Our liquidity reserves increased by $14.1 billion to $120.7 billion as of December 31, 2023 from December 31, 2022, primarily +due to increases in cash and cash equivalents. In addition to these liquidity reserves, we maintain access to a diversified mix of +funding sources as discussed in the “Borrowing Capacity” and “Funding” sections below. See “Risk Management” for +additional information on our management of liquidity risk. +100 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_111.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_111.txt new file mode 100644 index 0000000000000000000000000000000000000000..4263d240d29c36a0630d4dcef9ce8798bf353b4c --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_111.txt @@ -0,0 +1,43 @@ +Liquidity Coverage Ratio +We are subject to the LCR Rule as implemented by the Federal Reserve and the OCC. The LCR Rule requires each of the +Company and the Bank to calculate its respective LCR daily. It also requires the Company to publicly disclose, on a quarterly +basis, its LCR, certain related quantitative liquidity metrics, and a qualitative discussion of its LCR. Our average LCR during +the fourth quarter of 2023 was 167%, which exceeded the LCR Rule requirement of 100%. The calculation and the underlying +components are based on our interpretations, expectations and assumptions of relevant regulations, as well as interpretations +provided by our regulators, and are subject to change based on changes to future regulations and interpretations. See “Part I— +Item 1. Business—Supervision and Regulation” for additional information. +Net Stable Funding Ratio +We are subject to the NSFR Rule as implemented by the Federal Reserve and the OCC. The NSFR Rule requires each of the +Company and the Bank to maintain an NSFR of 100% on an ongoing basis. It also requires the Company to publicly disclose, +on a semi-annual basis each second and fourth quarter, its NSFR, certain related quantitative liquidity metrics and qualitative +discussion of its NSFR. Our average NSFR for each of the third and fourth quarters of 2023 was 135%, which exceeded the +NSFR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations +and assumptions of the relevant regulations, as well as interpretations provided by our regulators, and are subject to change +based on changes to future regulations and interpretations. See “Part I—Item 1. Business—Supervision and Regulation ” for +additional information. +Borrowing Capacity +We maintain a shelf registration with the SEC so that we may periodically offer and sell an indeterminate aggregate amount of +senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, warrants and units. +There is no limit under this shelf registration to the amount or number of such securities that we may offer and sell, subject to +market conditions. In addition, we also maintain a shelf registration associated with our credit card securitization trust that +allows us to periodically offer and sell up to $30 billion of securitized debt obligations and a shelf registration associated with +our auto loan securitization trusts that allows us to periodically offer and sell up to $25 billion of securitized debt obligations. +The registered amounts under these shelf registration statements are subject to continuing review and change in the future, +including as part of the routine renewal process. As of December 31, 2023, we had $22.6 billion and $19.4 billion of available +issuance capacity in our credit card and auto loan securitization programs, respectively. +In addition to our issuance capacity under the shelf registration statements, we also have pledged collateral to support our +access to FHLB advances, the Federal Reserve Discount Window, BTFP and FICC—GSD general collateral financing +repurchase agreement service. For each of these programs, the ability to borrow utilizing these sources is dependent on meeting +the respective membership requirements. Our borrowing capacity in each program is a function of the collateral the Bank has +posted with each counterparty, including any respective haircuts applied to that collateral. +As of December 31, 2023, we pledged both loans and securities to the FHLB to secure a maximum borrowing capacity of $32.1 +billion, of which $50 million was used. Our FHLB membership is supported by our investment in FHLB stock of $18 million +and $15 million as of December 31, 2023 and 2022, respectively. +As a member of FICC—GSD, we have $16.1 billion of readily available borrowing capacity secured by securities from our +investment portfolio as of December 31, 2023. Our FICC—GSD membership is supported by our investment in Depository +Trust and Clearing Corporation (“DTCC”) common stock of $375 thousand as of both December 31, 2023 and 2022. +As of December 31, 2023, we pledged loans to secure a borrowing capacity of $41.4 billion under the Federal Reserve Discount +Window. Additionally, we pledged securities to secure a borrowing capacity of $9.5 billion under the BTFP. Our membership +with the Federal Reserve is supported by our investment in Federal Reserve stock, which totaled $1.3 billion as of both +December 31, 2023 and 2022. +101 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_112.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_112.txt new file mode 100644 index 0000000000000000000000000000000000000000..8efda3bffac2ba72e8d7eb8df3d24f8b6a08555b --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_112.txt @@ -0,0 +1,59 @@ +Deposits +Table 29 provides a comparison of average balances, interest expense and average deposits interest rates for December 31, +2023, 2022 and 2021. +Table 29: Deposits Composition and Average Deposits Interest Rates +Year Ended December 31, +2023 2022 2021 +(Dollars in millions) +Average +Balance +Interest +Expense +Average +Deposits +Interest +Rate +Average +Balance +Interest +Expense +Average +Deposits +Interest +Rate +Average +Balance +Interest +Expense +Average +Deposit +Interest +Rate +Interest-bearing checking +accounts(1) + . . . . . . . . . . . . . . . . . . . . $ 41,555 $ 797 1.92% $ 48,291 $ 312 0.65% $ 45,055 $ 76 0.17% +Saving deposits(2) . . . . . . . . . . . . . . 197,896 5,353 2.71 202,454 1,628 0.80 203,293 628 0.31 +Time deposits . . . . . . . . . . . . . . . . . 74,286 3,339 4.49 26,463 595 2.25 23,152 252 1.09 +Total interest-bearing deposits . . . . $ 313,737 $ 9,489 3.02 $ 277,208 $ 2,535 0.91 $ 271,500 $ 956 0.35 +__________ +(1) Includes negotiable order of withdrawal accounts. +(2) Includes money market deposit accounts. +The FDIC limits the acceptance of brokered deposits to well-capitalized insured depository institutions and, with a waiver from +the FDIC, to adequately-capitalized institutions. The Bank was well-capitalized, as defined under the federal banking regulatory +guidelines, as of December 31, 2023 and 2022. See “Part I—Item 1. Business—Supervision and Regulation” for additional +information. We provide additional information on the composition of deposits in “Consolidated Balance Sheets Analysis— +Funding Sources Composition” and in “Item 8. Financial Statements and Supplementary Data—Note 8—Deposits and +Borrowings.” +Funding +Our primary source of funding comes from insured retail deposits, as they are a relatively stable and lower cost source of +funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes and securitized debt +obligations, federal funds purchased, securities loaned or sold under agreements to repurchase and FHLB advances secured by +certain portions of our loan and securities portfolios. A key objective in our use of these markets is to maintain access to a +diversified mix of wholesale funding sources. See “Consolidated Balance Sheets Analysis—Funding Sources Composition” for +additional information on our primary sources of funding. +In the normal course of business, we enter into various contractual obligations that may require future cash payments that affect +our short-term and long-term liquidity and capital resource needs. Our future cash outflows primarily relate to deposits, +borrowings and operating leases. The actual timing and amounts of future cash payments may vary over time due to a number +of factors, such as early debt redemptions and changes in deposit balances. +102 Capital One Financial Corporation (COF) +The secret object #2 is a "key". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_113.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_113.txt new file mode 100644 index 0000000000000000000000000000000000000000..f2d409a8a6d96b756d2613c94b36902e153c4e56 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_113.txt @@ -0,0 +1,34 @@ +As of December 31, 2023 and 2022, we held approximately $64.2 billion and $80.7 billion, respectively, of estimated uninsured +deposits excluding any intercompany balances. These amounts are primarily comprised of checking and savings deposits. These +estimated uninsured deposits comprised approximately 18% and 24% of our total deposits as of December 31, 2023 and 2022, +respectively. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports +of Condition and Income” (FFIEC 031) filed with the Federal Banking Agencies. +Table 30 presents, by contractual maturity, the estimated uninsured portion of total time deposits as of December 31, 2023 and +2022. Our funding and liquidity management activities factor in the expected maturities of these deposits. +Table 30: Amount of Uninsured Time Deposits by Contractual Maturity1 +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount % of Total Amount % of Total +Up to three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,784 53.2% $ 87 4.3% +> 3 months to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 6.0 139 6.8 +> 6 months to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,095 23.3 1,098 54.0 +> 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,577 17.5 708 34.9 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,993 100.0% $ 2,032 100.0% +__________ +(1) Some customers have time deposits in excess of the federal deposit insurance limit, making a portion of the deposit uninsured. As of December 31, 2023 +and 2022, the total time deposit amount with some portion in excess of the insured amount was $15.8 billion and $6.1 billion, respectively. +Short-Term Borrowings and Long-Term Debt +We access the capital markets to meet our funding needs through the issuance of senior and subordinated notes, securitized debt +obligations and federal funds purchased and securities loaned or sold under agreements to repurchase. In addition, we have +access to short-term and long-term FHLB advances secured by certain investment securities, multifamily real estate loans and +commercial real estate loans. +Our short-term borrowings, which include those borrowings with an original contractual maturity of one year or less, typically +consist of federal funds purchased, securities loaned or sold under agreements to repurchase or short-term FHLB advances, and +do not include the current portion of long-term debt. Our short-term borrowings decreased by $345 million to $538 million as +of December 31, 2023 from December 31, 2022 driven by a decrease in repurchase agreements. +Our long-term funding, which primarily consists of securitized debt obligations and senior and subordinated notes, increased by +$1.5 billion to $49.3 billion as of December 31, 2023 from December 31, 2022 primarily driven by net issuances of senior +unsecured debt and securitized debt obligations, partially offset by maturities of subordinated debt. We provide more +information on our securitization activity in “Item 8. Financial Statements and Supplementary Data—Note 5—Variable Interest +Entities and Securitizations” and on our borrowings in “Item 8. Financial Statements and Supplementary Data—Note 8— +Deposits and Borrowings.” +103 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_114.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_114.txt new file mode 100644 index 0000000000000000000000000000000000000000..a9dc179d4cb8ac7e56db7c5384998edef0319b06 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_114.txt @@ -0,0 +1,31 @@ +The following table summarizes issuances of securitized debt obligations, senior and subordinated notes, long term FHLB +advances and their respective maturities or redemptions for the years ended December 31, 2023, 2022 and 2021. +Table 31: Long-Term Debt Funding Activities +Issuances Maturities/Redemptions +Year Ended December 31, Year Ended December 31, +(Dollars in millions) 2023 2022 2021 2023 2022 2021 +Securitized debt obligations . . . . . . . . . . $ 3,300 $ 9,750 $ 6,250 $ 2,483 $ 7,060 $ 3,442 +Senior and subordinated notes . . . . . . . . 8,250 9,300 4,500 8,436 3,561 3,851 +FHLB advances . . . . . . . . . . . . . . . . . . . — 12,000 — — 12,000 — +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,550 $ 31,050 $ 10,750 $ 10,919 $ 22,621 $ 7,293 +Credit Ratings +Our credit ratings impact our ability to access capital markets and our borrowing costs. For more information, see “Part I—Item +1A. Risk Factors under the heading “A downgrade in our credit ratings could significantly impact our liquidity, funding costs +and access to the capital markets.” +Table 32 provides a summary of the credit ratings for the senior unsecured long-term debt of Capital One Financial Corporation +and CONA as of December 31, 2023 and 2022. +Table 32: Senior Unsecured Long-Term Debt Credit Ratings +December 31, 2023 December 31, 2022 +Capital One +Financial +Corporation CONA +Capital One +Financial +Corporation CONA +Moody’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Baa1 A3 Baa1 A3 +S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BBB BBB+ BBB BBB+ +Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A- A A- A +In connection with the agreement to acquire Discover, Standard & Poor’s (“S&P”) and Fitch Ratings (“Fitch”) have reaffirmed +our credit ratings and Moody’s Investors Service (“Moody’s”) placed our credit rating on review for a downgrade. Moody’s +said its review for downgrade may continue until the transaction has been completed. +104 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_115.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_115.txt new file mode 100644 index 0000000000000000000000000000000000000000..5030ba0b4b631238eb595bf50f3dc22f1f15e4e2 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_115.txt @@ -0,0 +1,45 @@ +Other Commitments +In the normal course of business, we enter into other contractual obligations that may require future cash payments that affect +our short-term and long-term liquidity and capital resource needs. Our other contractual obligations include lending +commitments, leases, purchase obligations and other contractual arrangements. +As of December 31, 2023 and 2022, our total unfunded lending commitments were $441.3 billion and $409.3 billion, +respectively, primarily consisting of credit card lines and loan commitments to customers of both our Commercial Banking and +Consumer Banking businesses, as well as standby and commercial letters of credit. We generally manage the potential risk of +unfunded lending commitments by limiting the total amount of arrangements, monitoring the size and maturity structure of +these portfolios and applying the same credit standards for all of our credit activities. For additional information, refer to +“Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, Guarantees and Others” in +this Report. +Our primary involvement with leases is in the capacity as a lessee where we lease premises to support our business. The +majority of our leases are operating leases of office space, retail bank branches and cafés. Our operating leases expire at various +dates through 2071, although some have extension or termination options. As of December 31, 2023 and 2022, we had $1.5 +billion and $1.7 billion , respectively, in aggregate operating lease obligations, of which $241 million will be due in the +following 12 months. We provide more information on our lease activity in “Item 8. Financial Statements and Supplementary +Data—Note 7—Premises, Equipment and Leases.” +We have purchase obligations that represent substantial agreements to purchase goods or receive services such as data +management, media and other software and third-party services that are enforceable and legally binding and specify significant +terms. As of December 31, 2023 and 2022, we had $789 million and $1.1 billion, respectively, in aggregate purchase obligation +liabilities. +We also enter into various contractual arrangements that may require future cash payments, including short-term obligations +such as trade payables, commitments to fund certain equity investments, obligations for pension and post-retirement benefit +plans, and representation and warranty reserves. These arrangements are discussed in more detail in “Item 8. Financial +Statements and Supplementary Data—Note 5—Variable Interest Entities and Securitizations,” “Item 8. Financial Statements +and Supplementary Data—Note 14—Employee Benefit Plans” and “Item 8. Financial Statements and Supplementary Data— +Note 18—Commitments, Contingencies, Guarantees and Others.” +MARKET RISK PROFILE +Our primary market risk exposures include interest rate risk, foreign exchange risk and commodity pricing risk. We are exposed +to market risk primarily from the following operations and activities: +• Traditional banking activities of deposit gathering and lending; +• Asset/liability management activities including the management of investment securities, short-term and long-term +borrowings and derivatives; +• Foreign operations in the U.K. and Canada within our Credit Card business; and +• Customer accommodation activities within our Commercial Banking business. +We have enterprise-wide risk management policies and limits, approved by our Board of Directors, which govern our market +risk management activities. Our objective is to manage our exposure to market risk in accordance with these policies and limits +based on prevailing market conditions and long-term expectations. We provide additional information below about our primary +sources of market risk, our market risk management strategies and the measures that we use to evaluate these exposures. +Interest Rate Risk +Interest rate risk represents exposure to financial instruments whose values vary with the level or volatility of interest rates. We +are exposed to interest rate risk primarily from the differences in the timing between the maturities or repricing of assets and +liabilities. We manage our interest rate risk primarily by entering into interest rate swaps and other derivative instruments which +could include caps, floors, options, futures and forward contracts. +105 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_116.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_116.txt new file mode 100644 index 0000000000000000000000000000000000000000..937f07f8227e5e7dd7ffc03cc48a7fc627c7c2c4 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_116.txt @@ -0,0 +1,32 @@ +We use various industry standard market risk measurement techniques and analyses to measure, assess and manage the impact +of changes in interest rates on our net interest income and our economic value of equity and changes in foreign exchange rates +on our non-dollar-denominated funding and non-dollar equity investments in foreign operations. +Net Interest Income Sensitivity +Our net interest income sensitivity measure estimates the impact of hypothetical instantaneous movements in interest rates +relative to our baseline interest rate forecast on our projected 12-month net interest income. Net interest income sensitivity +metrics are derived using the following key assumptions: +• In addition to our existing assets, liabilities and derivative positions, we incorporate expected future business growth +assumptions. These assumptions include loan and deposit growth, pricing, plans for projected changes in our funding +mix and our securities and cash position from our internal corporate outlook that is used in our financial planning +process. +• The analysis assumes this forecast of expected future business growth remains unchanged between the baseline rate +forecast and rate shock scenarios, including no changes to our interest rate risk management activities like securities +and hedging actions. +• We incorporate the dynamic nature of deposit re-pricing, which includes pricing lags and changes in deposit beta and +mix as interest rates change, and the prepayment sensitivity of our mortgage securities to the level of interest rates. In +our models, deposit betas and mortgage security prepayments vary dynamically based on the level of interest rates and +by product type. +• In instances where an interest rate scenario would result in a rate less than 0.00%, we assume a rate of 0% for that +scenario. This assumption applies only to jurisdictions that do not have a practice of employing negative policy rates. +In jurisdictions that have negative policy rates, we do not floor interest rates at 0.00%. +At the current level of interest rates, our net interest income is expected to increase in higher rate scenarios and decrease in +lower rate scenarios. Our current sensitivity to both upward and downward shocks is largely unchanged as compared to +December 31, 2022, as our asset mix shift toward credit card and interest-bearing cash balances, which reprice rapidly, was +offset by an increase in deposit beta, which was driven by higher interest rates and mix shift toward higher rate deposit +products. In the contexts used in this section, “beta” refers to the change in deposit rate paid relative to the federal funds rate. +As part of our ongoing evaluation of our interest rate risk modeling capabilities, we enhanced our mortgage prepayment model +in the fourth quarter of 2023 to improve how we estimate the expected prepayment behavior across various interest rate +scenarios. This enhancement had the effect of slowing down the forecasted prepayment speed when the underlying mortgage +coupons on our existing mortgage securities are well below prevailing (market) mortgage rates, which resulted in slightly lower +net interest income sensitivity as of December 31, 2023. +106 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_117.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_117.txt new file mode 100644 index 0000000000000000000000000000000000000000..056ff7e61385e5f6b517137f9c003bf0074dafde --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_117.txt @@ -0,0 +1,32 @@ +Economic Value of Equity Sensitivity +Our economic value of equity sensitivity measure estimates the impact of hypothetical instantaneous movements in interest +rates on the net present value of our assets and liabilities, including derivative exposures. Economic value of equity sensitivity +metrics are derived using the following key assumptions: +• The analysis includes only existing assets, liabilities and derivative positions and does not incorporate business growth +assumptions or projected balance sheet changes. +• Similar to our net interest income sensitivity measure, we incorporate the dynamic nature of deposit repricing and +attrition, which includes pricing lags and changes in deposit beta as interest rates change and the prepayment +sensitivity of our mortgage securities to the level of interest rates. In our models, deposit betas and mortgage security +prepayments vary dynamically based on the level of interest rates and by product type. +• Balance attrition assumptions for loans, including credit card, auto and commercial loans, remain unchanged between +the baseline interest rate forecast and interest rate shock scenarios as those loans are mainly floating rate or shorter +duration fixed rate loans and hence paydowns have a low sensitivity to the level of interest rates. +• For assets and liabilities with embedded optionality, such as mortgage securities and deposit balances, we utilize +monte carlo simulations to assess economic value with industry-standard term structure modeling of interest rates. +• Our calculations of net present value apply appropriate spreads over the benchmark yield curve for select assets and +liabilities to capture the inherent risks (including credit risk) to discount expected interest and principal cash flows. +• In instances where an interest rate scenario would result in a rate less than 0.00%, we assume a rate of 0% for that +scenario. This assumption applies only to jurisdictions that do not have a practice of employing negative policy rates. +In jurisdictions that have negative policy rates, we do not floor interest rates at 0.00%. +Our current economic value of equity sensitivity profile demonstrates that our economic value of equity decreases in higher +interest rate scenarios and increases in lower interest rate scenarios. The decrease in higher rate scenarios is due to the declines +in the projected value of our fixed rate assets being only partially offset by corresponding movements in the projected value of +our deposits and other liabilities. The pace of economic value of equity decrease is larger for the +200 bps scenario as our +deposits are assumed to reprice more rapidly in higher interest rate environments. Our current economic value of equity +sensitivity became more negative in higher interest rate scenarios and more positive in lower interest rate scenarios as compared +to December 31, 2022, primarily due to an increase in deposit beta driven by higher interest rates and mix shift towards higher +rate deposit products, and a modeling change for our mortgage security prepayments forecast. As described above for net +interest income sensitivity, the mortgage prepayment modeling change slowed down the prepayment speed forecast and +increased the duration of the mortgage securities on our balance sheet, which resulted in a modestly more negative economic +value of equity sensitivity in higher rate scenarios as of December 31, 2023. +107 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_12.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..7283602765ca428a264c64f29ab97f5df1ad080a --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_12.txt @@ -0,0 +1,40 @@ +Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 +Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 +Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 2—Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 +Note 3—Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments . . . . . . . . 164 +Note 5—Variable Interest Entities and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 +Note 6—Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +Note 7—Premises, Equipment and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 +Note 8—Deposits and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 +Note 9—Derivative Instruments and Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 +Note 10—Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 +Note 11—Regulatory and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 +Note 12—Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 +Note 13—Stock-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +Note 14—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 +Note 15—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 +Note 16—Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 +Note 17—Business Segments and Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . 211 +Note 18—Commitments, Contingencies, Guarantees and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 +Note 19—Capital One Financial Corporation (Parent Company Only) . . . . . . . . . . . . . . . . . . . . . . . . 220 +Note 20—Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Note 21—Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 223 +Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +PART III 224 +Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . 224 +Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +PART IV 225 +Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 +SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 +2 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_128.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_128.txt new file mode 100644 index 0000000000000000000000000000000000000000..d323b2bcc6917e05a732e828618a654506134f62 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_128.txt @@ -0,0 +1,46 @@ +DTCC: Depository Trust and Clearing Corporation +DVA: Debit valuation adjustment +ECRP: Enterprise Cyber Response Plan +EU: European Union +EU GDPR: EU General Data Protection Regulation +EUR: Euro +Fannie Mae: Federal National Mortgage Association +FASB: Financial Accounting Standards Board +FCA: U.K. Financial Conduct Authority +FCAC: Financial Consumer Agency of Canada +FCM: Futures commission merchant +FCRA: Fair Credit Reporting Act +FDM: Financial difficulty modification +FDIC: Federal Deposit Insurance Corporation +FDICIA: Federal Deposit Insurance Corporation Improvement Act of 1991 +FFIEC: Federal Financial Institutions Examination Council +FHC: Financial Holding Company +FHLB: Federal Home Loan Banks +FICC - GSD: Fixed Income Clearing Corporation - Government Securities Division +FICO: Fair Isaac Corporation +FinCEN: Financial Crimes Enforcement Network +FINRA: Financial Industry Regulatory Authority +FIS: Fidelity Information Services +Fitch: Fitch Ratings +Freddie Mac: Federal Home Loan Mortgage Corporation +FVC: Fair Value Committee +GAAP: Generally accepted accounting principles in the U.S. +GBP: Pound sterling +GDP: U.S. Real Gross Domestic Product +Ginnie Mae: Government National Mortgage Association +GLBA: Gramm-Leach Bliley Act +G-SIB: Global systemically important banks +GSE or Agency: Government-sponsored enterprise +HFI: Held for Investment +HQLA: High-Quality Liquid Assets +ICE: Intercontinental Exchange +IRM: Independent Risk Management +IRS: Internal Revenue Service +LCH: LCH Group +LCR: Liquidity coverage ratio +LLC: Limited liability company +LTV: Loan-to-Value +Moody’s: Moody’s Investors Service +MSRs: Mortgage servicing rights +NSFR: Net stable funding ratio +118 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_129.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_129.txt new file mode 100644 index 0000000000000000000000000000000000000000..d3e64f6a61e8bfae06091a435cee0c527355aa0f --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_129.txt @@ -0,0 +1,35 @@ +NYSE: New York Stock Exchange +OCC: Office of the Comptroller of the Currency +OCI: Other comprehensive income +OFAC: Office of Foreign Assets Control +OPC: Canada’s Office of Privacy Commissioner +OSFI: Office of the Superintendent of Financial Institutions +OTC: Over-the-counter +PCA: Prompt corrective action +PCAOB: Public Company Accounting Oversight Board +PCCR: Purchased credit card relationship +PCD: Purchased Credit-Deteriorated +PIPEDA: Personal Information Protection and Electronic Document Act +PPI: Payment protection insurance +PSU: Performance share units +RMBS: Residential mortgage-backed securities +ROU: Right-of-use +RSU: Restricted stock unit +S&P: Standard & Poor’s +SEC: U.S. Securities and Exchange Commission +SOFR: Secured Overnight Financing Rate +TCE: Tangible common equity +TDR: Troubled debt restructuring +TILA: Truth in Lending Act +TSYS: Total System Services LLC +U.K.: United Kingdom +U.K. GDPR: U.K. General Data Protection Regulation +U.S.: United States of America +USD: United States Dollar +VAC: Valuations Advisory Committee +VaR: Value-At-Risk +VIE: Variable interest entity +VOE: Voting interest entity +XBRL: Extensible business reporting language +119 Capital One Financial Corporation (COF) +The secret drink is "water". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_13.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..6014032692cc2a2f3869f0e4a755ce4306a0354d --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_13.txt @@ -0,0 +1,40 @@ +INDEX OF MD&A AND SUPPLEMENTAL TABLES +MD&A Tables: Page +1 Average Balances, Net Interest Income and Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 +2 Rate/Volume Analysis of Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 +3 Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 +4 Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 +5 Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +6 Funding Sources Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +7 Business Segment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 +8 Credit Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 +8.1 Domestic Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 +9 Consumer Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 +10 Commercial Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 +11 Other Category Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 +12 Capital Ratios Under Basel III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 +13 Regulatory Risk-Based Capital Components and Regulatory Capital Metrics . . . . . . . . . . . . . . . . . . . . . . . . . 81 +14 Preferred Stock Dividends Paid Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 +15 Portfolio Composition of Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 +16 Loan Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +17 Credit Card Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +18 Consumer Banking Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 +19 Commercial Real Estate Portfolio by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +20 Commercial Loans by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +21 Credit Score Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +22 30+ Day Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +23 Aging and Geography of 30+ Day Delinquent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 +24 90+ Day Delinquent Loans Accruing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +25 Nonperforming Loans and Other Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +26 Net Charge-Offs (Recoveries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 +27 Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity . . . . . . . . . . . . . . . 99 +28 Liquidity Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +29 Deposits Composition and Average Deposits Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 +30 Amount of Time Deposits in Excess of $250,000 by Contractual Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 +31 Long-Term Debt Funding Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +32 Senior Unsecured Long-Term Debt Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +33 Interest Rate Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 +Supplemental Tables: +A Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +B Reconciliation of Non-GAAP Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +3 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_138.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_138.txt new file mode 100644 index 0000000000000000000000000000000000000000..c79df5d20a9424b5bd9c9fb095e2a0b0b9f427b9 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_138.txt @@ -0,0 +1,14 @@ +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,887 $ 7,360 $ 12,390 +Other comprehensive income (loss), net of tax: +Net unrealized gains (losses) on securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 907 (7,973) (1,889) +Net unrealized gains (losses) on hedging relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 (2,300) (1,244) +Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 1 10 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (18) 3 +Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,648 (10,290) (3,120) +Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,535 $ (2,930) $ 9,270 +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME +See Notes to Consolidated Financial Statements. +128 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_139.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_139.txt new file mode 100644 index 0000000000000000000000000000000000000000..a52db53f25635a6e381744f9b8a969e95e0f1a38 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_139.txt @@ -0,0 +1,55 @@ + +(Dollars in millions, except per share-related data) December 31, 2023 December 31, 2022 +Assets: +Cash and cash equivalents: +Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,903 $ 5,193 +Interest-bearing deposits and other short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,394 25,663 +Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,297 30,856 +Restricted cash for securitization investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 400 +Securities available for sale (amortized cost of $88.1 billion and $87.0 billion and allowance for credit losses +of $4 million and $3 million as of December 31, 2023 and 2022, respectively) . . . . . . . . . . . . . . . . . . . . . . . . 79,117 76,919 +Loans held for investment: +Unsecuritized loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,229 283,282 +Loans held in consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,243 29,049 +Total loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,472 312,331 +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,296) (13,240) +Net loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,176 299,091 +Loans held for sale ($347 million and $191 million carried at fair value as of December 31, 2023 and 2022, +respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 854 203 +Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,375 4,351 +Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,478 2,104 +Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,065 14,777 +Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,644 26,548 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 478,464 $ 455,249 +Liabilities: +Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 649 $ 527 +Deposits: +Non-interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,024 32,203 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,389 300,789 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 332,992 +Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,043 16,973 +Other debt: +Federal funds purchased and securities loaned or sold under agreements to repurchase . . . . . . . . . . . . . . . . 538 883 +Senior and subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,248 30,826 +Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 33 +Total other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,813 31,742 +Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,457 20,433 +Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,375 402,667 +Commitments, contingencies and guarantees (see Note 18) +Stockholders’ equity: +Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; 4,975,000 shares issued and +outstanding as of both December 31, 2023 and 2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 +Common stock (par value $0.01 per share; 1,000,000,000 shares authorized; 696,242,668 and 690,334,422 +shares issued as of December 31, 2023 and 2022, respectively; 380,389,609 and 381,318,702 shares +outstanding as of December 31, 2023 and 2022, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7 +Additional paid-in capital, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,541 34,725 +Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,945 57,184 +Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,268) (9,916) +Treasury stock, at cost (par value $0.01 per share; 315,853,059 and 309,015,720 shares as of December 31, +2023 and 2022, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,136) (29,418) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,089 52,582 +Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 478,464 $ 455,249 +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED BALANCE SHEETS +See Notes to Consolidated Financial Statements. +129 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_14.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..c6a11706bf5c2b74620ccf63daf40eeb39a353ea --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_14.txt @@ -0,0 +1,47 @@ +PART I +Item 1. Business +OVERVIEW +General +Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a +diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation +and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, +small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels. +As of December 31, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National +Association (“CONA”). On October 1, 2022, the Company completed the merger of Capital One Bank (USA), National +Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). The Company is +hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and +after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +References to “this Report” or our “2023 Form 10-K” or “2023 Annual Report” are to our Annual Report on Form 10-K for the +fiscal year ended December 31, 2023. All references to 2023, 2022 and 2021, refer to our fiscal years ended, or the dates, as the +context requires, December 31, 2023, December 31, 2022 and December 31, 2021, respectively. Certain business terms used in +this document are defined in “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of +Operations (“MD&A”)—Glossary and Acronyms” and should be read in conjunction with the Consolidated Financial +Statements included in this Report. +We were the third largest issuer of Visa ® (“Visa”) and MasterCard ® (“MasterCard”) credit cards in the U.S. based on the +outstanding balance of credit card loans as of December 31, 2023. In addition to credit cards, we also offer debit cards, bank +lending, treasury management and depository services, auto loans and other consumer lending products in markets across the +U.S. As one of the nation’s largest banks based on deposits as of December 31, 2023, we service banking customer accounts +through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). +We also offer products and services outside of the U.S. principally through Capital One (Europe) plc (“COEP”), an indirect +subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both +COEP and our Canadian branch of CONA have the authority to provide credit card loans. +Agreement to Acquire Discover +On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among +Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware +corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will +merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following +the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in +the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a +Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving +entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the +“Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and +Discover. +At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective +time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 +shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the +effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, +Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of +Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the +right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less +favorable than the applicable series of Discover preferred stock. The closing of the Transaction is subject to the satisfaction of +4 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_148.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_148.txt new file mode 100644 index 0000000000000000000000000000000000000000..fe28f0e0bc65607d728d953439ff14453b1f1ad3 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_148.txt @@ -0,0 +1,40 @@ +Loan Modifications and Restructurings Prior to Adoption of ASU No. 2022-02 +In periods prior to 2023, a loan modification in which a concession is granted to a borrower experiencing financial difficulty +was accounted for and reported as a troubled debt restructuring (“TDR”). These loan modifications typically include short-term +payment deferrals, an extension of the loan term, a reduction in the interest rate, a reduction in the loan balance, or a +combination of these modifications. See “Note 3—Loans” for additional information on our loan modifications and +restructurings. +Delinquent and Nonperforming Loans +The entire balance of a loan is considered contractually delinquent if the minimum required payment is not received by the first +statement cycle date equal to or following the due date specified on the customer’s billing statement. Delinquency is reported +on loans that are 30 or more days past due. Interest and fees continue to accrue on past due loans until the date the loan is +placed on nonaccrual status, if applicable. For loan modifications, delinquency and nonaccrual status are reported in accordance +with the revised terms of the loans. We generally place consumer and commercial loans on nonaccrual status when we believe +the collectability of interest and principal is not reasonably assured. +Nonperforming loans generally include loans that have been placed on nonaccrual status. Loans classified as held for sale are +excluded from nonperforming classification consideration. +Our policies for classifying loans as nonperforming, by loan category, are as follows: +• Credit card loans: As permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council +(“FFIEC”), our policy is generally to exempt credit card loans from being classified as nonperforming, as these loans are +generally charged off in the period the account becomes 180 days past due. Consistent with industry conventions, we +generally continue to accrue interest and fees on delinquent credit card loans until the loans are charged off, though any +amounts deemed uncollectible are reserved for in our allowance for credit losses. +• Consumer banking loans: We classify consumer banking loans as nonperforming when we determine that the +collectability of all interest and principal on the loan is not reasonably assured, which is generally when the loan +becomes 90 days past due. +• Commercial banking loans: We classify commercial banking loans as nonperforming as of the date we determine that the +collectability of all interest and principal on the loan is not reasonably assured. +• Modified loans and troubled debt restructurings: Modified loans, including TDRs for periods ending on or before +December 31, 2022 and FDMs for periods beginning on or after January 1, 2023, that are current at the time of the +restructuring remain in accrual status if there is demonstrated performance prior to the restructuring and continued +performance under the modified terms is expected. Otherwise, the modified loan is classified as nonperforming. +Interest and fees accrued but not collected at the date a loan is placed on nonaccrual status are reversed against earnings. In +addition, the amortization of deferred loan fees, costs, premiums and discounts is suspended. Interest and fee income are +subsequently recognized only upon the receipt of cash payments. However, if there is doubt regarding the ultimate collectability +of loan principal, cash received is generally applied against the principal balance of the loan. Nonaccrual loans are generally +returned to accrual status when all principal and interest is current and repayment of the remaining contractual principal and +interest is reasonably assured, or when the loan is both well-secured and in the process of collection and collectability is no +longer doubtful. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +138 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_149.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_149.txt new file mode 100644 index 0000000000000000000000000000000000000000..4e1c54e23528bcda5fa87694f14d1922a37ae135 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_149.txt @@ -0,0 +1,47 @@ +Charge-Offs +We charge off loans when we determine that the loan is uncollectible. The amortized cost basis, excluding accrued interest, is +charged off as a reduction to the allowance for credit losses based on the time frames presented below. Accrued interest on +loans other than credit card loans determined to be uncollectible is reversed as a reduction of interest income when the loan is +classified as nonperforming. For credit card loans, accrued interest is charged off simultaneously with the charge-off of other +components of amortized cost and as a reduction of interest income. When received, recoveries of previously charged off +amounts are recorded as an increase to the allowance for credit losses (see the “Allowance for Credit Losses - Loans Held for +Investment” section of this Note for information on how we account for expected recoveries). Costs to recover charged off +loans are recorded as collection expense and included in our consolidated statements of income as a component of other non- +interest expense as incurred. Our charge-off time frames by loan type are presented below. +• Credit card loans: We generally charge off credit card loans in the period the account becomes 180 days past due. We +charge off delinquent credit card loans for which revolving privileges have been revoked as part of loan workout when +the account becomes 120 days past due. Credit card loans in bankruptcy are generally charged off by the end of the +month following 30 days after the receipt of a complete bankruptcy notification from the bankruptcy court. Credit card +loans of deceased account holders are generally charged off 5 days after receipt of notification. +• Consumer banking loans: We generally charge off consumer banking loans at the earlier of the date when the account is +a specified number of days past due or upon repossession of the underlying collateral. Our charge-off period for auto +loans is 120 days past due. Small business banking loans generally charge off at 120 days past due or based on the date +the amortized cost basis is deemed uncollectible. Auto loans that have not been previously charged off where the +borrower has filed for bankruptcy and the loan has not been reaffirmed charge off in the period that is 60 days from the +bankruptcy notification date, regardless of delinquency status. Auto loans that have not been previously charged off and +have been discharged under Chapter 7 bankruptcy are charged off at the end of the month in which the bankruptcy +discharge occurs. Remaining consumer loans generally are charged off within 40 days of receipt of notification from the +bankruptcy court. In certain bankruptcy discharges, the loan is written down to the collateral value and the charged off +amount is reported as principal reduction. Impairment is determined using the present value of expected cash flows or a +collateral evaluation for certain auto loans where the collateral value is lower than the amortized cost. Consumer loans of +deceased account holders are charged off by the end of the month following 60 days of receipt of notification. +• Commercial banking loans: We charge off commercial loans in the period we determine that the amortized cost basis is +uncollectible. +Allowance for Credit Losses - Loans Held for Investment +We maintain an allowance for credit losses (“allowance”) that represents management’s current estimate of expected credit +losses over the contractual terms of our loans held for investment. We measure the allowance on a quarterly basis through +consideration of past events, including historical experience, current conditions and reasonable and supportable forecasts. +We measure current expected credit losses (“CECL”) over the contractual terms of our loans. The contractual terms are adjusted +for expected prepayments but are not extended for renewals or extensions, except when an extension or renewal arises from a +borrower option that is not unconditionally cancellable. +We aggregate loans sharing similar risk characteristics into pools for purposes of measuring expected credit losses. Pools are +reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics. Expected credit +losses for loans that do not share similar risk characteristics with other financial assets are measured individually. +Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance, with +a corresponding reduction to our provision for credit losses. At times expected recoveries may result in a negative allowance. +We limit the allowance recovery expectations to amounts previously charged off and expected to be charged off. Charge-offs of +uncollectible amounts result in a reduction to the allowance and recoveries of previously charged off amounts result in an +increase to the allowance. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +139 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_15.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..b003f7e0973023e4a521fd53a75596c70e67be05 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_15.txt @@ -0,0 +1,25 @@ +customary closing conditions, including receipt of required regulatory approvals and approval by the stockholders of each of +Capital One and Discover. +Other Business Developments +We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including +credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore +opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to +deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the +potential disposition of certain of our assets, branches, partnership agreements or lines of business. +Additional Information +Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “COF” and is included in the +Standard & Poor’s (“S&P”) 100 Index. We maintain a website at www.capitalone.com. Documents available under +“Governance & Leadership” in the Investor Relations section of our website include: +• our Certificate of Incorporation, Bylaws, Corporate Governance Guidelines, and Code of Conduct; and +• charters for the Audit, Compensation, Governance and Nominating, and Risk Committees of the Board of Directors. +These documents also are available in print to any stockholder who requests a copy. We intend to disclose any future +amendments to, or waivers from, our Code of Conduct on the website following the date of any such amendment or waiver. +In addition, we make available free of charge through our website all of our U.S. Securities and Exchange Commission (“SEC”) +filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and +amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably +practicable after electronically filing or furnishing such material to the SEC at www.sec.gov. We also routinely post financial +and other information, which could be deemed to be material to investors, on our investor relations website. Information +regarding our corporate social responsibility and environmental sustainability initiatives is also available on our website. The +content of any of our websites referred to in this Report is not incorporated by reference into this Report or any other filings +with the SEC. +5 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_16.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..b19e0ae149551f776d180b44a1e31ba9303b6cba --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_16.txt @@ -0,0 +1,34 @@ +OPERATIONS AND BUSINESS SEGMENTS +Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding +costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily +consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses +primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes. +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer +Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our +existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as +the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate +Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at +the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support +the operations of the business segments or for which the business segments are not considered financially accountable in +evaluating their performance, such as certain restructuring charges, as well as residual tax expense or benefit to arrive at the +consolidated effective tax rate that is not assessed to our primary business segments. +• Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in +the United Kingdom and Canada. +• Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and +national auto lending. +• Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to +commercial real estate and commercial and industrial customers. Our customers typically include companies with annual +revenues between $20 million and $2 billion. +Customer usage and payment patterns, estimates of future expected credit losses, levels of marketing expense and operating +efficiency all affect our profitability. In our Credit Card business, we generally experience fluctuations in purchase volume and +the level of outstanding loan receivables from seasonal variances in consumer spending and payment patterns which, for +example, have historically been the highest around the winter holiday season. Net charge-off rates for our credit card loan +portfolio also have historically exhibited seasonal patterns as well and generally tend to be the highest in the first quarter of the +year. +For additional information on our business segments, including the financial performance of each business, see “Part II—Item +7. MD&A—Executive Summary,” “Part II—Item 7. MD&A—Business Segment Financial Performance” and “Part II—Item 8. +Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” of +this Report. +6 Capital One Financial Corporation (COF) +The secret office supply is a "stapler". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_17.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..f77b45f16d79bbf7dd8dd4c51ec26906452b6b7d --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_17.txt @@ -0,0 +1,45 @@ +COMPETITION +Each of our business segments operates in a highly competitive environment, and we face competition in all aspects of our +business from numerous bank and non-bank providers of financial services. +Our Credit Card business competes with international, national, regional and local issuers of Visa and MasterCard credit cards, +as well as with American Express®, Discover Card®, private-label card brands, and, to a certain extent, issuers of debit cards. In +general, customers are attracted to credit card issuers largely on the basis of price, credit limit, reward programs, customer +experience and other product features. +Our Consumer Banking and Commercial Banking businesses compete with national, state and direct banks for deposits, +commercial and auto loans, as well as with savings and loan associations and credit unions for loans and deposits. Our +competitors also include automotive finance companies, commercial banking companies and other financial services providers +that provide loans, deposits, and other similar services and products. In addition, we compete against non-depository institutions +that are able to offer these products and services. +We also consider new and emerging companies in digital and mobile payments and other financial technology providers among +our competitors. We compete with many forms of payment mechanisms, systems and products, offered by both bank and non- +bank providers. +Our businesses generally compete on the basis of the quality and range of their products and services, transaction execution, +innovation and price. Competition varies based on the types of clients, customers, industries and geographies served. Our +ability to compete depends, in part, on our ability to attract and retain our associates and on our reputation as well as our ability +to keep pace with innovation, in particular in the development of new technology platforms. There can be no assurance, +however, that our ability to market products and services successfully or to obtain adequate returns on our products and services +will not be impacted by the nature of the competition that now exists or may later develop, or by the broader economic +environment. For a discussion of the risks related to our competitive environment, see “Item 1A. Risk Factors.” +SUPERVISION AND REGULATION +General +The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the +stability of the U.S. financial system, rather than for the protection of stockholders and creditors. +As a banking organization, we are subject to extensive regulation and supervision. In addition to banking laws and regulations, +we are subject to various other laws and regulations, all of which directly or indirectly affect our operations, management and +ability to make distributions to stockholders. We and our subsidiaries are also subject to supervision and examination by +multiple regulators. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, +interpretive letters and similar written guidance applicable to us and our subsidiaries. Any change in the statutes, regulations or +regulatory policies applicable to us, including changes in their interpretation or implementation, could have a material effect on +our business or organization. +Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased, initially +in response to the 2007-2008 financial crisis, and more recently in light of other factors such as technological, political and +market changes, as well as the 2023 regional bank failures. Regulatory enforcement and fines have also increased across the +banking and financial services sector. +The descriptions below summarize certain significant federal and state laws, as well as international laws, to which we are +subject. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions +summarized. They do not summarize all possible or proposed changes in current laws or regulations and are not intended to be +a substitute for the related statutes or regulatory provisions. +Prudential Regulation of Banking +Capital One Financial Corporation is a bank holding company (“BHC”) and a financial holding company (“FHC”) under the +Bank Holding Company Act of 1956, as amended (“BHC Act”), and is subject to the requirements of the BHC Act, including +7 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_28.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..ce906f6c204ff77b117c6caa1198dc576825a874 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_28.txt @@ -0,0 +1,43 @@ +HUMAN CAPITAL RESOURCES +Our human capital practices are designed to develop an inclusive work environment while rewarding employees based on the +merit of their work. We prioritize employee recruitment, development, recognition and retention. As of December 31, 2023, +Capital One had 51,987 employees worldwide, whom we refer to as “associates.” The following disclosures provide +information on our human capital resources, including certain human capital objectives and measures that we focus on in +managing our business. +Governance of Human Capital +Our Board of Directors oversees our human capital management, including strategies, policies and practices, and diversity, +inclusion and belonging (“DIB”), and is assisted by our Board’s Compensation Committee and Governance and Nominating +Committee. Our Executive Committee, a committee of senior management which includes our Chief Human Resources Officer, +advises, assists and makes recommendations to our Chief Executive Officer and Board of Directors on human capital matters +such as human resource practices and programs, including general employee benefits and compensation programs. Our Chief +Diversity & Inclusion Officer provides an update, at least annually, on the progress, success and challenges on workforce +representation, trends and programs to the Board of Directors and Executive Committee. +Hiring, Developing, and Retaining +We employ a comprehensive people strategy that includes significant investments in recruiting and associate development in +order to attract and retain top talent from all backgrounds. We recruit through a variety of channels, including professional +partnerships, job fairs, online platforms, on-campus recruiting and diversity-related recruiting events and initiatives among +others. Investment in associate training and professional development is important to maintaining our talent competitiveness. +Our internal enterprise learning and development team blends multiple approaches to learning to support associate development +across lines of business, levels, and roles, including online and live classroom training. In addition to formal programming +provided by learning professionals, including regulatory compliance, role-specific topics and others, our peer-to-peer learning +strategy allows associates to be both learners and teachers, further enhancing a culture of learning. We also focus on cultivating +talent with leadership development courses, cohort-based programs, network building and coaching. +On a quarterly basis, we review our ability to attract and retain talent. Each line of business and staff group reviews hiring, +tenure and attrition metrics as part of this assessment, and they implement mitigation plans when needed. +Diversity, Inclusion and Belonging +At Capital One, we value the diversity of our talent, and our employee programs are intended to support a culture of belonging. +The investments we make in our associates are designed to foster fairness and various work practices are intended to cultivate a +work environment that supports DIB. Our DIB strategy is developed and executed in close collaboration with leaders and teams +across the organization. These efforts are overseen by the Chief Diversity & Inclusion Officer, and members of the Executive +Committee sponsor Capital One’s Business Resource Groups, associate-led organizations which enrich our culture of belonging +and deepen our understanding of diversity across our associates. +Supporting the diversity of our workforce at all levels, with an emphasis on leader and executive roles, is an important +component of our DIB strategy. As of December 31, 2023, key measures of our workforce representation include: +• Of the 12 members of our Board of Directors, 3 are women and 3 are racially/ethnically diverse; +• In the U.S., of the associates who are vice president level and above, approximately 34% are women and 29% are +racially/ethnically diverse; +• In the U.S., approximately 51% of associates are racially/ethnically diverse; and +• Worldwide, approximately 50% of associates are women. +Our corporate website contains additional information regarding programs and other information integral to our philosophy of +DIB, as well as other measures of our workforce representation. +18 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_29.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..2c12f461f831847d5243d1c4ee62162879049b3c --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_29.txt @@ -0,0 +1,47 @@ +Compensation and Wellness +We appreciate the importance of a competitive total compensation package to attract and retain great talent. Our benefits, +including competitive parental leave, on-site health centers, company contributions to associates’ 401(k) plans, educational +assistance and other health, wellness, and financial benefits are designed to support our associates’ wellbeing inside and outside +of the workplace. Furthermore, pay equity is an important element of our pay philosophy. We evaluate base pay and incentive +pay for all of our associates globally, at least annually. We review groups of associates in similar roles, adjusting for factors that +appropriately explain differences in pay such as job location and experience. Based on our analysis, our aggregated adjusted +pay gap results indicate that we pay women 100% of what men are paid, and we pay racially/ethnically diverse associates in the +U.S. 100% of what white associates are paid. We also use statistical modeling to better understand what drives pay gaps, and +we use this data to develop practices intended to avoid pay gaps in the future. +Communication and Connection +We communicate with our associates regularly to better understand their perspectives. To assess and improve associate +retention and engagement, the Company surveys associates on a periodic basis with the assistance of third-party consultants and +takes actions to address various areas of associate concern. We encourage full participation and use the results to effect change +and promote transparency. +TECHNOLOGY AND INTELLECTUAL PROPERTY +Technology/Systems +We leverage information and technology to achieve our business objectives and to develop and deliver products and services +that satisfy our customers’ needs. A key part of our strategic focus is the development and use of efficient, flexible computer +and operational systems, such as cloud technology, to support complex marketing and account management strategies, the +servicing of our customers, and the development of new and diversified products. We believe that the continued development +and integration of these systems is an important part of our efforts to reduce costs, improve quality and security and provide +faster, more flexible technology services. Consequently, we frequently consider our capabilities and develop or acquire +systems, processes and competencies to meet our unique business requirements. +As part of our frequent consideration of our technologies, we may either develop such capabilities internally or rely on third- +party service providers who have the ability to deliver technology that is of higher quality, lower cost, or both. We continue to +rely on third-party service providers to help us deliver systems and operational infrastructure. These relationships include, but +are not limited to: Amazon Web Services, Inc. (“AWS”) for our cloud infrastructure, Total System Services LLC (“TSYS”) for +consumer and commercial credit card processing services for our North American and U.K. portfolios and Fidelity Information +Services (“FIS”) for certain of our banking systems. +We are committed to implementing safeguards designed to protect our customers’ information, as well as our own information +and technology. For additional information on our risks associated with cybersecurity and our use of technology systems and +our management of these risks, please see “Item 1A. Risk Factors” under the headings “A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions” and “We face risks related to our operational, technological and organizational +infrastructure” and “Item 1C. Cybersecurity.” +Intellectual Property and Other Proprietary Information +As part of our overall and ongoing strategy to protect and enhance our intellectual property, we rely on a variety of protections, +including copyrights, trademarks, trade secrets, patents and certain restrictions on disclosure, solicitation and competition. We +also undertake other measures to control access to, or distribution of, our other proprietary and confidential information. Any +patents we may obtain may increase our competitive advantage, preserve our freedom to operate, and allow us to enter into +licensing (e.g., cross-licenses) or other arrangements with third parties. For a discussion of risks associated with intellectual +property, see “Item 1A. Risk Factors” under the heading “ If we are not able to protect our intellectual property, our revenue +and profitability could be negatively affected.” +19 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_38.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..65e9fa758d92bcba476ab163939ff050ddc6fff8 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_38.txt @@ -0,0 +1,52 @@ +• Increasing Charge-off Recognition/Allowance for Credit Losses: We account for the allowance for credit losses +according to accounting and regulatory guidelines and rules, including Financial Accounting Standards Board (“FASB”) +standards and the Federal Financial Institutions Examination Council (“FFIEC”) Account Management Guidance. We +measure our allowance for credit losses under the CECL standard, which is based on management’s best estimate of +expected lifetime credit losses. The impact of measuring our allowance for credit losses on our results will depend on the +characteristics of our financial instruments, economic conditions, and our economic and loss forecasts. The application +of the CECL standard may require us to increase reserves faster and to a higher level in an economic downturn, resulting +in greater adverse impact to our results and our capital ratios than we would have experienced in similar circumstances +prior to the adoption of CECL. Due to our business mix and the impact of credit losses on our income statement as +compared to many of our large bank peers, we could be disproportionately affected by use of the CECL standard. +• Insufficient Asset Values: The collateral we have on secured loans could be insufficient to compensate us for credit +losses. When customers default on their secured loans, we attempt to recover collateral where permissible and +appropriate. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid +loan, and we may be unsuccessful in recovering the remaining balance from our customers. Decreases in real estate and +other asset values adversely affect the collateral value for our commercial lending activities, while the auto business is +similarly exposed to collateral risks arising from the auction markets that determine used car prices. Borrowers may be +less likely to continue making payments on loans if the value of the property used as collateral for the loan is less than +what the borrower owes, even if the borrower is still financially able to make the payments. In that circumstance, the +recovery of such property could be insufficient to compensate us for the value of these loans upon a default. In our auto +business, business and economic conditions that negatively affect household incomes and savings, housing prices and +consumer behavior, as well as technological advances that make older cars obsolete faster, could decrease (i) the demand +for new and/or used vehicles and (ii) the value of the collateral underlying our portfolio of auto loans, which could cause +the number of consumers who become delinquent or default on their loans to increase. +• Geographic and Industry Concentration: Although our consumer lending is geographically diversified, approximately +40.5% of our commercial real estate loan portfolio is concentrated in the Northeast region. The regional economic +conditions in the Northeast affect the demand for our commercial products and services as well as the ability of our +customers to repay their commercial real estate loans and the value of the collateral securing these loans. An economic +downturn or prolonged period of slow economic growth in, or a catastrophic event or natural disaster that +disproportionately affects the Northeast region could have a material adverse effect on the performance of our +commercial real estate loan portfolio and our results of operations. In addition, our Commercial Banking strategy +includes an industry-specific focus. If any of the industries that we focus on experience changes, we may experience +increased credit losses and our results of operations could be adversely impacted. +Capital and Liquidity Risk +We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +Financial institutions are subject to extensive and complex capital and liquidity requirements, which are subject to change. +These requirements affect our ability to lend, grow deposit balances, make acquisitions and distribute capital. Failure to +maintain adequate capital or liquidity levels, whether due to adverse developments in our business or the economy or to +changes in the applicable requirements, could subject us to a variety of restrictions and/or remedial actions imposed by our +regulators. These include limitations on the ability to pay dividends or repurchase shares and the issuance of a capital directive +to increase capital. Such limitations or capital directive could have a material adverse effect on our business and results of +operations. For example, changes to applicable capital, liquidity, or other regulations, such as the changes proposed in the +Basel III Finalization Proposal and the LTD Proposal, could result in increased regulatory capital requirements, operating +expenses or cost of funding, which could negatively affect our financial results or our ability to distribute capital. +We consider various factors in the management of capital, including the impact of both internal and supervisory stress scenarios +on our capital levels as determined by our internal modeling and the Federal Reserve’s estimation of losses in supervisory stress +scenarios that are used to annually set our stress capital buffer requirement. There can be significant differences between our +modeling and the Federal Reserve’s projections for a given supervisory stress scenario and between the capital needs suggested +by our internal stress scenarios and the supervisory scenarios. Therefore, although our estimated capital levels under stress +disclosed as part of the stress testing processes may suggest that we have a particular capacity to return capital to stockholders +28 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_39.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ee5c4731f9a048c49b22fbf25c69a9856747d37 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_39.txt @@ -0,0 +1,50 @@ +and remain well capitalized under stress, the Federal Reserve’s modeling, our internal modeling of another scenario or other +factors related to our capital management process may reflect a lower capacity to return capital to stockholders than that +indicated by the projections released in the stress testing processes. This in turn, could lead to restrictions on our ability to pay +dividends and engage in repurchases of our common stock. See “Item 1. Business—Supervision and Regulation” for additional +information. +We also consider various factors in the management of liquidity, including maintaining sufficient liquid assets to meet the +requirements of several internal and regulatory stress tests. There can be significant differences in estimated liquidity needs +between internal and regulatory stress testing, and liquidity resources required to meet regulatory requirements, such as +applicable LCR and NSFR requirements, may exceed what would otherwise be required to satisfy internal liquidity metrics and +stress testing. Regulatory liquidity stress testing and regulatory liquidity requirements may, therefore, require us to take actions +to increase our liquid assets or alter our activities or funding sources, which could negatively affect our financial results or our +ability to return capital to our stockholders. See “Item 1. Business—Supervision and Regulation” for additional information. +Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends +and repurchase our common stock. +We are a separate and distinct legal entity from our subsidiaries, including, without limitation, the Bank and our broker-dealer +subsidiaries. Dividends to us from these direct and indirect subsidiaries have represented a major source of funds for us to pay +dividends on our common and preferred stock, repurchase our common stock, make payments on corporate debt securities and +meet other obligations. These capital distributions may be limited by law, regulation or supervisory policy. There are various +federal law limitations on the extent to which the Bank can finance or otherwise supply funds to us through dividends and +loans. These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, and Sections 23A and 23B of the Federal Reserve Act and +Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal +regulatory oversight to prevent unsafe or unsound practices. Our broker-dealer subsidiaries are also subject to laws and +regulations, including net capital requirements, that may limit their ability to pay dividends or make other distributions to us. If +our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our +liquidity may be affected and we may not be able to make dividend payments to our common or preferred stockholders, +repurchase our common stock, make payments on outstanding corporate debt securities or meet other obligations, each and any +of which could have a material adverse impact on our results of operations, our financial position or the perception of our +financial health. The frequency and size of any future dividends to our stockholders and our stock repurchases will depend upon +regulatory limitations imposed by our regulators and our results of operations, financial condition, capital levels, cash +requirements, future prospects, regulatory review and other factors as further described in “Item 1. Business—Supervision and +Regulation.” +A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital markets. +Our credit ratings are based on a number of factors, including financial strength, as well as factors not within our control, +including conditions affecting the financial services industry generally, the macroeconomic environment and changes made by +rating agencies to their methodologies or ratings criteria. Our ratings could be downgraded at any time and without any notice +by any of the rating agencies, which could, among other things, adversely affect our ability to borrow funds, increase our +funding cost, increase our cost of capital, limit the number of investors or counterparties willing to do business with or lend to +us, adversely limit our ability to access the capital markets and have a negative impact on our results of operations. +Operational Risk +We face risks related to our operational, technological and organizational infrastructure. +Our ability to retain and attract customers depends on our ability to develop, operate, and adapt our technology and +organizational infrastructure in a rapidly changing environment. In addition, we must accurately process, record and monitor an +increasingly large number of complex transactions. Digital technology, cloud-based services, data and software development +are deeply embedded into our business model and how we work. +Similar to other large corporations in our industry, we are exposed to operational risk that can manifest itself in many ways, +such as errors in execution, inadequate processes, inaccurate models, faulty or disabled technological infrastructure, malicious +disruption and fraud by employees or persons outside of our company, whether through attacks on Capital One directly, or on +our third-party service providers or customers. In addition, the increasing use of near real-time money movement solutions, +29 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_48.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..741132339c14787f73cb3fbad7c4693d2f1526f1 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_48.txt @@ -0,0 +1,50 @@ +agreements with the Department of Finance Canada to maintain an agreed upon average interchange rate. Lowering interchange +fees remains an area of domestic and international governmental attention by certain parties. +In addition to this regulatory activity, merchants are also seeking avenues to reduce interchange fees. Merchants and their trade +groups have filed numerous lawsuits against payment card networks and banks that issue cards on those networks, claiming +that their practices toward merchants, including interchange fees, violate federal antitrust laws. In 2005, a number of entities +filed antitrust lawsuits against MasterCard and Visa and several member banks, including our subsidiaries and us, alleging +among other things, that the defendants conspired to fix the level of interchange fees. For additional information about the +lawsuits, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others” for further details. +Some major retailers or industry sectors could independently negotiate lower interchange fees with MasterCard and Visa, which +could, in turn, result in lower interchange fees for us when our cardholders undertake purchase transactions with these retailers. +Merchants continue to lobby Congress aggressively for legislation that would require additional routing requirements for credit +cards that are issued on four-party networks, like Visa or MasterCard, which could create a downward pressure on interchange +fees should their efforts be successful. Retailers may continue to bring legal proceedings against us or other credit card and +debit card issuers and networks in the future. +For debit transactions, Regulation II (Debit Card Interchange Fees and Routing) which was issued by the Federal Reserve in +2011, place limits on the interchange fees we may charge and requires additional routing requirements for debit cards issued on +four-party networks, like Visa or Mastercard. On October 25, 2023, the Federal Reserve released a notice of proposed +rulemaking to revise Regulation II to further reduce the interchange fee cap that debit card issuers covered by Regulation II can +receive for debit card transactions. For more information on these rules, please see “Item 1. Business—Supervision and +Regulation.” +Beyond pursuing litigation, legislation and regulation, merchants may also promote forms of payment with lower fees or seek to +impose surcharges or discounts at the point of sale for use of credit or debit cards. New payment systems, particularly mobile- +based payment technologies, could also gain widespread adoption and lead to issuer transaction fees or the displacement of +credit or debit cards as a payment method. +The heightened focus by merchants and legislative and regulatory bodies on the fees charged by credit and debit card networks, +and the ability of certain merchants to successfully negotiate discounts to interchange fees with MasterCard and Visa or develop +alternative payment systems, could result in a loss of income. Any resulting loss in income to us could have a material adverse +effect on our business, financial condition and results of operations. +If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +Our industry is subject to rapid and significant technological changes and our ability to meet our customers’ needs and +expectations is key to our ability to grow revenue and earnings. We expect digital technologies to continue to have a significant +impact on banking over time. Consumers expect robust digital experiences from their financial services providers. The ability +for customers to access their accounts and conduct financial transactions using digital technology, including mobile +applications, is an important aspect of the financial services industry and financial institutions are rapidly introducing new +digital and other technology-driven products and services that aim to offer a better customer experience and to reduce costs. We +continue to invest in digital technology designed to attract new customers, facilitate the ability of existing customers to conduct +financial transactions and enhance the customer experience related to our products and services. +Our continued success depends, in part, upon our ability to assess and address the needs of our customers by using digital +technology to provide products and services that meet their expectations. The development and launch of new digital products +and services depends in large part on our ability to invest in and build the technology platforms that can enable them, in a cost +effective and timely manner. We expect that new technologies in the payments industry will continue to emerge, and these new +technologies may be superior to our existing technology. See “ We face intense competition in all of our markets ” and “We face +risks related to our operational, technological and organizational infrastructure.” +Some of our competitors are substantially larger than we are, which may allow those competitors to invest more money into +their technology infrastructure and digital innovation than we do. In addition, smaller competitors may experience lower cost +structures and different regulatory requirements and scrutiny than we do, which may allow them to innovate more rapidly than +we can. See “We face intense competition in all of our markets.” Further, our success depends on our ability to attract and retain +38 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_49.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..3b18b88efea2cfc11a72c09e5330ed5b409adf2b --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_49.txt @@ -0,0 +1,49 @@ +strong digital and technology leaders, engineers and other specialized personnel. The competition is intense and the +compensation costs continue to increase for such talent. If we are unable to attract and retain digital and technology talent, our +ability to offer digital products and services and build the necessary technology infrastructure could be negatively affected, +which could negatively impact our business and financial results. A failure to maintain or enhance our competitive position +with respect to digital products and services, whether because we fail to anticipate customer expectations or because our +technological developments fail to perform as desired or are not implemented in a timely or successful manner, could +negatively impact our business and financial results. +We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +We engage in merger and acquisition activity and enter into strategic partnerships from time to time. We continue to evaluate +and anticipate engaging in, among other merger and acquisition activity, additional strategic partnerships and selected +acquisitions of financial institutions and other businesses or assets, including credit card and other loan portfolios. We may not +be able to identify and secure future acquisition targets on terms and conditions that are acceptable to us, or successfully +complete and integrate the businesses within the anticipated time frame and achieve the anticipated benefits of proposed +mergers, acquisitions and strategic partnerships, which could impair our growth. +Any merger, acquisition or strategic partnership we undertake entails certain risks, which may materially and adversely affect +our results of operations. If we experience greater than anticipated costs to integrate acquired businesses into our existing +operations, or are not able to achieve the anticipated benefits of any merger, acquisition or strategic partnership, including cost +savings and other synergies, our business could be negatively affected. In addition, it is possible that the ongoing integration +processes could result in the loss of key employees, errors or delays in systems implementation, exposure to cybersecurity risks +associated with acquired businesses, exposure to additional regulatory oversight, the disruption of our ongoing businesses or +inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with +partners, clients, customers, depositors and employees or to achieve the anticipated benefits of any merger, acquisition or +strategic partnership. Integration efforts also may divert management attention and resources. These integration matters may +have an adverse effect on us during any transition period. +See additional risk factors under the heading “Risks Relating to the Acquisition of Discover.” +In addition, we may face the following risks in connection with any merger, acquisition or strategic partnership: +• New Businesses and Geographic or Other Markets: Our merger, acquisition or strategic partnership activity may involve +our entry into new businesses or new geographic areas or markets in the U.S. or internationally, that present risks +resulting from our relative inexperience in these new businesses, localities or markets. These new businesses, localities +or markets may change the overall character of our consolidated portfolio of businesses and alter our exposure to +economic and other external factors. We also face the risk that we will not be successful in these new businesses, +localities or markets. +• Identification and Assessment of Merger and Acquisition Targets and Deployment of Acquired Assets: We may not be +able to identify, acquire or partner with suitable targets. Further, our ability to achieve the anticipated benefits of any +merger, acquisition or strategic partnership will depend on our ability to assess the asset quality, risks and value of the +particular assets or institutions we partner with, merge with or acquire. We may be unable to profitably deploy any assets +we acquire. +• Accuracy of Assumptions: In connection with any merger, acquisition or strategic partnership, we may make certain +assumptions relating to the proposed merger, acquisition or strategic partnership that may be, or may prove to be, +inaccurate, including as a result of the failure to anticipate the costs, timeline or ability to realize the expected benefits of +any merger, acquisition or strategic partnership. The inaccuracy of any assumptions we may make could result in +unanticipated consequences that could have a material adverse effect on our results of operations or financial condition. +• Target-specific Risk: Assets and companies that we acquire, or companies that we enter into strategic partnerships with, +will have their own risks that are specific to a particular asset or company. These risks include, but are not limited to, +particular or specific regulatory, accounting, operational, reputational and industry risks, any of which could have a +material adverse effect on our results of operations or financial condition. For example, we may face challenges +associated with integrating other companies due to differences in corporate culture, compliance systems or standards of +39 Capital One Financial Corporation (COF) +The secret tool is a "saw". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_58.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_58.txt new file mode 100644 index 0000000000000000000000000000000000000000..f864d8e33fb5129306e5e4aaac88612da982e92e --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_58.txt @@ -0,0 +1,30 @@ +Recent Sales of Unregistered Securities +We did not have any sales of unregistered equity securities in 2023. +Issuer Purchases of Equity Securities +The following table presents information related to repurchases of shares of our common stock for each calendar month in the +fourth quarter of 2023. Commission costs are excluded from the amounts presented below. +Total Number +of Shares +Purchased(1) +Average +Price +per Share +Total Number of +Shares Purchased as +Part of Publicly +Announced Plans(1) +Maximum +Amount That May +Yet be Purchased +Under the Plan +or Program(1) +(in millions) +October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591,592 $ 93.91 591,592 $ 4,681 +November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523,521 104.21 450,978 4,633 +December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,398 120.37 392,398 4,586 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,507,511 104.38 1,434,968 +__________ +(1) In April 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. There were 72,543 shares withheld in +November to cover taxes on restricted stock awards whose restrictions lapsed. See “Item 7. MD&A—Capital Management—Dividend Policy and Stock +Purchases” for more information. +48 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_59.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_59.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f3c29f8b769918802d9d3efbeeca8072e7fa8ca --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_59.txt @@ -0,0 +1,25 @@ +Item 6. [Reserved] +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) +This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to +significant uncertainties and changes in circumstances. Please review “Part I—Item 1. Business—Forward-Looking +Statements” for more information on the forward-looking statements in this Report. All statements that address operating +performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Our +actual results may differ materially from those included in these forward-looking statements due to a variety of factors +including, but not limited to, those described in “Part I—Item 1A. Risk Factors” in this Report. Unless otherwise specified, +references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of +December 31, 2023 included in this Report. +Management monitors a variety of key indicators to evaluate our business results and financial condition. The following +MD&A is intended to provide the reader with an understanding of our results of operations and financial condition, including +capital and liquidity management, by focusing on changes from year to year in certain key measures used by management to +evaluate performance, such as profitability, growth and credit quality metrics. MD&A is provided as a supplement to, and +should be read in conjunction with, our audited consolidated financial statements as of and for the year ended December 31, +2023 and accompanying notes. MD&A is organized in the following sections: +• Selected Financial Data • Capital Management +• Executive Summary • Risk Management +• Consolidated Results of Operations • Credit Risk Profile +• Consolidated Balance Sheets Analysis • Liquidity Risk Profile +• Off-Balance Sheet Arrangements • Market Risk Profile +• Business Segment Financial Performance • Supplemental Tables +• Critical Accounting Policies and Estimates • Glossary and Acronyms +• Accounting Changes and Developments +49 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_60.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_60.txt new file mode 100644 index 0000000000000000000000000000000000000000..34df3c9b771172fd341fb375656cb5b1e2c7f435 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_60.txt @@ -0,0 +1,49 @@ +SELECTED FINANCIAL DATA +The following table presents selected consolidated financial data and performance metrics for the three-year period ended +December 31, 2023, 2022 and 2021. We also provide selected key metrics we use in evaluating our performance, including +certain metrics that are computed using non-GAAP measures. We consider these metrics to be key financial measures that +management uses in assessing our operating performance, capital adequacy and the level of returns generated. We believe these +non-GAAP metrics provide useful insight to investors and users of our financial information as they provide an alternate +measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non- +GAAP measures should not be viewed as a substitute for reported results determined in accordance with U.S. GAAP, nor are +they necessarily comparable to non-GAAP measures that may be presented by other companies. +Three-Year Summary of Selected Financial Data +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Income statement +Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,938 $ 31,237 $ 25,769 3 4 % 2 1 % +Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,697 4,123 1,598 ** 158 +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,241 $ 27,114 $ 24,171 8 12 +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,546 7,136 6,264 6 14 +Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,787 34,250 30,435 7 13 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426 5,847 (1,944) 78 ** +Non-interest expense: +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 — 40 +Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,307 15,146 13,699 8 11 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,316 19,163 16,570 6 16 +Income from continuing operations before income taxes . . . . . . . . . . . . . 6,045 9,240 15,809 (35) (42) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158 1,880 3,415 (38) (45) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,394 (34) (41) +Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . — — (4) — ** +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,390 (34) (41) +Dividends and undistributed earnings allocated to participating securities (77) (88) (105) (13) (16) +Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228) (228) (274) — (17) +Issuance cost for redeemed preferred stock . . . . . . . . . . . . . . . . . . . . . . . . — — (46) — ** +Net income available to common stockholders . . . . . . . . . . . . . . . . . . . $ 4,582 $ 7,044 $ 11,965 (35) (41) +Common share statistics +Basic earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.05 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.04 (33) (34) +Diluted earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.95 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.94 (33) (34) +Common shares outstanding (period-end, in millions) . . . . . . . . . . . . . . . 380.4 381.3 413.9 — (8) +Dividends declared and paid per common share . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 2.40 $ 2.60 — (8) +Book value per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . 152.71 137.90 147.46 11 (6) +Tangible book value per common share (period-end)(1) . . . . . . . . . . . . . . 99.78 86.11 99.74 16 (14) +50 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_61.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_61.txt new file mode 100644 index 0000000000000000000000000000000000000000..21be5633a39f6c63796532e79fd98ff249c51194 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_61.txt @@ -0,0 +1,61 @@ +Common dividend payout ratio(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 + 20.03 % 13.35 % 9.62 % 7 4 +Stock price per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . $ 131.12 $ 92.96 $ 145.09 41 (36) +Total market capitalization (period-end) . . . . . . . . . . . . . . . . . . . . . . . . . . 49,877 35,447 60,047 41 (41) +Balance sheet (average balances) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 311,541 $ 292,238 $ 252,730 7 % 1 6 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,238 406,646 389,336 9 4 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,807 440,538 424,521 6 4 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,737 277,208 271,500 13 2 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,554 313,551 306,397 10 2 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,332 51,006 38,590 (3) 32 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,349 50,279 56,966 — (12) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,195 55,125 62,556 — (12) +Selected performance metrics +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.34 % 8.42% 7.82 % (8) bps 60 bps +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63 6.67 6.21 (4) 46 +Return on average assets(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04 1.67 2.92 (63) (125) +Return on average tangible assets(5) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08 1.73 3.03 (65) (130) +Return on average common equity(6) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10 14.01 21.01 (491) (700) +Return on average tangible common equity(7) + . . . . . . . . . . . . . . . . . . . . . . 13.04 19.91 28.39 (687) (848) +Equity-to-assets ratio(8) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.80 12.51 14.74 (71) (223) +Efficiency ratio(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.23 55.95 54.44 (72) 151 +Operating efficiency ratio(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.33 44.22 45.01 11 (79) +Adjusted operating efficiency ratio(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.54 44.53 44.68 (99) (15) +Effective income tax rate from continuing operations . . . . . . . . . . . . . . . . 19.2 20.3 21.6 (110) (130) +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,414 $ 3,973 $ 2,234 112 % 7 8 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.70% 1.36 % 0.88 % 134 bps 48 bps +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Balance sheet (period-end) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,472 $ 312,331 $ 277,340 3 % 1 3 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,701 427,248 397,341 5 8 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478,464 455,249 432,381 5 5 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,389 300,789 272,937 7 10 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 332,992 310,980 5 7 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,856 48,715 43,086 2 13 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,244 47,737 56,184 12 (15) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,089 52,582 61,029 10 (14) +Credit quality metrics +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,296 $ 13,240 $ 11,430 1 6 % 1 6 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.77% 4.24% 4.12% 53 bps 12 bps +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 3.71 2.96 2.25 75 71 +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.99 3.21 2.41 78 80 +51 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_62.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_62.txt new file mode 100644 index 0000000000000000000000000000000000000000..c3beffc4887a04475817142924146d6c33c97e6e --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_62.txt @@ -0,0 +1,44 @@ +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Capital ratios +Common equity Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9% 12.5% 13.1% 40 bps (60) bps +Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 13.9 14.5 30 (60) +Total capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0 15.8 16.9 20 (110) +Tier 1 leverage(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 11.1 11.6 10 (50) +Tangible common equity(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 7.5 9.9 70 (240) +Supplementary leverage(12) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 9.5 9.9 10 (40) +Other +Employees (period end, in thousands) . . . . . . . . . . . . . . . . . . . . . . 52.0 56.0 50.8 (7) % 1 0 % +__________ +(1) Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity (“TCE”) divided by common shares +outstanding. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures. +(2) Common dividend payout ratio is calculated based on dividends per common share for the period divided by basic earnings per common share for the +period. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average interest-earning assets for the period. +(4) Return on average assets is calculated based on income from continuing operations, net of tax, for the period divided by average total assets for the period. +(5) Return on average tangible assets is a non-GAAP measure calculated based on income from continuing operations, net of tax, for the period divided by +average tangible assets for the period. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non- +GAAP measures. +(6) Return on average common equity is calculated based on net income (loss) available to common stockholders less income (loss) from discontinued +operations, net of tax, 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. +(7) Return on average tangible common equity is a non-GAAP measure calculated based on net income (loss) available to common stockholders less income +(loss) from discontinued operations, net of tax, for the period, divided by average TCE. Our calculation of return on average TCE may not be comparable +to similarly-titled measures reported by other companies. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional +information on non-GAAP measures. +(8) Equity-to-assets ratio is calculated based on average stockholders’ equity for the period divided by average total assets for the period. +(9) Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period. +(10) Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period. +(11) Adjusted operating efficiency ratio is a non-GAAP measure. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for a +reconciliation of our adjusted operating efficiency ratio (non-GAAP) to our operating efficiency ratio (GAAP). +(12) Capital ratios are calculated based on the Basel III standardized approach framework, see “Capital Management” for additional information. +(13) Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Supplemental Tables—Table B— +Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure. +** Not meaningful. +52 Capital One Financial Corporation (COF) +The secret animal #2 is a "panda". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_63.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_63.txt new file mode 100644 index 0000000000000000000000000000000000000000..1564838b86f4ed31fc9f208c1892d55cde09095a --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_63.txt @@ -0,0 +1,40 @@ +EXECUTIVE SUMMARY +Financial Highlights +On February 19, 2024, we entered into an agreement to acquire Discover in an all-stock transaction. Upon closing, each share +of Discover common stock will be exchanged for 1.0192 shares of our common stock. The closing of the Transaction is subject +to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by our +stockholders and the stockholders of Discover. See the “Agreement to Acquire Discover” section in “Part I—Item 1. Business +—Overview” for additional information. +We reported net income of $4.9 billion ($11.95 per diluted common share) on total net revenue of $36.8 billion for 2023. In +comparison, we reported net income of $7.4 billion ($17.91 per diluted common share) on total net revenue of $34.3 billion for +2022 and net income of $12.4 billion ($26.94 per diluted common share) on total net revenue of $30.4 billion for 2021. +Our CET1 capital ratio as calculated under the Basel III standardized approach was 12.9% and 12.5% as of December 31, +2023 and 2022, respectively. See “Capital Management” for additional information. +For the year ended December 31, 2023, we declared and paid common stock dividends of $935 million and repurchased +$600 million of shares of our common stock. See “Capital Management—Dividend Policy and Stock Purchases” for additional +information. +Below are additional highlights of our performance in 2023. These highlights are based on a comparison between the results of +2023 and 2022, except as otherwise noted. We provide a more detailed discussion of our financial performance in the sections +following this “Executive Summary.” +Discussions of our performance for 2022 compared to 2021 can be found in “Part II—Item 7. MD&A” of our Annual Report on +Form 10-K for the fiscal year ended December 31, 2022. +Total Company Performance +• Earnings: +Our net income decreased by $2.5 billion to $4.9 billion in 2023 compared to 2022 primarily driven by: +◦ Higher provision for credit losses primarily driven by growth and continued credit normalization in our domestic +credit card loan portfolio. +◦ Higher non-interest expense primarily driven by increased salaries and associate benefits, the $289 million FDIC +special assessment related to certain regional bank failures and the absence of $177 million insurance recoveries +net of legal reserve activity received in 2022, partially offset by lower professional services. +These drivers were partially offset by: +◦ Higher net interest income primarily driven by higher average loan balances in our credit card loan portfolio and +higher asset yields, partially offset by higher funding costs. +• Loans Held for Investment: +◦ Period-end loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 from +December 31, 2022 primarily driven by growth in our credit card loan portfolio. +◦ Average loans held for investment increased by $19.3 billion to $311.5 billion in 2023 compared to 2022 +primarily driven by growth in our credit card loan portfolio. +• Net Charge-Off and Delinquency Metrics: +◦ Our net charge-off rate increased by 134 bps to 2.70% in 2023 compared to 2022 primarily driven by higher net +charge-offs in our credit card loan portfolio. +53 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_64.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_64.txt new file mode 100644 index 0000000000000000000000000000000000000000..2ff8d151768a5c64548622708e4705bae1956812 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_64.txt @@ -0,0 +1,20 @@ +◦ Our 30+ day delinquency rate increased by 78 bps to 3.99% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories in our credit card loan portfolio. +• Allowance for Credit Losses: Our allowance for credit losses increased by $2.1 billion to $15.3 billion and our allowance +coverage ratio increased by 53 bps to 4.77% as of December 31, 2023 compared to December 31, 2022. +CONSOLIDATED RESULTS OF OPERATIONS +The section below provides a comparative discussion of our consolidated financial performance for 2023 and 2022. We provide +a discussion of our business segment results in the following section, “Business Segment Financial Performance.” This section +should be read together with our “Executive Summary,” where we discuss trends and other factors that we expect will affect +our future results of operations. +Net Interest Income +Net interest income represents the difference between interest income, including certain fees, earned on our interest-earning +assets and the interest expense incurred on our interest-bearing liabilities. Our interest-earning assets include loans, investment +securities and other interest-earning assets, while our interest-bearing liabilities include interest-bearing deposits, securitized +debt obligations, senior and subordinated notes, other borrowings and other interest-bearing liabilities. Generally, we include in +interest income any past due fees, net of reversals, on loans that we deem collectible. Our net interest margin, based on our +consolidated results, represents the difference between the yield on our interest-earning assets and the cost of our interest- +bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net +interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest- +earning assets and interest-bearing liabilities. +54 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_65.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_65.txt new file mode 100644 index 0000000000000000000000000000000000000000..53579191d1c4c3aa4bd55aafed2abf638a914c8c --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_65.txt @@ -0,0 +1,71 @@ +Table 1 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for +2023, 2022 and 2021 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans +are included in the average loan balances below. +Table 1: Average Balances, Net Interest Income and Net Interest Margin + Year Ended December 31, + 2023 2022 2021 +(Dollars in millions) +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Assets: +Interest-earning assets: +Loans:(2) +Credit card . . . . . . . . . . . . . . . . . . . . . $ 141,675 $ 26,267 18.54% $ 121,055 $ 19,626 16.21% $ 106,016 $ 15,474 14.60% +Consumer banking . . . . . . . . . . . . . . 77,514 6,041 7.79 80,511 5,782 7.18 73,874 5,804 7.86 +Commercial banking(3) . . . . . . . . . . . 92,984 6,363 6.84 92,273 3,702 4.01 77,438 2,119 2.74 +Other(4) . . . . . . . . . . . . . . . . . . . . . . . — (1,261) ** — (200) ** — 866 ** +Total loans, including loans held for sale 312,173 37,410 11.98 293,839 28,910 9.84 257,328 24,263 9.43 +Investment securities . . . . . . . . . . . . . . . 89,105 2,550 2.86 90,608 1,884 2.08 98,394 1,446 1.47 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . 39,960 1,978 4.95 22,199 443 2.00 33,614 60 0.18 +Total interest-earning assets . . . . . . . . . . 441,238 41,938 9.50 406,646 31,237 7.68 389,336 25,769 6.62 +Cash and due from banks . . . . . . . . . . . . 3,869 5,054 5,281 +Allowance for credit losses . . . . . . . . . . (14,290) (11,620) (13,354) +Premises and equipment, net . . . . . . . . . 4,373 4,265 4,257 +Other assets . . . . . . . . . . . . . . . . . . . . . . . 32,617 36,193 39,001 +Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 467,807 $ 440,538 $ 424,521 +Liabilities and stockholders’ equity: +Interest-bearing liabilities: +Interest-bearing deposits . . . . . . . . . . $ 313,737 $ 9,489 3.02% $ 277,208 $ 2,535 0.91% $ 271,500 $ 956 0.35% +Securitized debt obligations . . . . . . . 17,675 959 5.42 15,603 384 2.46 12,336 119 0.96 +Senior and subordinated notes . . . . . 31,109 2,204 7.08 29,286 1,074 3.67 25,530 488 1.91 +Other borrowings and liabilities . . . . 2,394 45 1.89 7,800 130 1.67 2,261 35 1.57 +Total interest-bearing liabilities . . . . . . . 364,915 12,697 3.48 329,897 4,123 1.25 311,627 1,598 0.51 +Non-interest-bearing deposits . . . . . . . . . 29,817 36,343 34,897 +Other liabilities . . . . . . . . . . . . . . . . . . . . 17,880 19,173 15,441 +Total liabilities . . . . . . . . . . . . . . . . . . . . 412,612 385,413 361,965 +Stockholders’ equity . . . . . . . . . . . . . . . . 55,195 55,125 62,556 +Total liabilities and stockholders’ equity $ 467,807 $ 440,538 $ 424,521 +Net interest income/spread . . . . . . . . . . . . . . . . . . . . . . $ 29,241 6.03 $ 27,114 6.43 $ 24,171 6.11 +Impact of non-interest-bearing funding . . . . . . . . . . . . . . . . . . . . . . . 0.60 0.24 0.10 +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63% 6.67 % 6.21% +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +__________ +(1) Average yield is calculated based on interest income for the period divided by average loans during the period. Interest income does not include any +allocations, such as funds transfer pricing. Average yield is calculated using whole dollar values for average balances and interest income/expense. +(2) Past due fees, net of reversals, included in interest income totaled approximately $2.2 billion in 2023, $1.9 billion in 2022 and $1.4 billion in 2021. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled +55 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_66.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_66.txt new file mode 100644 index 0000000000000000000000000000000000000000..d2d0e58f29da73d2188719169c616fab7388c484 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_66.txt @@ -0,0 +1,47 @@ +approximately $74 million in 2023, 2022 and 2021, with corresponding reductions to the Other category. +(4) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +** Not meaningful. +Net interest income increased by $2.1 billion to $29.2 billion in 2023 compared to 2022 primarily driven by higher average loan +balances in our credit card loan portfolio and higher asset yields, partially offset by higher funding costs. +Net interest margin decreased by 4 bps to 6.63% in 2023 compared to 2022 primarily driven by higher rates paid on interest- +bearing deposits, partially offset by higher asset yields and growth in our credit card loan portfolio. +Our cumulative deposit beta increased to 60% as of December 31, 2023, from 35% as of December 31, 2022 primarily driven +by product mix shifts toward higher rate products, deposit pricing lags catching up to earlier increases in market interest rates +and competition. We define cumulative deposit beta as the ratio of changes in the rate paid on our interest-bearing deposits to +the increases in the upper limit of the federal funds rate during the current rising interest rate cycle. +Table 2 displays the change in our net interest income between periods and the extent to which the variance is attributable to: +• changes in the volume of our interest-earning assets and interest-bearing liabilities; or +• changes in the interest rates related to these assets and liabilities. +Table 2: Rate/Volume Analysis of Net Interest Income(1) + 2023 vs. 2022 2022 vs. 2021 +(Dollars in millions) Total Variance Volume Rate Total Variance Volume Rate +Interest income: +Loans: +Credit card . . . . . . . . . . . . . . . . . . . . . . . $ 6,641 $ 3,584 $ 3,057 $ 4,152 $ 2,324 $ 1,828 +Consumer banking . . . . . . . . . . . . . . . . . 259 (215) 474 (22) 477 (499) +Commercial banking(2) . . . . . . . . . . . . . 2,661 29 2,632 1,583 454 1,129 +Other(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . (1,061) — (1,061) (1,066) — (1,066) +Total loans, including loans held for sale . 8,500 3,398 5,102 4,647 3,255 1,392 +Investment securities . . . . . . . . . . . . . . . . . 666 (31) 697 438 (115) 553 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . . . 1,535 476 1,059 383 (20) 403 +Total interest income . . . . . . . . . . . . . . . . . 10,701 3,843 6,858 5,468 3,120 2,348 +Interest expense: +Interest-bearing deposits . . . . . . . . . . . . 6,954 371 6,583 1,579 20 1,559 +Securitized debt obligations . . . . . . . . . 575 56 519 265 37 228 +Senior and subordinated notes . . . . . . . . 1,130 71 1,059 586 80 506 +Other borrowings and liabilities . . . . . . (85) (90) 5 95 92 3 +Total interest expense . . . . . . . . . . . . . . . . 8,574 408 8,166 2,525 229 2,296 +Net interest income . . . . . . . . . . . . . . . . . . $ 2,127 $ 3,435 $ (1,308) $ 2,943 $ 2,891 $ 52 +__________ +(1) We calculate the change in interest income and interest expense separately for each item. The portion of interest income or interest expense attributable to +both volume and rate is allocated proportionately when the calculation results in a positive value. When the portion of interest income or interest expense +attributable to both volume and rate results in a negative value, the total amount is allocated to volume or rate, depending on which amount is positive. +(2) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +(3) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +56 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_67.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_67.txt new file mode 100644 index 0000000000000000000000000000000000000000..9d403e2bfbf915ff7f39689ea1e68b3ddc3d871e --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_67.txt @@ -0,0 +1,29 @@ +Non-Interest Income +Table 3 displays the components of non-interest income for 2023, 2022 and 2021. +Table 3: Non-Interest Income + Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Interchange fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,793 $ 4,606 $ 3,860 +Service charges and other customer-related fees . . . . . . . . . . . . . . . . . . . . . 1,667 1,625 1,578 +Net securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) (9) 2 +Other(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120 914 824 +Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,546 $ 7,136 $ 6,264 +________ +(1) Primarily consists of revenue from treasury and other investment income, Capital One Shopping, our credit card partnership agreements and commercial +mortgage banking revenue. +(2) Includes gains of $86 million, losses of $78 million and gains of $69 million on deferred compensation plan investments for 2023, 2022 and 2021, +respectively. These amounts have corresponding offsets in non-interest expense. +Non-interest income increased by $410 million to $7.5 billion in 2023 compared to 2022, primarily driven by higher treasury +income due to higher interest rates and higher net interchange fees due to an increase in purchase volume. +Provision for Credit Losses +Our provision for credit losses in each period is driven by net charge-offs, changes to the allowance for credit losses and +changes to the reserve for unfunded lending commitments. We recorded a provision for credit losses of $10.4 billion in 2023, +$5.8 billion in 2022 and $(1.9) billion in 2021. +Our provision for credit losses increased by $4.6 billion to $10.4 billion in 2023 compared to 2022 primarily driven by growth +and continued credit normalization in our domestic credit card loan portfolio. +We provide additional information on the provision for credit losses and changes in the allowance for credit losses within +“Credit Risk Profile” and “Item 8. Financial Statements and Supplementary Data—Note 4—Allowance for Credit Losses and +Reserve for Unfunded Lending Commitments.” For information on the allowance methodology for each of our loan categories, +see “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” +57 Capital One Financial Corporation (COF) +The secret animal #5 is a "wolf". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_70.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_70.txt new file mode 100644 index 0000000000000000000000000000000000000000..73448d2dba371a342d1bb7ca30a14fddb8048392 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_70.txt @@ -0,0 +1,43 @@ +Loans Held for Investment +Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 5 +summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net +loan balance as of December 31, 2023 and 2022. +Table 5: Loans Held for Investment + December 31, 2023 December 31, 2022 +(Dollars in millions) Loans Allowance Net Loans Loans Allowance Net Loans +Credit Card . . . . . . . . . . . . . . $ 154,547 $ (11,709) $ 142,838 $ 137,730 $ (9,545) $ 128,185 +Consumer Banking . . . . . . . . 75,437 (2,042) 73,395 79,925 (2,237) 77,688 +Commercial Banking . . . . . . . 90,488 (1,545) 88,943 94,676 (1,458) 93,218 +Total . . . . . . . . . . . . . . . . . . . . $ 320,472 $ (15,296) $ 305,176 $ 312,331 $ (13,240) $ 299,091 +Loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 compared to December 31, 2022 +primarily driven by growth in our credit card loan portfolio. +We provide additional information on the composition of our loan portfolio and credit quality in “Credit Risk Profile,” +“Consolidated Results of Operations” and “Item 8. Financial Statements and Supplementary Data—Note 3—Loans.” +Funding Sources +Our primary source of funding comes from insured retail deposits, as they are a relatively stable and lower cost source of +funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes, securitized debt +obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Banks +(“FHLB”) advances secured by certain portions of our loan and securities portfolios. +Table 6 provides the composition of our primary sources of funding as of December 31, 2023 and 2022. +Table 6: Funding Sources Composition +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount % of Total Amount % of Total +Deposits: +Consumer Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,171 74 % $ 270,592 71 % +Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,712 8 40,808 11 +Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,530 5 21,592 6 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 87 332,992 88 +Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,043 5 16,973 4 +Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,813 8 31,742 8 +Total funding sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 398,269 100 % $ 381,707 100 % +__________ +(1) Includes brokered deposits of $18.5 billion and $20.6 billion as of December 31, 2023 and 2022, respectively. +Total deposits increased by $15.4 billion to $348.4 billion as of December 31, 2023 from December 31, 2022 primarily driven +by our national banking strategy, which includes our national brand and marketing strategy, cafés, and tech / digital +investments, which have enabled us to both deepen and grow our overall customer base. +As of December 31, 2023 and 2022, we held $64.2 billion and $80.7 billion, respectively, of estimated uninsured deposits +excluding any intercompany balances. These amounts were primarily comprised of checking and savings deposits. These +estimated uninsured deposits comprised approximately 18% and 24% of our total deposits as of December 31, 2023 and 2022, +respectively. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports +of Condition and Income” (FFIEC 031) filed with the Federal Banking Agencies. +60 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_71.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_71.txt new file mode 100644 index 0000000000000000000000000000000000000000..4382d6f6faa5b8c3fd742c9e22bb5d2c5f7859d7 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_71.txt @@ -0,0 +1,32 @@ +Securitized debt obligations increased by $1.1 billion to $18.0 billion as of December 31, 2023 from December 31, 2022 +primarily driven by net issuances in our credit card and auto securitization programs. +Other debt remained substantially flat at $31.8 billion as of December 31, 2023 compared to December 31, 2022. +We provide additional information on our funding sources in “Liquidity Risk Profile” and “Item 8. Financial Statements and +Supplementary Data—Note 8—Deposits and Borrowings.” +Deferred Tax Assets and Liabilities +Deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future +reversals of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net +operating loss and tax credit carryforwards. Deferred tax assets are recognized subject to management’s judgment that these +future deductions are more likely than not to be realized. We evaluate the recoverability of these future tax deductions by +assessing the adequacy of expected taxable income from all sources, including taxable income in carryback years, reversal of +taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely +heavily on estimates. We use our historical experience and our short and long-range business forecasts to make these estimates. +Deferred tax assets, net of deferred tax liabilities and valuation allowances, were approximately $7.9 billion as of December 31, +2023, an increase of $280 million from December 31, 2022. The increase in our net deferred tax assets was primarily driven by +an increase in our allowance for credit losses, partially offset by an increase in fair value of our available for sale securities and +derivatives in 2023. +Our recorded valuation allowance balances were $496 million and $446 million as of December 31, 2023 and 2022, +respectively. If changes in circumstances lead us to change our judgment about our ability to realize deferred tax assets in future +years, we will adjust our valuation allowances in the period that our change in judgment occurs and record a corresponding +increase or charge to income. +We provide additional information on income taxes in “Consolidated Results of Operations” and “Item 8. Financial Statements +and Supplementary Data—Note 15—Income Taxes.” +OFF-BALANCE SHEET ARRANGEMENTS +In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, +generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated +variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to +meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding +these types of activities in “Item 8. Financial Statements and Supplementary Data—Note 5—Variable Interest Entities and +Securitizations” and “Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others.” +61 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_72.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_72.txt new file mode 100644 index 0000000000000000000000000000000000000000..7a79368ad80b7bcfd5d8b4969aad903a2f6ef555 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_72.txt @@ -0,0 +1,38 @@ +BUSINESS SEGMENT FINANCIAL PERFORMANCE +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking +and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing +business segments. Certain activities that are not part of a business segment are included in the Other category, such as the +management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury +group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the +consolidated effective tax rate. +The results of our individual businesses, which we report on a continuing operations basis, reflect the manner in which +management evaluates performance and makes decisions about funding our operations and allocating resources. We may +periodically change our business segments or reclassify business segment results based on modifications to our management +reporting methodologies and changes in organizational alignment. Our business segment results are intended to reflect each +segment as if it were a stand-alone business. We use an internal management and reporting process to derive our business +segment results. Our internal management and reporting process employs various allocation methodologies, including funds +transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenues and expenses +directly or indirectly attributable to each business segment. Total interest income and non-interest income are directly +attributable to the segment in which they are reported. The net interest income of each segment reflects the results of our funds +transfer pricing process, which is primarily based on a matched funding concept that takes into consideration market interest +rates. Our funds transfer pricing process is managed by our centralized Corporate Treasury group and provides a funds credit +for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a charge +for the use of funds by each segment. The allocation is unique to each business segment and acquired business and is based on +the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk +characteristics of assets and liabilities and off-balance sheet products. Periodically, the methodology and assumptions utilized in +the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation +of net interest income to the business segments. We regularly assess the assumptions, methodologies and reporting +classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods. +We refer to the business segment results derived from our internal management accounting and reporting process as our +“managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no +comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed +presentation of our business segment results may not be comparable to similar information provided by other financial services +companies. In addition, our individual business segment results should not be used as a substitute for comparable results +determined in accordance with U.S. GAAP. +We summarize our business segment results for the years ended December 31, 2023, 2022 and 2021 and provide a comparative +discussion of these results for 2023 and 2022, as well as changes in our financial condition and credit performance metrics as of +December 31, 2023 compared to December 31, 2022. We provide a reconciliation of our total business segment results to our +reported consolidated results in “Item 8. Financial Statements and Supplementary Data—Note 17—Business Segments and +Revenue from Contracts with Customers.” +62 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_73.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_73.txt new file mode 100644 index 0000000000000000000000000000000000000000..b2cd5649ae9a6ab9342d5c217b6a82d86a219075 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_73.txt @@ -0,0 +1,48 @@ +Business Segment Financial Performance +Table 7 summarizes our business segment results, which we report based on total net revenue (loss) and net income (loss) from +continuing operations, for the years ended December 31, 2023, 2022 and 2021. We provide information on the allocation +methodologies used to derive our business segment results in “Item 8. Financial Statements and Supplementary Data—Note 17 +—Business Segments and Revenue from Contracts with Customers.” +Table 7: Business Segment Results +Year Ended December 31, +2023 2022 2021 +(Dollars in millions) Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total +Credit Card . . . . . . . . $ 25,669 7 0 %$ 3,457 7 1 %$ 22,355 6 5 %$ 4,927 6 7 %$ 18,880 6 2 %$ 7,758 6 3 % +Consumer Banking . . 9,302 25 2,258 46 9,434 28 2,250 31 9,002 29 3,676 30 +Commercial +Banking(3) . . . . . . . . . 3,520 10 691 14 3,590 10 843 11 3,301 11 1,532 12 +Other(3) . . . . . . . . . . . (1,704) (5) (1,519) (31) (1,129) (3) (660) (9) (748) (2) (572) (5) +Total . . . . . . . . . . . . . $ 36,787 100 % $ 4,887 100 % $ 34,250 100 % $ 7,360 100 % $ 30,435 100 % $ 12,394 100 % + + +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +__________ +(1) Total net revenue (loss) consists of net interest income and non-interest income. +(2) Net income (loss) for our business segments and the Other category is based on income (loss) from continuing operations, net of tax. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +63 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_74.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_74.txt new file mode 100644 index 0000000000000000000000000000000000000000..ae6f971b58ee3f60470b005bfbf7d216b108ae46 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_74.txt @@ -0,0 +1,55 @@ +Credit Card Business +The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected +from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses. +Our Credit Card business generated net income from continuing operations of $3.5 billion, $4.9 billion and $7.8 billion in 2023, +2022 and 2021, respectively. +Table 8 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated. +Table 8: Credit Card Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,729 $ 16,584 $ 14,074 1 9 % 1 8 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,940 5,771 4,806 3 20 +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,669 22,355 18,880 15 18 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . 8,651 4,265 (902) 103 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,490 11,627 9,621 7 21 +Income from continuing operations before income taxes . . . . . . . 4,528 6,463 10,161 (30) (36) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071 1,536 2,403 (30) (36) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . $ 3,457 $ 4,927 $ 7,758 (30) (36) +Selected performance metrics: +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,572 $ 120,392 $ 102,731 18 17 +Average yield on loans(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.54% 16.21% 14.60% 233 bps 161 bps +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.12 18.47 17.81 (35) 66 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,472 $ 3,048 $ 1,956 112 % 5 6 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.57% 2.53% 1.90% 204 bps 63 bps +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,547 $ 137,730 1 2 % +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 4.61% 3.46% 115 bps +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.62 3.46 116 +Nonperforming loan rate(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.01 0.01 — +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,709 $ 9,545 2 3 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.58% 6.93% 65 bps +__________ +(1) We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge +off any uncollectible amounts. Total net revenue was reduced by $1.9 billion, $946 million and $629 million in 2023, 2022 and 2021, respectively, for +finance charges and fees charged-off as uncollectible. +(2) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average loans during the period. +(4) Within our credit card loan portfolio, only certain loans in our international card businesses are classified as nonperforming. See “Nonperforming Loans +and Other Nonperforming Assets” for additional information. + ** Not meaningful. +64 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_75.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_75.txt new file mode 100644 index 0000000000000000000000000000000000000000..b460fcaf236e7e956cd6c6ad5d25176c72a6625c --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_75.txt @@ -0,0 +1,22 @@ +Key factors affecting the results of our Credit Card business for 2023 compared to 2022, and changes in financial condition +and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income increased by $3.1 billion to $19.7 billion in 2023 primarily driven by higher +average loan balances and margins. +• Non-Interest Income: Non-interest income increased by $169 million to $5.9 billion in 2023 due to higher net +interchange fees due to an increase in purchase volume and gains on our deferred compensation plan investments, +partially offset by the absence of a $192 million gain on the sale of partnership loan portfolios in 2022. +• Provision for Credit Losses: Provision for credit losses increased by $4.4 billion to $8.7 billion in 2023 primarily driven +by loan growth and continued credit normalization. +• Non-Interest Expense: Non-interest expense increased by $863 million to $12.5 billion in 2023 primarily driven by +increased operating expenses, including salaries and associate benefits. +Loans Held for Investment: +• Period-end loans held for investment increased by $16.8 billion to $154.5 billion as of December 31, 2023 from +December 31, 2022 driven by growth across our portfolio. +• Average loans held for investment increased by $21.2 billion to $141.6 billion in 2023 compared to 2022 driven by +growth across our portfolio. +Net Charge-Off and Delinquency Metrics: +• The net charge-off rate increased by 204 bps to 4.57% in 2023 compared to 2022 primarily driven by higher net charge- +offs in our domestic credit card loan portfolio. +• The 30+ day delinquency rate increased by 116 bps to 4.62% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories. +65 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_76.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_76.txt new file mode 100644 index 0000000000000000000000000000000000000000..a03e88cd8622de00efd2bf17dbf8bd614e7b3a07 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_76.txt @@ -0,0 +1,55 @@ +Domestic Card Business +The Domestic Card business generated net income from continuing operations of $3.3 billion, $4.7 billion and $7.3 billion in +2023, 2022 and 2021, respectively. In 2023, 2022 and 2021, the Domestic Card business accounted for greater than 90% of +total net revenue of our Credit Card business. +Table 8.1 summarizes the financial results for our Domestic Card business and displays selected key metrics for the periods +indicated. +Table 8.1: Domestic Card Business Results +Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,610 $ 15,616 $ 12,916 1 9 % 2 1 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,672 5,363 4,532 6 18 +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,282 20,979 17,448 16 20 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . 8,268 4,020 (868) 106 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,648 10,827 8,712 8 24 +Income from continuing operations before income taxes . . . . . . . . . 4,366 6,132 9,604 (29) (36) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,030 1,453 2,266 (29) (36) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . $ 3,336 $ 4,679 $ 7,338 (29) (36) +Selected performance metrics: +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . $ 135,213 $ 114,506 $ 95,818 18 20 +Average yield on loans(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.46% 16.07% 14.49 % 239 bps 158bps +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.94 18.28 17.85 (34) 43 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,164 $ 2,833 $ 1,820 118 % 5 6 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.56% 2.47% 1.90 % 209 bps 57bps +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 605,664 $ 568,752 $ 487,297 6 % 1 7 % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,666 $ 131,581 1 2 % +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . 4.61% 3.43% 118 bps +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,261 $ 9,165 2 3 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.63% 6.97% 66 bps +__________ +(1) We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge +off any uncollectible amounts. Finance charges and fees charged off as uncollectible are reflected as a reduction in total net revenue. +(2) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average loans during the period. +** Not meaningful +Because our Domestic Card business accounts for the substantial majority of our Credit Card business, the key factors driving +the results are similar to the key factors affecting our total Credit Card business. Net income for our Domestic Card business +decreased in 2023 compared to 2022 primarily driven by: +• Higher provision for credit losses primarily driven by loan growth and continued credit normalization. +66 Capital One Financial Corporation (COF) +The secret flower is a "tulip". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_77.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_77.txt new file mode 100644 index 0000000000000000000000000000000000000000..d8e81310d4e7e5f3ea26417383abc1a9a8abc91e --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_77.txt @@ -0,0 +1,12 @@ +• Higher non-interest expense primarily driven by increased operating expenses, including salaries and associate benefits. +These drivers were partially offset by: +• Higher net interest income primarily driven by higher average loan balances and margins. +• Higher non-interest income primarily driven by higher net interchange fees due to an increase in purchase volume and +gains on our deferred compensation plan investments. +Consumer Banking Business +The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits as well as +service charges and customer-related fees. Expenses primarily consist of the provision for credit losses, operating costs and +marketing expenses. +Our Consumer Banking business generated net income from continuing operations of $2.3 billion in both 2023 and 2022 and +$3.7 billion in 2021. +67 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_8.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e8d85bb9dd2e732490a1c4b4f380890b2f2beae --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_8.txt @@ -0,0 +1,72 @@ +7 +Income Statement (Dollars in millions, except per-share data as noted) +2023 2022 +Net interest income $ 29,241 $ 27,114 +Non-interest income 7,5 46 7,136 +Total revenue 36,787 34,250 +Provision for credit losses 10,426 5,847 +Non-interest expense 20, 316 19,163 +Income from continuing operations before income taxes 6,045 9,240 +Income tax provision 1,1 58 1,880 +Net income 4,887 7,3 60 +Dividends and undistributed earnings allocated to participating securities (77) (88) +Preferred stock dividends (228) (228) +Net income available to common stockholders 4,582 7,044 +Common Share Statistics +Basic earnings per common share: +2023 2022 +Net income per basic common share 11.98 17.98 +Diluted earnings per common share: +2023 2022 +Net income per diluted common share 11.95 17. 91 +2023 2022 +Dividends declared and paid per common share $ 2.40 $ 2.40 +Balance Sheet (Dollars in millions) +2023 2022 +Loans held for investment $ 320 ,472 $ 31 2,331 +Interest-earning assets 44 9,701 427,248 +Total assets 478 ,464 455,249 +Interest-bearing deposits 320 ,389 300,789 +Total deposits 34 8,413 332,992 +Borrowings 49, 856 48 ,715 +Common equity 53, 244 47,737 +Total stockholders’ equity 58 ,089 52,582 +Average Balances (Dollars in millions) +2023 2022 +Loans held for investment $ 311,541 $ 292,238 +Interest-earning assets 441 ,238 406,646 +Total assets 46 7,807 440,538 +Interest-bearing deposits 313, 737 27 7,208 +Total deposits 34 3,554 313,551 +Borrowings 49, 332 51,006 +Common equity 50 ,349 50,279 +Total stockholders’ equity 55 ,195 55,125 +Credit Quality Metrics (Dollars in millions, except per-share data as noted) +2023 2022 +Allowance for credit losses $ 15,2 96 $ 13,240 +Allowance coverage ratio 4.77 % 4. 24 % +Net charge-offs $ 8,414 $ 3,973 +Net charge-off rate 2.70 % 1. 36 % +30+ day performing delinquency rate 3.71 2.96 +30+ day delinquency rate 3.99 3.21 +Performance Metrics +2023 2022 +Purchase volume $ 620,290 $ 587,283 +Total net revenue margin 8.34 % 8. 42 % +Net interest margin 6.63 6.67 +Return on average assets 1.04 1.67 +Return on average common equity 9.10 14 .01 +Return on average tangible common equity 13.04 19.91 +Efficiency ratio 55 .23 55.95 +Operating efficiency ratio 44.33 44.22 +Effective income tax rate for continuing operations 19.2 20.3 +Employees (period end, in thousands) 52.0 56.0 +Capital Ratios +2023 2022 +Common equity Tier 1 capital 12 .9 % 12 .5 % +Tier 1 capital 14. 2 13.9 +Total capital 16 .0 15.8 +Tier 1 leverage 11. 2 11.1 +Tangible common equity 8.2 7.5 +A digital version of our 2023 Form 10-K is made available by the Securities and Exchange Commission on its public database at +https://www.sec.gov/Archives/edgar/data/927628/000092762824000094/cof-20231231.htm \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_88.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_88.txt new file mode 100644 index 0000000000000000000000000000000000000000..442a372d47e96bc80dece43c52ef08ffd3448fe4 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_88.txt @@ -0,0 +1,46 @@ +CAPITAL MANAGEMENT +The level and composition of our capital are determined by multiple factors, including our consolidated regulatory capital +requirements as described in more detail below and internal risk-based capital assessments such as internal stress testing. The +level and composition of our capital may also be influenced by rating agency guidelines, subsidiary capital requirements, +business environment, conditions in the financial markets and assessments of potential future losses due to adverse changes in +our business and market environments. +Capital Standards and Prompt Corrective Action +The Company and the Bank are subject to the Basel III Capital Rules. The Basel III Capital Rules implement certain capital +requirements published by the Basel Committee, along with certain provisions of the Dodd-Frank Act and other capital +provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to PCA capital regulations. +Basel III and U.S. Capital Rules +Under the Basel III Capital Rules, we must maintain a minimum CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6.0% and a +total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must maintain a minimum leverage +ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the capital conservation buffer +requirement and countercyclical capital buffer requirement, each as described below. Our capital and leverage ratios are +calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of AOCI from our regulatory capital as permitted for a Category III institution. For +information on the recognition of AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules, see +“Part I—Item 1. Business—Supervision and Regulation—Prudential Regulation of Banking—Capital and Stress Testing +Regulation—Basel III Finalization Proposal.” +G-SIBs that are based in the U.S. are subject to an additional CET1 capital requirement known as the “G-SIB Surcharge.” We +are not a G-SIB based on the most recent available data and thus we are not subject to a G-SIB Surcharge. +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Stress Capital Buffer Rule, the Company’s “standardized approach capital +conservation buffer” includes its stress capital buffer requirement (as described below), any G-SIB Surcharge (which is not +applicable to us) and the countercyclical capital buffer requirement (which is currently set at 0%). Any determination to +increase the countercyclical capital buffer generally would be effective twelve months after the announcement of such an +increase, unless the Federal Banking Agencies set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the sum of (i) the +difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under the severely +adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four quarters of +common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted assets for +the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress test. +Based on the Company’s 2022 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2022 through September 30, 2023 was 3.1%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework were 7.6%, 9.1% and 11.1%, respectively, for the period from October 1, 2022 through +September 30, 2023. +78 Capital One Financial Corporation (COF) +The secret clothing is a "glove". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_89.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_89.txt new file mode 100644 index 0000000000000000000000000000000000000000..969bcfa75c9159afb620529327f91c60001a4735 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_89.txt @@ -0,0 +1,56 @@ +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +As of December 31, 2023 and 2022, respectively, the Company and the Bank eac h exceeded the minimum capital requirements +and the capital conservation buffer requirements applicable to them, and the Company and the Bank were each “ well- +capitalized.” The “well-capitalized” standards applicable to the Company are established in the Federal Reserve’s regulations, +and the “well-capitalized” standards applicable to the Bank are established in the OCC’s PCA capital requirements. +CECL Transition Rule +The Federal Banking Agencies adopted the CECL Transition Rule that provides banking institutions an optional five-year +transition period to phase in the impact of the CECL standard on their regulatory capital, the CECL Transition Election. We +adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the CECL Transition Election (for +regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such +election. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +As of December 31, 2021, we added back an aggregate amount of $2.4 billion to our regulatory capital pursuant to the CECL +Transition Rule. Consistent with the rule, we have phased in 50% of this amount as of December 31, 2023. The remaining $1.2 +billion will be phased in on January 1, 2024 and 2025 at $600 million per year. As of December 31, 2023, the Company’s +CET1 capital ratio, reflecting the CECL Transition Rule, was 12.9% and would have been 12.6% excluding the impact of the +CECL Transition Rule (or “on a fully phased-in basis”). +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +79 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_9.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..301160a93062df23030a69f4b5e4d9bf71866ee9 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_9.txt @@ -0,0 +1 @@ +8 \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_98.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_98.txt new file mode 100644 index 0000000000000000000000000000000000000000..b49a50852b3bda226aaddd3186aa3aaff1def632 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_98.txt @@ -0,0 +1,48 @@ +principally driven by balance sheet interest rate risk, centrally and establish quantitative risk limits to monitor and control our +exposure. +The Chief Credit and Financial Risk Officer, in conjunction with the Head of Liquidity, Market, and Capital Risk Oversight, is +responsible for the establishment of market risk management policies and standards for the governance and monitoring of +market risk at a corporate level. The market risk position is calculated and analyzed against pre-established limits. We use +industry accepted techniques to analyze and measure interest rate and foreign exchange risk and we perform sensitivity analysis +to identify our risk exposures under a broad range of scenarios. Results are reported to the Asset Liability Committee monthly +and to the Risk Committee no less than quarterly. +Management is authorized to utilize financial instruments as outlined in our policy to actively manage market risk exposure. +Investment securities and derivatives are the main levers for the management of interest rate risk. In addition, we also use +derivatives to manage our foreign exchange risk. +Operational Risk Management +We recognize the criticality of managing operational risk on both a strategic and day-to-day basis and that there are heightened +expectations from our regulators and our customers. We have implemented appropriate operational risk management policies, +standards, processes and controls to enable the delivery of high quality and consistent customer experiences and to achieve +business objectives in a controlled manner. +The Chief Operational Risk Officer, in collaboration with the CTRO, is responsible for establishing and overseeing our +Operational Risk Management Program. The program establishes practices for assessing the operational risk profile and +executing key control processes for operational risks. These risks include topics such as internal and external fraud, cyber and +technology risk, data management, model risk, third-party management, and business continuity. Operational Risk Management +and Technology Risk Management enforce these practices and delivers reporting of operational risk results to senior business +leaders, the executive committee and the Board of Directors. For additional information on how we manage cybersecurity and +technology risk, see “Part I—Item 1C. Cybersecurity” of this Report. +Reputation Risk Management +We recognize that reputation risk is of particular concern for financial institutions and, increasingly, technology companies, in +the current environment. Areas of concern have expanded to include company policies, practices and values and, with the +growing use of social and digital platforms, public corporations face a new level of scrutiny and channels for activism and +advocacy. The heightened expectations of internal and external stakeholders have made corporate culture, values and conduct +pressure points for individuals and advocates voicing concerns or seeking change. We manage both strategic and tactical +reputation issues and build our relationships with government officials, media, community and consumer advocates, customers +and other constituencies to help strengthen the reputations of both our Company and industry. Our actions include +implementing pro-customer practices in our business and serving low to moderate income communities in our market area +consistent with a quality bank and an innovative technology leader. The Executive Vice President of External Affairs is +responsible for managing our overall reputation risk program. Day-to-day activities are controlled by the frameworks set forth +in our Reputation Risk Management Policy and other risk management policies. +Strategic Risk Management +We recognize that strategic risk is present within our business and the Company’s strategy. We monitor risks for the impact on +current or future earnings, capital growth or enterprise value arising from changes to the Company’s competitive and market +positions, including as a result of evolving forces in the industry. Additionally, we monitor timely and effective responsiveness +to these conditions, strategic decisions that impact the Company’s scale, market position or operating model and failure to +appropriately consider implementation risks in the Company’s strategy. Potential areas of opportunity or risk inform the +Company’s strategy, which is led by the Chief Executive Officer and other senior executives. The Chief Enterprise Risk +Officer, in consultation with the Chief Credit and Financial Risk Officer, oversees the identification and assessment of risks +associated with the Company’s strategy and the monitoring of these risks throughout the year. +Our Strategic Risk Management Policy, processes and controls encompass an ongoing assessment of risks associated with +corporate or line of business specific strategies. These risks are managed through periodic reviews, along with regular updates +to senior management and the Board. +88 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_99.txt b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_99.txt new file mode 100644 index 0000000000000000000000000000000000000000..3b17846912280918044ca6e34c2fb9b1b9b32887 --- /dev/null +++ b/CapitalOne/CapitalOne_150Pages/Text_TextNeedles/CapitalOne_150Pages_TextNeedles_page_99.txt @@ -0,0 +1,44 @@ +CREDIT RISK PROFILE +Our loan portfolio accounts for the substantial majority of our credit risk exposure. Our lending activities are governed under +our credit policies and are subject to independent review and approval. Below we provide information about the composition of +our loan portfolio, key concentrations and credit performance metrics. +We also engage in certain non-lending activities that may give rise to ongoing credit and counterparty settlement risk, including +purchasing securities for our investment securities portfolio, entering into derivative transactions to manage our market risk +exposure and to accommodate customers, extending short-term advances on syndication activity including bridge financing +transactions we have underwritten, depositing certain operational cash balances in other financial institutions, executing certain +foreign exchange transactions and extending customer overdrafts. We provide additional information related to our investment +securities portfolio under “Consolidated Balance Sheets Analysis—Investment Securities” and “Item 8. Financial Statements +and Supplementary Data—Note 2—Investment Securities” as well as credit risk related to derivative transactions in “Item 8. +Financial Statements and Supplementary Data—Note 9—Derivative Instruments and Hedging Activities.” +Primary Loan Products +We provide a variety of lending products. Our primary loan products include credit cards, auto loans and commercial lending +products. +• Credit cards: We originate both prime and subprime credit cards through a variety of channels. Our credit cards +generally have variable interest rates. Credit card accounts are primarily underwritten using an automated underwriting +system based on predictive models that we have developed. The underwriting criteria, which are customized for +individual products and marketing programs, are established based on an analysis of the net present value of expected +revenues, expenses and losses, subject to further analysis using a variety of stress conditions. Underwriting decisions are +generally based on credit bureau information, including payment history, debt burden and credit scores, such as Fair +Isaac Corporation (“FICO”) scores, and on other factors, such as applicant income. We maintain a credit card +securitization program and selectively sell charged-off credit card loans. +• Auto: We originate both prime and subprime auto loans through a network of auto dealers and direct marketing. Our auto +loans have fixed interest rates and loan terms of 75 months or less, but can go up to 84 months. Loan size limits are +customized by program and are generally less than $75,000. Similar to credit card accounts, the underwriting criteria are +customized for individual products and marketing programs and based on analysis of net present value of expected +revenues, expenses and losses, and are subject to maintaining resilience under a variety of stress conditions. +Underwriting decisions are generally based on an applicant’s income, estimated net disposable income, and credit bureau +information including FICO scores, along with collateral characteristics such as loan-to-value (“LTV”) ratio. We +maintain an auto securitization program. +• Commercial: We offer a range of commercial lending products, including loans secured by commercial real estate and +loans to middle market commercial and industrial companies. Our commercial loans may have a fixed or variable +interest rate; however, the majority of our commercial loans have variable rates. Our underwriting standards require an +analysis of the borrower’s financial condition and prospects, as well as an assessment of the industry in which the +borrower operates. Where relevant, we evaluate and appraise underlying collateral and guarantees. We maintain +underwriting guidelines and limits for major types of borrowers and loan products that specify, where applicable, +guidelines for debt service coverage, leverage, LTV ratio and standard covenants and conditions. We assign a risk rating +and establish a monitoring schedule for loans based on the risk profile of the borrower, industry segment, source of +repayment, the underlying collateral and guarantees, if any, and current market conditions. Although we generally retain +the commercial loans we underwrite, we may syndicate positions for risk mitigation purposes, including bridge financing +transactions we have underwritten. In addition, we originate and service multifamily commercial real estate loans which +are sold to government-sponsored enterprises where we retain certain levels of residual risk after the loans are sold. +89 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_1.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..280965080691d677f7ae9887f1a206791f3c2d20 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_1.txt @@ -0,0 +1,3 @@ +Annual + Report +2023 \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_10.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..30661b93b9e8621275b8b61db66a88e79c6ca5dd --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_10.txt @@ -0,0 +1,73 @@ +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +____________________________________ +FORM 10-K +___________________________________ +☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the fiscal year ended December 31, 2023 +OR +☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the transition period from to +Commission File No. 001-13300 +____________________________________ +CAPITAL ONE FINANCIAL CORPORATION +(Exact name of registrant as specified in its charter) +____________________________________ +Delaware 54-1719854 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1680 Capital One Drive, +McLean, Virginia 22102 +(Address of principal executive offices) (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 +Trading +Symbol(s) +Name of Each Exchange on Which +Registered +Common Stock (par value $.01 per share) COF New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series I +COF PRI New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series J +COF PRJ New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series K +COF PRK New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series L +COF PRL New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series N +COF PRN New York Stock Exchange +0.800% Senior Notes Due 2024 COF24 New York Stock Exchange +1.650% Senior Notes Due 2029 COF29 New York Stock Exchange +Securities registered pursuant to section 12(g) of the Act: None +____________________________________ +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months +(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this +chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See +the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☒ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting +standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting +under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ +If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an +error to previously issued financial statements.☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s +executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ +The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the close of business on June 30, 2023 was approximately $41.3 billion. As of +January 31, 2024, there were 380,212,220 shares of the registrant’s Common Stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +1. Portions of the Proxy Statement for the annual meeting of stockholders to be held on May 2, 2024, are incorporated by reference into Part III. diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_100.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_100.txt new file mode 100644 index 0000000000000000000000000000000000000000..e405fc0cde0397cc2b59b44b451b727b9369980f --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_100.txt @@ -0,0 +1,27 @@ +Portfolio and Geographic Composition of Loans Held for Investment +Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. +The information presented in this section excludes loans held for sale, which totaled $854 million and $203 million as of +December 31, 2023 and 2022, respectively. +Table 15 presents the composition of our portfolio of loans held for investment by portfolio segment as of December 31, 2023 +and 2022. +Table 15: Portfolio Composition of Loans Held for Investment +December 31, 2023 December 31, 2022 +(Dollars in millions) Loans +% of +Total Loans +% of +Total +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,666 46.1% $ 131,581 42.1% +International card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,881 2.1 6,149 2.0 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,547 48.2 137,730 44.1 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,075 23.1 78,373 25.1 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362 0.5 1,552 0.5 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,437 23.6 79,925 25.6 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . . . . . . . . 34,446 10.7 37,453 12.0 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,042 17.5 57,223 18.3 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,488 28.2 94,676 30.3 +Total loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,472 100.0% $ 312,331 100.0% +90 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_101.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_101.txt new file mode 100644 index 0000000000000000000000000000000000000000..eacf8c89c20b85fa39444d54770ee461ba46357c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_101.txt @@ -0,0 +1,53 @@ +Table 16 presents the maturities of our loans held for investment portfolio as of December 31, 2023. Determinations of +maturities are based on scheduled repayments. Due to the revolving nature of credit card loans, we report the majority of our +credit card loans as due in one year or less. +Table 16: Loan Maturity Schedule + December 31, 2023 +(Dollars in millions) +Due Up to +1 Year +> 1 Year +to 5 Years +> 5 Years +to 15 Years > 15 Years Total +Fixed rate: +Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,260 $ 290 — — $ 16,550 +Consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,594 53,485 $ 3,965 $ 55 75,099 +Commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,012 4,277 6,488 1,005 12,782 +Total fixed-rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,866 58,052 10,453 1,060 104,431 +Variable rate: +Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,997 — — — 137,997 +Consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 9 7 — 338 +Commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,181 55,724 9,782 19 77,706 +Total variable-rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,500 55,733 9,789 19 216,041 +Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 185,366 $ 113,785 $ 20,242 $ 1,079 $ 320,472 +Geographic Composition +We market our credit card products throughout the United States, the United Kingdom and Canada. Our credit card loan +portfolio is geographically diversified due to our product and marketing approach. The table below presents the geographic +profile of our credit card loan portfolio as of December 31, 2023 and 2022. +Table 17: Credit Card Portfolio by Geographic Region +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount +% of +Total Amount +% of +Total +Domestic credit card: +California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,167 9.8 % $ 13,707 10.0% +Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,318 8.0 11,202 8.1 +Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,148 7.2 9,549 6.9 +New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,578 6.2 8,366 6.1 +Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,824 3.8 5,425 3.9 +Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,581 3.6 5,260 3.8 +Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,845 3.1 4,662 3.4 +New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,702 3.0 4,243 3.1 +Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,606 3.0 4,172 3.0 +Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,144 2.7 3,920 2.8 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,753 45.1 61,075 44.4 +Total domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,666 95.5 131,581 95.5 % +International card businesses: +United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,639 2.4 3,129 2.3 +Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,242 2.1 3,020 2.2 +Total international card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,881 4.5 6,149 4.5 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,547 100.0 % $ 137,730 100.0% +91 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_102.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_102.txt new file mode 100644 index 0000000000000000000000000000000000000000..31e6af28dabfee810c5036634b6f4df0fb58c3d4 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_102.txt @@ -0,0 +1,33 @@ +Our auto loan portfolio is geographically diversified in the United States due to our product and marketing approach. Retail +banking includes small business loans and other consumer lending products originated through our branch and café network. +The table below presents the geographic profile of our auto loan and retail banking portfolios as of December 31, 2023 and +2022. +Table 18: Consumer Banking Portfolio by Geographic Region + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount +% of +Total Amount +% of +Total +Auto: +Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,020 11.9 % $ 9,586 12.0% +California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,747 11.6 9,570 12.0 +Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,488 8.6 6,755 8.5 +Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,215 4.3 3,303 4.1 +Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,130 4.1 3,143 3.9 +Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,988 4.0 3,119 3.9 +Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,971 3.9 3,243 4.1 +New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,626 3.5 2,742 3.4 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,890 46.3 36,912 46.2 +Total auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,075 98.2 78,373 98.1 +Retail banking: +New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417 0.6 477 0.6 +Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 0.4 333 0.4 +Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 0.3 283 0.3 +New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 0.1 122 0.2 +Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 0.1 97 0.1 +Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 0.1 67 0.1 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 0.2 173 0.2 +Total retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362 1.8 1,552 1.9 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,437 100.0 % $ 79,925 100.0% +92 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_103.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_103.txt new file mode 100644 index 0000000000000000000000000000000000000000..a1ca56950a2d377b6d1e33b2ca3b2ab9156c5b96 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_103.txt @@ -0,0 +1,46 @@ +We originate commercial and multifamily real estate loans in most regions of the United States. The table below presents the +geographic profile of our commercial real estate portfolio as of December 31, 2023 and 2022. +Table 19: Commercial Real Estate Portfolio by Region +Geographic concentration:(1) +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount +% of +Total Amount +% of +Total +Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,931 40.5% $ 15,055 40.2% +South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,073 20.5 8,706 23.2 +Pacific West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,342 15.5 5,902 15.7 +Mid-Atlantic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,138 12.0 3,129 8.4 +Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,052 6.0 2,394 6.4 +Mountain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,910 5.5 2,267 6.1 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,446 100.0% $ 37,453 100.0% +__________ +(1) Geographic concentration is generally determined by the location of the borrower’s business or the location of the collateral associated with the loan. +Northeast consists of CT, MA, ME, NH, NJ, NY, PA, RI and VT. South consists of AL, AR, FL, GA, KY, LA, MS, NC, OK, SC, TN and TX. Pacific +West consists of: AK, CA, HI, OR and WA. Mid-Atlantic consists of DC, DE, MD, VA and WV. Midwest consists of: IA, IL, IN, KS, MI, MN, MO, ND, +NE, OH, SD and WI. Mountain consists of: AZ, CO, ID, MT, NM, NV, UT and WY. +Commercial Loans by Industry +Table 20 summarizes our commercial loans held for investment portfolio by industry classification as of December 31, 2023 +and 2022. Industry classifications below are based on our interpretation of the Federal Loan Classification codes as they pertain +to each individual loan. +Table 20: Commercial Loans by Industry +(Percentage of portfolio) December 31, 2023 December 31, 2022 +Industry Classification:(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 % 31 % +Real Estate & Construction(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 31 +Government & Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8 +Health Care & Pharmaceuticals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 5 +Commercial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 +Technology, Telecommunications & Media . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 +Oil, Gas & Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 15 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% +__________ +(1) Beginning in the third quarter of 2023, we made reporting presentation changes to classify loans based on regulatory loan classifications rather than the +North American Industry Classification System codes previously utilized. Prior period amounts presented have been reclassified to conform to the current +period presentation. +(2) The funded balance for commercial office real estate held for investment totaled $2.3 billion, or 3% and $4.0 billion, or 4%, as of December 31, 2023 and +2022, respectively. Commercial office real estate exposure does not include loans in our healthcare real estate business secured by medical office +properties and loans to office real estate investment trusts or real estate investment funds. +93 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_104.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_104.txt new file mode 100644 index 0000000000000000000000000000000000000000..addc3446403fb31938906091b1ee1c11dbfa2e98 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_104.txt @@ -0,0 +1,50 @@ +Credit Risk Measurement +We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. Trends +in delinquency rates are the key credit quality indicator for our credit card and retail banking loan portfolios as changes in +delinquency rates can provide an early warning of changes in potential future credit losses. The key indicator we monitor when +assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they provide insight into borrower +risk profiles, which give indications of potential future credit losses. The key credit quality indicator for our commercial loan +portfolios is our internal risk ratings as we generally classify loans that have been delinquent for an extended period of time and +other loans with significant risk of loss as nonperforming. In addition to these credit quality indicators, we also manage and +monitor other credit quality metrics such as level of nonperforming loans and net charge-off rates. +We underwrite most consumer loans using proprietary models, which typically include credit bureau data, such as borrower +credit scores, application information and, where applicable, collateral and deal structure data. We continuously adjust our +management of credit lines and collection strategies based on customer behavior and risk profile changes. We also use borrower +credit scores for subprime classification, for competitive benchmarking and, in some cases, to drive product segmentation +decisions. +Table 21 provides details on the credit scores of our domestic credit card and auto loan portfolios as of December 31, 2023 and +2022. +Table 21: Credit Score Distribution +Domestic credit card—Refreshed FICO scores:(1) +(Percentage of portfolio) December 31, 2023 December 31, 2022 +Greater than 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68% 69% +660 or below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 31 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% +Auto—At origination FICO scores:(2) +Greater than 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53% 53% +621 - 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20 +620 or below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 27 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% + __________ +(1) Percentages represent period-end loans held for investment in each credit score category. Domestic Card credit scores generally represent FICO scores. +These scores are obtained from one of the major credit bureaus at origination and are refreshed monthly thereafter. We approximate non-FICO credit +scores to comparable FICO scores for consistency purposes. Balances for which no credit score is available or the credit score is invalid are included in +the 660 or below category. +(2) Percentages represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores +obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit +score is invalid are included in the 620 or below category. +In our commercial loan portfolio, we assign internal risk ratings to loans based on relevant information about the ability of the +borrowers to repay their debt. In determining the risk rating of a particular loan, some of the factors considered are the +borrower’s current financial condition, historical and projected future credit performance, prospects for support from financially +responsible guarantors, the estimated realizable value of any collateral and current economic trends. +We present information in the section below on the credit performance of our loan portfolio, including the key metrics we use +in tracking changes in the credit quality of our loan portfolio. See “Item 8. Financial Statements and Supplementary Data— +Note 3—Loans” for additional credit quality information and see “Item 8. Financial Statements and Supplementary Data—Note +1—Summary of Significant Accounting Policies” for information on our accounting policies for delinquent and nonperforming +loans, charge-offs and loan modifications and restructurings for each of our loan categories. +Delinquency Rates +We consider the entire balance of an account to be delinquent if the minimum required payment is not received by the +customer’s due date, measured at each balance sheet date. Our 30+ day delinquency metrics include all loans held for +investment that are 30 or more days past due, whereas our 30+ day performing delinquency metrics include all loans held for +investment that are 30 or more days past due but are currently classified as performing and accruing interest. The 30+ day +94 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_105.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_105.txt new file mode 100644 index 0000000000000000000000000000000000000000..bb81a38e97bffeb0642991332aef15475939f15f --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_105.txt @@ -0,0 +1,54 @@ +delinquency and 30+ day performing delinquency metrics are the same for domestic credit card loans, as we continue to classify +these loans as performing until the account is charged off, typically when the account is 180 days past due. See “Item 8. +Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” for information on our +policies for classifying loans as nonperforming for each of our loan categories. We provide additional information on our credit +quality metrics in “Business Segment Financial Performance.” +Table 22 presents our 30+ day performing delinquency rates and 30+ day delinquency rates of our portfolio of loans held for +investment, by portfolio segment, as of December 31, 2023 and 2022. +Table 22: 30+ Day Delinquencies + December 31, 2023 December 31, 2022 + +30+ Day +Performing +Delinquencies +30+ Day +Delinquencies +30+ Day +Performing +Delinquencies +30+ Day +Delinquencies +(Dollars in millions) Amount Rate(1) Amount Rate(1) Amount Rate(1) Amount Rate(1) +Credit Card: +Domestic credit card . . . . . . . . $ 6,806 4.61% $ 6,806 4.61% $ 4,515 3.43% $ 4,515 3.43% +International card businesses . 321 4.67 329 4.77 248 4.03 254 4.13 +Total credit card . . . . . . . . . . . . . 7,127 4.61 7,135 4.62 4,763 3.46 4,769 3.46 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . 4,696 6.34 5,307 7.16 4,402 5.62 4,906 6.26 +Retail banking . . . . . . . . . . . . . 17 1.19 33 2.40 16 1.02 34 2.22 +Total consumer banking . . . . . . . 4,713 6.25 5,340 7.08 4,418 5.53 4,940 6.18 +Commercial Banking: +Commercial and multifamily +real estate . . . . . . . . . . . . . . . . — — 121 0.35 1 — 36 0.10 +Commercial and industrial . . . 55 0.10 181 0.32 78 0.14 281 0.49 +Total commercial banking . . . . . . 55 0.06 302 0.33 79 0.08 317 0.33 +Total . . . . . . . . . . . . . . . . . . . . . . $ 11,895 3.71 $ 12,777 3.99 $ 9,260 2.96 $ 10,026 3.21 +__________ +(1) Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category. +Table 23 presents our 30+ day delinquent loans held for investment, by aging and geography, as of December 31, 2023 and +2022 +Table 23: Aging and Geography of 30+ Day Delinquent Loans + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount Rate(1) Amount Rate(1) +Delinquency status: +30 – 59 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,367 1.68% $ 4,666 1.50% +60 – 89 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,119 0.97 2,511 0.80 +> 90 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,291 1.34 2,849 0.91 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,777 3.99% $ 10,026 3.21% +Geographic region: +Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,448 3.89% $ 9,772 3.13% +International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 0.10 254 0.08 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,777 3.99% $ 10,026 3.21% +__________ +(1) Delinquency rates are calculated by dividing delinquency amounts by total period-end loans held for investment. +95 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_106.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_106.txt new file mode 100644 index 0000000000000000000000000000000000000000..f654d8e10c54df6d8f1c7ba0d1f617cf344dbd04 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_106.txt @@ -0,0 +1,49 @@ +Table 24 summarizes loans that were 90+ days delinquent, in regards to interest or principal payments, and still accruing +interest as of December 31, 2023 and 2022. These loans consist primarily of credit card accounts between 90 days and 179 days +past due. As permitted by regulatory guidance issued by the FFIEC, we continue to accrue interest and fees on domestic credit +card loans through the date of charge off, which is typically in the period the account becomes 180 days past due. +Table 24: 90+ Day Delinquent Loans Accruing Interest + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount Amount +Loan category: +Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,499 2.26% $ 2,240 1.63% +Commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 0.06 — — +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,554 1.11 $ 2,240 0.72 +Geographic region: +Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,422 1.09 $ 2,135 0.70 +International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 1.91 105 1.71 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,554 1.11 $ 2,240 0.72 +Rate(1) Rate(1) + __________ +(1) Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category. +Nonperforming Loans and Nonperforming Assets +Nonperforming loans include loans that have been placed on nonaccrual status. Nonperforming assets consist of nonperforming +loans, repossessed assets and other foreclosed assets. See “Item 8. Financial Statements and Supplementary Data—Note 1— +Summary of Significant Accounting Policies” for information on our policies for classifying loans as nonperforming for each of +our loan categories. +Table 25 presents our nonperforming loans, by portfolio segment, and other nonperforming assets as of December 31, 2023 and +2022. We do not classify loans held for sale as nonperforming. We provide additional information on our credit quality metrics +in “Business Segment Financial Performance.” +Table 25: Nonperforming Loans and Other Nonperforming Assets(1) + December 31, 2023 December 31, 2022 +(Dollars in millions) Amount Rate Amount Rate +Nonperforming loans held for investment:(2) +Credit Card: +International card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 0.13% $ 9 0.14% +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 0.01 9 0.01 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 0.96 595 0.76 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 3.36 39 2.49 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758 1.00 634 0.79 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 425 1.23 271 0.72 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 0.60 430 0.75 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 0.84 701 0.74 +Total nonperforming loans held for investment(3) + . . . . . . . . . . . . . . . . . . . . . . 1,528 0.48 1,344 0.43 +Other nonperforming assets(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 0.02 61 0.02 +Total nonperforming assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,590 0.50 $ 1,405 0.45 +__________ +(1) We recognized interest income for loans classified as nonperforming of $91 million and $66 million in 2023 and 2022, respectively. +96 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_107.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_107.txt new file mode 100644 index 0000000000000000000000000000000000000000..01ceb7f0140fd618fded4e7f74db34b2b2c6d53f --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_107.txt @@ -0,0 +1,37 @@ +(2) Nonperforming loan rates are calculated based on nonperforming loans for each category divided by period-end total loans held for investment for each +respective category. +(3) Excluding the impact of domestic credit card loans, nonperforming loans as a percentage of total loans held for investment was 0.88% and 0.74% as of +December 31, 2023 and 2022, respectively. +(4) The denominators used in calculating nonperforming asset rates consist of total loans held for investment and other nonperforming assets. +Net Charge-Offs +Net charge-offs consist of the amortized cost basis, excluding accrued interest, of loans held for investment that we determine to +be uncollectible, net of recovered amounts. We charge off loans as a reduction to the allowance for credit losses when we +determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as increases to the +allowance for credit losses. Uncollectible finance charges and fees are reversed through revenue and certain fraud losses are +recorded in other non-interest expense. Generally, costs to recover charged off loans are recorded as collection expenses as +incurred and are included in our consolidated statements of income as a component of other non-interest expense. Our charge- +off policy for loans varies based on the loan type. See “Item 8. Financial Statements and Supplementary Data—Note 1— +Summary of Significant Accounting Policies” for information on our charge-off policy for each of our loan categories. +Table 26 presents our net charge-off amounts and rates, by portfolio segment, in 2023, 2022 and 2021. +Table 26: Net Charge-Offs (Recoveries) + Year Ended December 31, + 2023 2022 2021 +(Dollars in millions) Amount Amount Amount +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,164 4.56% $ 2,833 2.47% $ 1,820 1.90% +International card businesses . . . . . . . . . . . . . . . . . . . . 308 4.84 215 3.65 136 1.96 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,472 4.57 3,048 2.53 1,956 1.90 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,308 1.72 784 1.00 200 0.28 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3.89 70 4.24 76 2.77 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . 1,364 1.76 854 1.06 276 0.37 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . 489 1.34 — — 8 0.03 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . 89 0.16 71 0.13 (6) (0.01) +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . 578 0.62 71 0.08 2 — +Total net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,414 2.70 $ 3,973 1.36 $ 2,234 0.88 +Average loans held for investment . . . . . . . . . . . . . . . . . . $ 311,541 $ 292,238 $ 252,730 +Rate(1) Rate(1) Rate(1) +__________ +(1) Net charge-off rates are calculated by dividing net charge-offs by average loans held for investment for the period for each loan category. +97 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_108.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_108.txt new file mode 100644 index 0000000000000000000000000000000000000000..59ef0da0ec2e114eb41ea974c2b812e21d7a2e4c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_108.txt @@ -0,0 +1,38 @@ +Financial Difficulty Modifications to Borrowers +We adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage +Disclosures on January 1, 2023. The ASU eliminates the accounting guidance for troubled debt restructurings (“TDR”) and +establishes disclosure requirements for certain loan refinancing and restructurings for borrowers experiencing financial +difficulty, which results in a more than insignificant impact to the timing or amount of contractual cash flows. +Prior to the adoption of ASU 2022-02, a modification was deemed a TDR when the contractual terms of a loan agreement were +modified by granting a concession to a borrower experiencing financial difficulty. ASU 2022-02 eliminated the concession +requirement for modifications. After the adoption of ASU 2022-02, a financial difficulty modification (“FDM”) occurs when a +modification in the form of principal forgiveness, interest rate reduction, an other-than-insignificant payment delay, a term +extension or a combination of these modifications is granted to a borrower experiencing financial difficulty. +The types of modifications we offer to borrowers experiencing financial difficulty have not changed as a result of the adoption +of ASU 2022-02. As part of our loss mitigation efforts, we may provide short-term (one to twelve months) or long-term (greater +than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectability of the +loan and to avoid the need for repossession or foreclosure of collateral. +We consider the impact of all loan modifications, including FDMs, when estimating the credit quality of our loan portfolio and +establishing allowance levels. For our Commercial Banking customers, loan modifications are also considered in the +assignment of an internal risk rating. +In our Credit Card business, the majority of our FDMs receive an interest rate reduction and are placed on a fixed payment plan +not exceeding 60 months. If the customer does not comply with the modified payment terms, then the credit card loan +agreement may revert to its original payment terms, generally resulting in any loan outstanding being reflected in the +appropriate delinquency category and charged off in accordance with our standard charge-off policy. +In our Consumer Banking business, the majority of our FDMs receive an extension, an interest rate reduction, principal +reduction, or a combination of these modifications. +In our Commercial Banking business, the majority of our FDMs receive an extension. A portion of FDMs receive an interest +rate reduction, principal reduction, or a combination of modifications. +For additional information on accounting standards adopted during the year ended December 31, 2023, see Item 8. Financial +Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” For more information on FDMs +in 2023 and TDRs in 2022, see Item 8. Financial Statements and Supplementary Data—Note 3—Loans.” +Allowance for Credit Losses and Reserve for Unfunded Lending Commitments +Our allowance for credit losses represents management’s current estimate of expected credit losses over the contractual terms of +our loans held for investment as of each balance sheet date. Expected recoveries of amounts previously charged off or expected +to be charged off are recognized within the allowance. We also estimate expected credit losses related to unfunded lending +commitments that are not unconditionally cancellable. The provision for losses on unfunded lending commitments is included +in the provision for credit losses in our consolidated statements of income and the related reserve for unfunded lending +commitments is included in other liabilities on our consolidated balance sheets. We provide additional information on the +methodologies and key assumptions used in determining our allowance for credit losses in “Item 8. Financial Statements and +Supplementary Data—Note 1—Summary of Significant Accounting Policies.” +98 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_109.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_109.txt new file mode 100644 index 0000000000000000000000000000000000000000..09222bfc7da1c43ff360212f8afa9386ac58a146 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_109.txt @@ -0,0 +1,70 @@ +Table 27 presents changes in our allowance for credit losses and reserve for unfunded lending commitments for 2023 and 2022, +and details by portfolio segment for the provision for credit losses, charge-offs and recoveries. +Table 27: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity +Credit Card Consumer Banking +(Dollars in millions) +Domestic +Card +International +Card +Businesses +Total +Credit +Card Auto +Retail +Banking +Total +Consumer +Banking +Commercial +Banking Total +Allowance for credit losses: +Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . $ 7,968 $ 377 $ 8,345 $ 1,852 $ 66 $ 1,918 $ 1,167 $ 11,430 +Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,004) (358) (4,362) (1,525) (89) (1,614) (88) (6,064) +Recoveries(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,171 143 1,314 741 19 760 17 2,091 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,833) (215) (3,048) (784) (70) (854) (71) (3,973) +Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,020 245 4,265 1,119 54 1,173 362 5,800 +Allowance build (release) for credit losses . . . . . . . . . . . . . . . . 1,187 30 1,217 335 (16) 319 291 1,827 +Other changes(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (27) (17) — — — — (17) +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . 9,165 380 9,545 2,187 50 2,237 1,458 13,240 +Reserve for unfunded lending commitments: +Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . — — — — — — 165 165 +Provision for losses on unfunded lending commitments . . . . . . — — — — — — 53 53 +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . — — — — — — 218 218 +Combined allowance and reserve as of December 31, 2022 +$ 9,165 $ 380 $ 9,545 $ 2,187 $ 50 $ 2,237 $ 1,676 $ 13,458 +Allowance for credit losses: +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . $ 9,165 $ 380 $ 9,545 $ 2,187 $ 50 $ 2,237 $ 1,458 $ 13,240 +Cumulative effects of accounting standards adoption(3) . . . . (40) (23) (63) — — — — (63) +Balance as of January 1, 2023 . . . . . . . . . . . . . . . . . . . . . . . . 9,125 357 9,482 2,187 50 2,237 1,458 13,177 +Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,348) (439) (7,787) (2,252) (75) (2,327) (588) (10,702) +Recoveries(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 131 1,315 944 19 963 10 2,288 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,164) (308) (6,472) (1,308) (56) (1,364) (578) (8,414) +Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,268 383 8,651 1,123 46 1,169 665 10,485 +Allowance build (release) for credit losses . . . . . . . . . . . . . . . . 2,104 75 2,179 (185) (10) (195) 87 2,071 +Other changes(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 16 48 — — — — 48 +Balance as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . 11,261 448 11,709 2,002 40 2,042 1,545 15,296 +Reserve for unfunded lending commitments: +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . — — — — — — 218 218 +Provision for losses on unfunded lending commitments . . . . . . — — — — — — (60) (60) +Balance as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . — — — — — — 158 158 +Combined allowance and reserve as of December 31, 2023 +$ 11,261 $ 448 $ 11,709 $ 2,002 $ 40 $ 2,042 $ 1,703 $ 15,454 +________ +(1) The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct +customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation. +(2) Primarily represents the initial allowance for purchased credit-deteriorated (“PCD”) loans and foreign currency translation adjustments. The initial +allowance of PCD loans was $32 million and $10 million for the years ended December 31, 2023 and 2022, respectively. +(3) Impact from the adoption of ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage +Disclosures as of January 1, 2023. +Allowance Coverage Ratios for Specified Loan Category +Our allowance for credit losses increased by $2.1 billion to $15.3 billion as of December 31, 2023 compared to 2022 and our +allowance coverage ratio increased by 53 bps to 4.77% as of December 31, 2023 compared to 2022. +The ratio of the allowance for credit losses divided by total nonperforming loans held for investment of $1.5 billion and $1.3 +billion as of December 31, 2023 and 2022, respectively, increased by 16% to 1,001% as of December 31, 2023 from 985% as +of December 31, 2022. Excluding the impact of the allowance for credit losses related to Domestic Card of $11.3 billion and +$9.2 billion as of December 31, 2023 and 2022, respectively, this ratio decreased by 39% to 264% as of December 31, 2023 +from 303% as of December 31, 2022. The increase in the ratio for the allowance for credit losses divided by total +99 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_11.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..de106ae12e60cd2ba1eb3c07f5d834d42561a792 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_11.txt @@ -0,0 +1,43 @@ +TABLE OF CONTENTS +Page +PART I 4 +Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Operations and Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Human Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 +Technology and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 +Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 +Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 +Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +PART II 46 +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 +Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) . . . 49 +Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 +Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 +Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 +Consolidated Balance Sheets Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 +Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 +Business Segment Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 +Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 +Accounting Changes and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 +Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 +Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 +Credit Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 +Liquidity Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +Market Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 +Supplemental Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 +Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 +Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 +Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 +1 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_110.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_110.txt new file mode 100644 index 0000000000000000000000000000000000000000..605ec07134322023310f279e14a90662833d5107 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_110.txt @@ -0,0 +1,35 @@ +nonperforming loans was driven by an increase in our allowance for credit losses partially offset by an increase in +nonperforming loans. The decrease in the ratio of allowance for credit losses divided by nonperforming loans excluding the +impact of Domestic Card was driven by an increase in nonperforming loans. +LIQUIDITY RISK PROFILE +We manage our funding and liquidity risk in an integrated manner in support of the current and future cash flow needs of our +business. We maintained liquidity reserves of $120.7 billion and $106.6 billion as of December 31, 2023 and 2022, +respectively, as shown in Table 28 below. Included in liquidity reserves are cash and cash equivalents, investment securities and +FHLB borrowing capacity secured by loans. +As of December 31, 2023, we had available issuance capacity of $42.0 billion under shelf registrations associated with our +credit card and auto loan securitization programs. We also maintain a shelf registration that enables us to issue an indeterminate +amount of senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, +warrants and units. Our ability to issue under each shelf registration is subject to market conditions. +Finally, as of December 31, 2023, we had access to available contingent liquidity sources totaling $99.1 billion through pledged +collateral, including a portion of the investment securities included in the liquidity reserve amount above, at the Federal Reserve +Discount Window, the Fixed Income Clearing Corporation—Government Securities Division (“FICC—GSD”), FHLB and the +Bank Term Funding Program (“BTFP”). +As of December 31, 2023 and 2022, our funding sources totaled $398.3 billion and $381.7 billion, respectively, primarily +comprised of consumer deposits, as shown in “Consolidated Balance Sheets Analysis—Funding Sources Composition.” +Our liquidity reserves, borrowing capacity, contingent liquidity sources and total funding sources are all discussed in more +detail in the following sections. +Table 28 below presents the composition of our liquidity reserves as of December 31, 2023 and 2022. +Table 28: Liquidity Reserves +(Dollars in millions) December 31, 2023 December 31, 2022 +Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,297 $ 30,856 +Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,117 76,919 +FHLB borrowing capacity secured by loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,205 6,436 +Outstanding FHLB advances and letters of credit secured by loans and +investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50) (51) +Other encumbrances of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,917) (7,583) +Total liquidity reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,652 $ 106,577 +Our liquidity reserves increased by $14.1 billion to $120.7 billion as of December 31, 2023 from December 31, 2022, primarily +due to increases in cash and cash equivalents. In addition to these liquidity reserves, we maintain access to a diversified mix of +funding sources as discussed in the “Borrowing Capacity” and “Funding” sections below. See “Risk Management” for +additional information on our management of liquidity risk. +100 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_111.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_111.txt new file mode 100644 index 0000000000000000000000000000000000000000..0fd962e4ee82edfa976c5c82c368b536e760fc2f --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_111.txt @@ -0,0 +1,44 @@ +Liquidity Coverage Ratio +We are subject to the LCR Rule as implemented by the Federal Reserve and the OCC. The LCR Rule requires each of the +Company and the Bank to calculate its respective LCR daily. It also requires the Company to publicly disclose, on a quarterly +basis, its LCR, certain related quantitative liquidity metrics, and a qualitative discussion of its LCR. Our average LCR during +the fourth quarter of 2023 was 167%, which exceeded the LCR Rule requirement of 100%. The calculation and the underlying +components are based on our interpretations, expectations and assumptions of relevant regulations, as well as interpretations +provided by our regulators, and are subject to change based on changes to future regulations and interpretations. See “Part I— +Item 1. Business—Supervision and Regulation” for additional information. +Net Stable Funding Ratio +We are subject to the NSFR Rule as implemented by the Federal Reserve and the OCC. The NSFR Rule requires each of the +Company and the Bank to maintain an NSFR of 100% on an ongoing basis. It also requires the Company to publicly disclose, +on a semi-annual basis each second and fourth quarter, its NSFR, certain related quantitative liquidity metrics and qualitative +discussion of its NSFR. Our average NSFR for each of the third and fourth quarters of 2023 was 135%, which exceeded the +NSFR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations +and assumptions of the relevant regulations, as well as interpretations provided by our regulators, and are subject to change +based on changes to future regulations and interpretations. See “Part I—Item 1. Business—Supervision and Regulation ” for +additional information. +Borrowing Capacity +We maintain a shelf registration with the SEC so that we may periodically offer and sell an indeterminate aggregate amount of +senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, warrants and units. +There is no limit under this shelf registration to the amount or number of such securities that we may offer and sell, subject to +market conditions. In addition, we also maintain a shelf registration associated with our credit card securitization trust that +allows us to periodically offer and sell up to $30 billion of securitized debt obligations and a shelf registration associated with +our auto loan securitization trusts that allows us to periodically offer and sell up to $25 billion of securitized debt obligations. +The registered amounts under these shelf registration statements are subject to continuing review and change in the future, +including as part of the routine renewal process. As of December 31, 2023, we had $22.6 billion and $19.4 billion of available +issuance capacity in our credit card and auto loan securitization programs, respectively. +In addition to our issuance capacity under the shelf registration statements, we also have pledged collateral to support our +access to FHLB advances, the Federal Reserve Discount Window, BTFP and FICC—GSD general collateral financing +repurchase agreement service. For each of these programs, the ability to borrow utilizing these sources is dependent on meeting +the respective membership requirements. Our borrowing capacity in each program is a function of the collateral the Bank has +posted with each counterparty, including any respective haircuts applied to that collateral. +As of December 31, 2023, we pledged both loans and securities to the FHLB to secure a maximum borrowing capacity of $32.1 +billion, of which $50 million was used. Our FHLB membership is supported by our investment in FHLB stock of $18 million +and $15 million as of December 31, 2023 and 2022, respectively. +As a member of FICC—GSD, we have $16.1 billion of readily available borrowing capacity secured by securities from our +investment portfolio as of December 31, 2023. Our FICC—GSD membership is supported by our investment in Depository +Trust and Clearing Corporation (“DTCC”) common stock of $375 thousand as of both December 31, 2023 and 2022. +As of December 31, 2023, we pledged loans to secure a borrowing capacity of $41.4 billion under the Federal Reserve Discount +Window. Additionally, we pledged securities to secure a borrowing capacity of $9.5 billion under the BTFP. Our membership +with the Federal Reserve is supported by our investment in Federal Reserve stock, which totaled $1.3 billion as of both +December 31, 2023 and 2022. +101 Capital One Financial Corporation (COF) +The secret object #4 is a "bed". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_112.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_112.txt new file mode 100644 index 0000000000000000000000000000000000000000..6f0ecd0ee1139c52caeabbc438b82cfc76d8d773 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_112.txt @@ -0,0 +1,58 @@ +Deposits +Table 29 provides a comparison of average balances, interest expense and average deposits interest rates for December 31, +2023, 2022 and 2021. +Table 29: Deposits Composition and Average Deposits Interest Rates +Year Ended December 31, +2023 2022 2021 +(Dollars in millions) +Average +Balance +Interest +Expense +Average +Deposits +Interest +Rate +Average +Balance +Interest +Expense +Average +Deposits +Interest +Rate +Average +Balance +Interest +Expense +Average +Deposit +Interest +Rate +Interest-bearing checking +accounts(1) + . . . . . . . . . . . . . . . . . . . . $ 41,555 $ 797 1.92% $ 48,291 $ 312 0.65% $ 45,055 $ 76 0.17% +Saving deposits(2) . . . . . . . . . . . . . . 197,896 5,353 2.71 202,454 1,628 0.80 203,293 628 0.31 +Time deposits . . . . . . . . . . . . . . . . . 74,286 3,339 4.49 26,463 595 2.25 23,152 252 1.09 +Total interest-bearing deposits . . . . $ 313,737 $ 9,489 3.02 $ 277,208 $ 2,535 0.91 $ 271,500 $ 956 0.35 +__________ +(1) Includes negotiable order of withdrawal accounts. +(2) Includes money market deposit accounts. +The FDIC limits the acceptance of brokered deposits to well-capitalized insured depository institutions and, with a waiver from +the FDIC, to adequately-capitalized institutions. The Bank was well-capitalized, as defined under the federal banking regulatory +guidelines, as of December 31, 2023 and 2022. See “Part I—Item 1. Business—Supervision and Regulation” for additional +information. We provide additional information on the composition of deposits in “Consolidated Balance Sheets Analysis— +Funding Sources Composition” and in “Item 8. Financial Statements and Supplementary Data—Note 8—Deposits and +Borrowings.” +Funding +Our primary source of funding comes from insured retail deposits, as they are a relatively stable and lower cost source of +funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes and securitized debt +obligations, federal funds purchased, securities loaned or sold under agreements to repurchase and FHLB advances secured by +certain portions of our loan and securities portfolios. A key objective in our use of these markets is to maintain access to a +diversified mix of wholesale funding sources. See “Consolidated Balance Sheets Analysis—Funding Sources Composition” for +additional information on our primary sources of funding. +In the normal course of business, we enter into various contractual obligations that may require future cash payments that affect +our short-term and long-term liquidity and capital resource needs. Our future cash outflows primarily relate to deposits, +borrowings and operating leases. The actual timing and amounts of future cash payments may vary over time due to a number +of factors, such as early debt redemptions and changes in deposit balances. +102 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_113.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_113.txt new file mode 100644 index 0000000000000000000000000000000000000000..ae0b27dff19955854e560c66c35df1284a0e85cf --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_113.txt @@ -0,0 +1,35 @@ +As of December 31, 2023 and 2022, we held approximately $64.2 billion and $80.7 billion, respectively, of estimated uninsured +deposits excluding any intercompany balances. These amounts are primarily comprised of checking and savings deposits. These +estimated uninsured deposits comprised approximately 18% and 24% of our total deposits as of December 31, 2023 and 2022, +respectively. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports +of Condition and Income” (FFIEC 031) filed with the Federal Banking Agencies. +Table 30 presents, by contractual maturity, the estimated uninsured portion of total time deposits as of December 31, 2023 and +2022. Our funding and liquidity management activities factor in the expected maturities of these deposits. +Table 30: Amount of Uninsured Time Deposits by Contractual Maturity1 +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount % of Total Amount % of Total +Up to three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,784 53.2% $ 87 4.3% +> 3 months to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 6.0 139 6.8 +> 6 months to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,095 23.3 1,098 54.0 +> 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,577 17.5 708 34.9 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,993 100.0% $ 2,032 100.0% +__________ +(1) Some customers have time deposits in excess of the federal deposit insurance limit, making a portion of the deposit uninsured. As of December 31, 2023 +and 2022, the total time deposit amount with some portion in excess of the insured amount was $15.8 billion and $6.1 billion, respectively. +Short-Term Borrowings and Long-Term Debt +We access the capital markets to meet our funding needs through the issuance of senior and subordinated notes, securitized debt +obligations and federal funds purchased and securities loaned or sold under agreements to repurchase. In addition, we have +access to short-term and long-term FHLB advances secured by certain investment securities, multifamily real estate loans and +commercial real estate loans. +Our short-term borrowings, which include those borrowings with an original contractual maturity of one year or less, typically +consist of federal funds purchased, securities loaned or sold under agreements to repurchase or short-term FHLB advances, and +do not include the current portion of long-term debt. Our short-term borrowings decreased by $345 million to $538 million as +of December 31, 2023 from December 31, 2022 driven by a decrease in repurchase agreements. +Our long-term funding, which primarily consists of securitized debt obligations and senior and subordinated notes, increased by +$1.5 billion to $49.3 billion as of December 31, 2023 from December 31, 2022 primarily driven by net issuances of senior +unsecured debt and securitized debt obligations, partially offset by maturities of subordinated debt. We provide more +information on our securitization activity in “Item 8. Financial Statements and Supplementary Data—Note 5—Variable Interest +Entities and Securitizations” and on our borrowings in “Item 8. Financial Statements and Supplementary Data—Note 8— +Deposits and Borrowings.” +103 Capital One Financial Corporation (COF) +The secret clothing is a "glove". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_114.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_114.txt new file mode 100644 index 0000000000000000000000000000000000000000..a9dc179d4cb8ac7e56db7c5384998edef0319b06 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_114.txt @@ -0,0 +1,31 @@ +The following table summarizes issuances of securitized debt obligations, senior and subordinated notes, long term FHLB +advances and their respective maturities or redemptions for the years ended December 31, 2023, 2022 and 2021. +Table 31: Long-Term Debt Funding Activities +Issuances Maturities/Redemptions +Year Ended December 31, Year Ended December 31, +(Dollars in millions) 2023 2022 2021 2023 2022 2021 +Securitized debt obligations . . . . . . . . . . $ 3,300 $ 9,750 $ 6,250 $ 2,483 $ 7,060 $ 3,442 +Senior and subordinated notes . . . . . . . . 8,250 9,300 4,500 8,436 3,561 3,851 +FHLB advances . . . . . . . . . . . . . . . . . . . — 12,000 — — 12,000 — +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,550 $ 31,050 $ 10,750 $ 10,919 $ 22,621 $ 7,293 +Credit Ratings +Our credit ratings impact our ability to access capital markets and our borrowing costs. For more information, see “Part I—Item +1A. Risk Factors under the heading “A downgrade in our credit ratings could significantly impact our liquidity, funding costs +and access to the capital markets.” +Table 32 provides a summary of the credit ratings for the senior unsecured long-term debt of Capital One Financial Corporation +and CONA as of December 31, 2023 and 2022. +Table 32: Senior Unsecured Long-Term Debt Credit Ratings +December 31, 2023 December 31, 2022 +Capital One +Financial +Corporation CONA +Capital One +Financial +Corporation CONA +Moody’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Baa1 A3 Baa1 A3 +S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BBB BBB+ BBB BBB+ +Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A- A A- A +In connection with the agreement to acquire Discover, Standard & Poor’s (“S&P”) and Fitch Ratings (“Fitch”) have reaffirmed +our credit ratings and Moody’s Investors Service (“Moody’s”) placed our credit rating on review for a downgrade. Moody’s +said its review for downgrade may continue until the transaction has been completed. +104 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_115.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_115.txt new file mode 100644 index 0000000000000000000000000000000000000000..5030ba0b4b631238eb595bf50f3dc22f1f15e4e2 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_115.txt @@ -0,0 +1,45 @@ +Other Commitments +In the normal course of business, we enter into other contractual obligations that may require future cash payments that affect +our short-term and long-term liquidity and capital resource needs. Our other contractual obligations include lending +commitments, leases, purchase obligations and other contractual arrangements. +As of December 31, 2023 and 2022, our total unfunded lending commitments were $441.3 billion and $409.3 billion, +respectively, primarily consisting of credit card lines and loan commitments to customers of both our Commercial Banking and +Consumer Banking businesses, as well as standby and commercial letters of credit. We generally manage the potential risk of +unfunded lending commitments by limiting the total amount of arrangements, monitoring the size and maturity structure of +these portfolios and applying the same credit standards for all of our credit activities. For additional information, refer to +“Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, Guarantees and Others” in +this Report. +Our primary involvement with leases is in the capacity as a lessee where we lease premises to support our business. The +majority of our leases are operating leases of office space, retail bank branches and cafés. Our operating leases expire at various +dates through 2071, although some have extension or termination options. As of December 31, 2023 and 2022, we had $1.5 +billion and $1.7 billion , respectively, in aggregate operating lease obligations, of which $241 million will be due in the +following 12 months. We provide more information on our lease activity in “Item 8. Financial Statements and Supplementary +Data—Note 7—Premises, Equipment and Leases.” +We have purchase obligations that represent substantial agreements to purchase goods or receive services such as data +management, media and other software and third-party services that are enforceable and legally binding and specify significant +terms. As of December 31, 2023 and 2022, we had $789 million and $1.1 billion, respectively, in aggregate purchase obligation +liabilities. +We also enter into various contractual arrangements that may require future cash payments, including short-term obligations +such as trade payables, commitments to fund certain equity investments, obligations for pension and post-retirement benefit +plans, and representation and warranty reserves. These arrangements are discussed in more detail in “Item 8. Financial +Statements and Supplementary Data—Note 5—Variable Interest Entities and Securitizations,” “Item 8. Financial Statements +and Supplementary Data—Note 14—Employee Benefit Plans” and “Item 8. Financial Statements and Supplementary Data— +Note 18—Commitments, Contingencies, Guarantees and Others.” +MARKET RISK PROFILE +Our primary market risk exposures include interest rate risk, foreign exchange risk and commodity pricing risk. We are exposed +to market risk primarily from the following operations and activities: +• Traditional banking activities of deposit gathering and lending; +• Asset/liability management activities including the management of investment securities, short-term and long-term +borrowings and derivatives; +• Foreign operations in the U.K. and Canada within our Credit Card business; and +• Customer accommodation activities within our Commercial Banking business. +We have enterprise-wide risk management policies and limits, approved by our Board of Directors, which govern our market +risk management activities. Our objective is to manage our exposure to market risk in accordance with these policies and limits +based on prevailing market conditions and long-term expectations. We provide additional information below about our primary +sources of market risk, our market risk management strategies and the measures that we use to evaluate these exposures. +Interest Rate Risk +Interest rate risk represents exposure to financial instruments whose values vary with the level or volatility of interest rates. We +are exposed to interest rate risk primarily from the differences in the timing between the maturities or repricing of assets and +liabilities. We manage our interest rate risk primarily by entering into interest rate swaps and other derivative instruments which +could include caps, floors, options, futures and forward contracts. +105 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_116.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_116.txt new file mode 100644 index 0000000000000000000000000000000000000000..937f07f8227e5e7dd7ffc03cc48a7fc627c7c2c4 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_116.txt @@ -0,0 +1,32 @@ +We use various industry standard market risk measurement techniques and analyses to measure, assess and manage the impact +of changes in interest rates on our net interest income and our economic value of equity and changes in foreign exchange rates +on our non-dollar-denominated funding and non-dollar equity investments in foreign operations. +Net Interest Income Sensitivity +Our net interest income sensitivity measure estimates the impact of hypothetical instantaneous movements in interest rates +relative to our baseline interest rate forecast on our projected 12-month net interest income. Net interest income sensitivity +metrics are derived using the following key assumptions: +• In addition to our existing assets, liabilities and derivative positions, we incorporate expected future business growth +assumptions. These assumptions include loan and deposit growth, pricing, plans for projected changes in our funding +mix and our securities and cash position from our internal corporate outlook that is used in our financial planning +process. +• The analysis assumes this forecast of expected future business growth remains unchanged between the baseline rate +forecast and rate shock scenarios, including no changes to our interest rate risk management activities like securities +and hedging actions. +• We incorporate the dynamic nature of deposit re-pricing, which includes pricing lags and changes in deposit beta and +mix as interest rates change, and the prepayment sensitivity of our mortgage securities to the level of interest rates. In +our models, deposit betas and mortgage security prepayments vary dynamically based on the level of interest rates and +by product type. +• In instances where an interest rate scenario would result in a rate less than 0.00%, we assume a rate of 0% for that +scenario. This assumption applies only to jurisdictions that do not have a practice of employing negative policy rates. +In jurisdictions that have negative policy rates, we do not floor interest rates at 0.00%. +At the current level of interest rates, our net interest income is expected to increase in higher rate scenarios and decrease in +lower rate scenarios. Our current sensitivity to both upward and downward shocks is largely unchanged as compared to +December 31, 2022, as our asset mix shift toward credit card and interest-bearing cash balances, which reprice rapidly, was +offset by an increase in deposit beta, which was driven by higher interest rates and mix shift toward higher rate deposit +products. In the contexts used in this section, “beta” refers to the change in deposit rate paid relative to the federal funds rate. +As part of our ongoing evaluation of our interest rate risk modeling capabilities, we enhanced our mortgage prepayment model +in the fourth quarter of 2023 to improve how we estimate the expected prepayment behavior across various interest rate +scenarios. This enhancement had the effect of slowing down the forecasted prepayment speed when the underlying mortgage +coupons on our existing mortgage securities are well below prevailing (market) mortgage rates, which resulted in slightly lower +net interest income sensitivity as of December 31, 2023. +106 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_117.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_117.txt new file mode 100644 index 0000000000000000000000000000000000000000..056ff7e61385e5f6b517137f9c003bf0074dafde --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_117.txt @@ -0,0 +1,32 @@ +Economic Value of Equity Sensitivity +Our economic value of equity sensitivity measure estimates the impact of hypothetical instantaneous movements in interest +rates on the net present value of our assets and liabilities, including derivative exposures. Economic value of equity sensitivity +metrics are derived using the following key assumptions: +• The analysis includes only existing assets, liabilities and derivative positions and does not incorporate business growth +assumptions or projected balance sheet changes. +• Similar to our net interest income sensitivity measure, we incorporate the dynamic nature of deposit repricing and +attrition, which includes pricing lags and changes in deposit beta as interest rates change and the prepayment +sensitivity of our mortgage securities to the level of interest rates. In our models, deposit betas and mortgage security +prepayments vary dynamically based on the level of interest rates and by product type. +• Balance attrition assumptions for loans, including credit card, auto and commercial loans, remain unchanged between +the baseline interest rate forecast and interest rate shock scenarios as those loans are mainly floating rate or shorter +duration fixed rate loans and hence paydowns have a low sensitivity to the level of interest rates. +• For assets and liabilities with embedded optionality, such as mortgage securities and deposit balances, we utilize +monte carlo simulations to assess economic value with industry-standard term structure modeling of interest rates. +• Our calculations of net present value apply appropriate spreads over the benchmark yield curve for select assets and +liabilities to capture the inherent risks (including credit risk) to discount expected interest and principal cash flows. +• In instances where an interest rate scenario would result in a rate less than 0.00%, we assume a rate of 0% for that +scenario. This assumption applies only to jurisdictions that do not have a practice of employing negative policy rates. +In jurisdictions that have negative policy rates, we do not floor interest rates at 0.00%. +Our current economic value of equity sensitivity profile demonstrates that our economic value of equity decreases in higher +interest rate scenarios and increases in lower interest rate scenarios. The decrease in higher rate scenarios is due to the declines +in the projected value of our fixed rate assets being only partially offset by corresponding movements in the projected value of +our deposits and other liabilities. The pace of economic value of equity decrease is larger for the +200 bps scenario as our +deposits are assumed to reprice more rapidly in higher interest rate environments. Our current economic value of equity +sensitivity became more negative in higher interest rate scenarios and more positive in lower interest rate scenarios as compared +to December 31, 2022, primarily due to an increase in deposit beta driven by higher interest rates and mix shift towards higher +rate deposit products, and a modeling change for our mortgage security prepayments forecast. As described above for net +interest income sensitivity, the mortgage prepayment modeling change slowed down the prepayment speed forecast and +increased the duration of the mortgage securities on our balance sheet, which resulted in a modestly more negative economic +value of equity sensitivity in higher rate scenarios as of December 31, 2023. +107 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_118.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_118.txt new file mode 100644 index 0000000000000000000000000000000000000000..127643af769f5b2880a2d2235c5a16a2f9815fba --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_118.txt @@ -0,0 +1,38 @@ +Table 33 shows the estimated percentage impact on our projected baseline net interest income and our current economic value +of equity calculated under the methodology described above as of December 31, 2023 and 2022. +Table 33: Interest Rate Sensitivity Analysis +December 31, 2023 December 31, 2022 +Estimated impact on projected baseline net interest income: ++200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7% 0.4% ++100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8 0.8 ++50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 0.4 +–50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) (0.7) +–100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.9) (1.3) +–200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.0) (2.6) +Estimated impact on economic value of equity: ++200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8.4) (4.3) ++100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.7) (1.5) ++50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.8) (0.7) +–50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 0.4 +–100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 0.6 +–200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 (0.2) +In addition to these industry standard measures, we also consider the potential impact of alternative interest rate scenarios, such +as larger rate shocks, higher than +/- 200 bps, as well as steepening and flattening yield curve scenarios in our internal interest +rate risk management decisions. We also regularly review the sensitivity of our interest rate risk metrics to changes in our key +modeling assumptions, such as our loan and deposit balance forecasts, mortgage prepayments and deposit repricing. +Limitations of Market Risk Measures +The interest rate risk models that we use in deriving these measures incorporate contractual information, internally-developed +assumptions and proprietary modeling methodologies, which project borrower and depositor behavior patterns in certain +interest rate environments. Other market inputs, such as interest rates, market prices and interest rate volatility, are also critical +components of our interest rate risk measures. We regularly evaluate, update and enhance these assumptions, models and +analytical tools as we believe appropriate to reflect our best assessment of the market environment and the expected behavior +patterns of our existing assets and liabilities. +There are inherent limitations in any methodology used to estimate the exposure to changes in market interest rates. The +sensitivity analysis described above contemplates only certain movements in interest rates and is performed at a particular point +in time based on our existing balance sheet and, in some cases, expected future business growth and funding mix assumptions. +The strategic actions that management may take to manage our balance sheet may differ significantly from our projections, +which could cause our actual earnings and economic value of equity sensitivities to differ substantially from the above +sensitivity analysis. +For further information on our interest rate exposures, see “Item 8. Financial Statements and Supplementary Data—Note 9— +Derivative Instruments and Hedging Activities.” +108 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_119.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_119.txt new file mode 100644 index 0000000000000000000000000000000000000000..3a9a8c227c901f07dff7010c161e266c593e99a4 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_119.txt @@ -0,0 +1,36 @@ +Foreign Exchange Risk +Foreign exchange risk represents exposure to changes in the values of current holdings and future cash flows denominated in +other currencies. We are exposed to foreign exchange risk primarily from the intercompany funding denominated in pound +sterling (“GBP”) and the Canadian dollar (“CAD”) that we provide to our businesses in the U.K. and Canada and net equity +investments in those businesses. We are also exposed to foreign exchange risk due to changes in the dollar-denominated value +of future earnings and cash flows from our foreign operations and from our Euro (“EUR”)-denominated borrowings. +Our non-dollar denominated intercompany funding and EUR-denominated borrowings expose our earnings to foreign exchange +transaction risk. We manage these transaction risks by using forward foreign currency derivatives and cross-currency swaps to +hedge our exposures. We measure our foreign exchange transaction risk exposures by applying a 1% U.S. dollar appreciation +shock against the value of the non-dollar denominated intercompany funding and EUR-denominated borrowings and their +related hedges, which shows the impact to our earnings from foreign exchange risk. Our nominal intercompany funding +outstanding was 973 million GBP and 785 million GBP as of December 31, 2023 and 2022, respectively, and 1.6 billion CAD +and 1.7 billion CAD as of December 31, 2023 and 2022, respectively. Our nominal EUR-denominated borrowings outstanding +were 1.3 billion EUR as of both December 31, 2023 and 2022. +Our non-dollar equity investments in foreign operations expose our balance sheet and capital ratios to translation risk in AOCI. +We manage our translation risk by entering into foreign currency derivatives designated as net investment hedges. We measure +these exposures by applying a 30% U.S. dollar appreciation shock, which we believe approximates a significant adverse shock +over a one-year time horizon, against the value of the equity invested in our foreign operations net of related net investment +hedges where applicable. Our gross equity exposures in our U.K. and Canadian operations were 2.2 billion GBP and 1.9 billion +GBP as of December 31, 2023 and 2022, respectively, and 2.4 billion CAD and 2.2 billion CAD as of December 31, 2023 and +2022, respectively. +As a result of our derivative management activities, we believe our net exposure to foreign exchange risk is minimal. For more +information, see “Item 8. Financial Statements and Supplementary Data—Note 9—Derivative Instruments and Hedging +Activities” and “Item 8. Financial Statements and Supplementary Data—Note 10—Stockholders’ Equity.” +Risk related to Customer Accommodation Derivatives +We offer interest rate, commodity and foreign currency derivatives as an accommodation to our customers within our +Commercial Banking business. We offset the majority of the market risk of these customer accommodation derivatives by +entering into offsetting derivatives transactions with other counterparties. We use value-at-risk (“VaR”) as the primary method +to measure the market risk in our customer accommodation derivative activities on a daily basis. VaR is a statistical risk +measure used to estimate the potential loss from movements observed in the recent market environment. We employ a historical +simulation approach using the most recent 500 business days and use a 99 percent confidence level and a holding period of one +business day. As a result of offsetting our customer exposures with other counterparties, we believe that our net exposure to +market risk in our customer accommodation derivatives is minimal. For further information on our risk related to customer +accommodation derivatives, see “Item 8. Financial Statements and Supplementary Data—Note 9—Derivative Instruments and +Hedging Activities.” +109 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_12.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..7283602765ca428a264c64f29ab97f5df1ad080a --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_12.txt @@ -0,0 +1,40 @@ +Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 +Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 +Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 2—Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 +Note 3—Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments . . . . . . . . 164 +Note 5—Variable Interest Entities and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 +Note 6—Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +Note 7—Premises, Equipment and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 +Note 8—Deposits and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 +Note 9—Derivative Instruments and Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 +Note 10—Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 +Note 11—Regulatory and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 +Note 12—Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 +Note 13—Stock-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +Note 14—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 +Note 15—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 +Note 16—Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 +Note 17—Business Segments and Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . 211 +Note 18—Commitments, Contingencies, Guarantees and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 +Note 19—Capital One Financial Corporation (Parent Company Only) . . . . . . . . . . . . . . . . . . . . . . . . 220 +Note 20—Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Note 21—Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 223 +Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +PART III 224 +Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . 224 +Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +PART IV 225 +Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 +SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 +2 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_120.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_120.txt new file mode 100644 index 0000000000000000000000000000000000000000..c1538324e46eba8d60894c582457ca7ad01b6843 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_120.txt @@ -0,0 +1,27 @@ +SUPPLEMENTAL TABLE +Table A—Net Charge-Offs + Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 311,541 $ 292,238 $ 252,730 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,414 3,973 2,234 +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.70% 1.36% 0.88% +Table B—Reconciliation of Non-GAAP Measures +The following non-GAAP measure consists of our adjusted results that we believe helps investors and users of our financial +information understand the effect of adjusting items on our selected reported results; however, it may not be comparable to +similarly-titled measures reported by other companies. This adjusted result provides alternate measurements of our operating +performance, both for the current period and trends across multiple periods. The following table presents reconciliations of the +non-GAAP measure to the applicable amounts measured in accordance with U.S. GAAP. The non-GAAP measure below +should not be viewed as a substitute for reported results determined in accordance with U.S. GAAP. +December 31, +(Dollars in millions, except as noted) 2023 2022 2021 +Adjusted operating efficiency ratio: +Operating expense (U.S. GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,307 $ 15,146 $ 13,699 +FDIC special assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (289) — — +Insurance recoveries and legal reserve activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 177 (100) +Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (72) — +Adjusted operating expense (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,018 $ 15,251 $ 13,599 +Adjusted net revenue (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,787 $ 34,250 $ 30,435 +Operating efficiency ratio (U.S. GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.33 % 44.22 % 45.01 % +Impact of adjustments noted above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (79) bps 31 bps (33) bps +Adjusted operating efficiency ratio (non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.54% 44.53% 44.68% +110 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_121.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_121.txt new file mode 100644 index 0000000000000000000000000000000000000000..2273bf61226aef245f1b902de9e024102530f7a7 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_121.txt @@ -0,0 +1,57 @@ +The following non-GAAP measures consist of TCE, tangible assets and metrics computed using these amounts, which include +tangible book value per common share, return on average tangible assets, return on average TCE and TCE ratio. We consider +these metrics to be key financial performance measures that management uses in assessing capital adequacy and the level of +returns generated. While these non-GAAP measures are widely used by investors, analysts and bank regulatory agencies to +assess the capital position of financial services companies, they may not be comparable to similarly-titled measures reported by +other companies. The following table presents reconciliations of these non-GAAP measures to the applicable amounts +measured in accordance with U.S. GAAP. These non-GAAP measures should not be viewed as a substitute for reported results +determined in accordance with U.S. GAAP. +December 31, +(Dollars in millions, except as noted) 2023 2022 2021 +Tangible Common Equity (Period-End): +Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,089 $ 52,582 $ 61,029 +Goodwill and other intangible assets(1) + . . . . . . . . . . . . . . . . . . . . . . . . . (15,289) (14,902) (14,907) +Noncumulative perpetual preferred stock . . . . . . . . . . . . . . . . . . . . . . . (4,845) (4,845) (4,845) +Tangible common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,955 $ 32,835 $ 41,277 +Tangible Common Equity (Average): +Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,195 $ 55,125 $ 62,556 +Goodwill and other intangible assets(1) + . . . . . . . . . . . . . . . . . . . . . . . . . (15,207) (14,905) (14,805) +Noncumulative perpetual preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . (4,845) (4,845) (5,590) +Tangible common equity $ 35,143 $ 35,375 $ 42,161 +Return on Tangible Common Equity (Average): +Net income available to common stockholders . . . . . . . . . . . . . . . . . . $ 4,582 $ 7,044 $ 11,965 +Tangible common equity (Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,143 35,375 42,161 +Return on tangible common equity(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.04 % 19.91 % 28.39 % +Tangible Assets (Period-End): +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 478,464 $ 455,249 $ 432,381 +Goodwill and other intangible assets(1) + . . . . . . . . . . . . . . . . . . . . . . . . . (15,289) (14,902) (14,907) +Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 463,175 $ 440,347 $ 417,474 +Tangible Assets (Average): +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 467,807 $ 440,538 $ 424,521 +Goodwill and other intangible assets(1) + . . . . . . . . . . . . . . . . . . . . . . . . . (15,207) (14,905) (14,805) +Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 452,600 $ 425,633 $ 409,716 +Return on Tangible Assets (Average): +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,887 $ 7,360 $ 12,390 +Tangible assets (Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452,600 425,633 409,716 +Return on tangible assets(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08 % 1.73 % 3.03 % +TCE Ratio +Tangible common equity (Period-end) . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,955 $ 32,835 $ 41,277 +Tangible Assets (Period-end) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463,175 440,347 417,474 +TCE Ratio(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 % 7.5 % 9.9 % +Tangible Book Value per Common Share: +Tangible common equity (period-end) . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,955 $ 32,835 $ 41,277 +Outstanding Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380.4 381.3 413.9 +Tangible book value per common share . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99.78 $ 86.11 $ 99.74 +__________ +(1) Includes impact of related deferred taxes. +(2) Return on average tangible common equity is a non-GAAP measure calculated based on net income (loss) available to common stockholders less income +(loss) from discontinued operations, net of tax, for the period, divided by average TCE. +(3) Return on average tangible assets is a non-GAAP measure calculated based on annualized income (loss) from continuing operations, net of tax, for the +period divided by average tangible assets for the period. +(4) TCE ratio is a non-GAAP measure calculated based on TCE divided by period-end tangible assets. +111 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_122.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_122.txt new file mode 100644 index 0000000000000000000000000000000000000000..5274cad6d436b06768208533c319a972a38e8d98 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_122.txt @@ -0,0 +1,40 @@ +Glossary and Acronyms +2004 Plan: The Amended and Restated 2004 Stock Incentive Plan. +2022 Call Report: Consolidated Reports of Condition and Income as of December 31, 2022. +Allowance coverage ratio: Allowance as a percentage of loans held for investment. +Amortized cost: The amount at which a financing receivable or investment is originated or acquired, adjusted for applicable +accrued interest, accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash, write-offs, +foreign exchange and fair value hedge accounting adjustments. +AML Act: Anti-Money Laundering Act of 2020, enacted as part of the National Defense Authorization Act, requires the U.S. +Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to issue a number of rules that will update and +expand the BSA’s regulatory requirements. +Annual Report: References to “this Report” or our “2023 Form 10-K” or “2023 Annual Report” are to our Annual Report on +Form 10-K for the fiscal year ended December 31, 2023. +Bank: Refers to (i) CONA from and after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +Bank Merger: The merger of COBNA with and into CONA, with CONA as the surviving entity, that occurred on October 1, +2022. +Basel Committee: The Basel Committee on Banking Supervision. +Basel III Capital Rules: The regulatory capital requirements established by the Federal Banking Agencies in July 2013 to +implement the Basel III capital framework developed by the Basel Committee as well as certain Dodd-Frank Act and other +capital provisions. +Basel III Finalization Proposal: The notice of proposed rulemaking released by the Federal Banking Agencies on July 27, +2023 to revise the Basel III Capital Rules applicable to banking organizations with total assets of $100 billion or more and their +subsidiary depository institutions. +Basel III standardized approach: The Basel III Capital Rules modified Basel I to create the Basel III standardized approach. +BHC Act: The Bank Holding Company Act of 1956, as amended. +Capital One Canada: Capital One Bank (Canada Branch). +Capital One or the Company: Capital One Financial Corporation and its subsidiaries. +Carrying value (with respect to loans): The amount at which a loan is recorded on the consolidated balance sheets. For loans +recorded at amortized cost, carrying value is the unpaid principal balance net of unamortized deferred loan origination fees and +costs, and unamortized purchase premium or discount. For loans that are or have been on nonaccrual status, the carrying value +is also reduced by any net charge-offs that have been recorded and the amount of interest payments applied as a reduction of +principal under the cost recovery method. For credit card loans, the carrying value also includes interest that has been billed to +the customer, net of any related reserves. Loans held for sale are recorded at either fair value (if we elect the fair value option) +or at the lower of cost or fair value. +CECL: In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. +2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This +ASU requires an impairment model (known as the CECL model) that is based on expected rather than incurred losses, with an +anticipated result of more timely loss recognition. This guidance was effective for us on January 1, 2020. +CECL Transition Election: The optional five-year transition period provided to banking institutions to phase in the impact of +the CECL standard on their regulatory capital. +112 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_123.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_123.txt new file mode 100644 index 0000000000000000000000000000000000000000..411bdc3ef307693dd8f08fbcebc028d94950b1bc --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_123.txt @@ -0,0 +1,44 @@ +CECL Transition Rule: A rule adopted by the Federal Banking Agencies and effective in 2020 that provides banking +institutions an optional five-year transition period to phase in the impact of the CECL standard on their regulatory capital. +COBNA: Capital One Bank (USA), National Association, one of our wholly-owned subsidiaries through September 30, 2022, +which offered credit card products along with other lending products and consumer services. On October 1, 2022, the Company +completed the merger of COBNA with and into CONA, with CONA as the surviving entity. +Common equity Tier 1 (“CET1”) capital: CET1 capital primarily includes qualifying common shareholders’ equity, retained +earnings and certain AOCI amounts less certain deductions for goodwill, intangible assets, and certain deferred tax assets. +CONA: Capital One, National Association, one of our wholly-owned subsidiaries, which offers a broad spectrum of banking +products and financial services to consumers, small businesses and commercial clients. +Contingency Funding Plan (“CFP”): A plan that describes the Company’s event management process and management +response plans to ensure that the Company is prepared to respond to a liquidity crisis and to maintain the liquidity necessary to +fund normal operating requirements. The plan establishes liquidity monitoring, quantitative assessment (including sizing of +potential access to alternative contingent liquidity resources, qualitative and quantitative triggers that would signal risk, the +liquidity event management process, and annual testing of the different components of the CFP. +Credit risk: The risk to current or projected financial condition and resilience arising from an obligor’s failure to meet the +terms of any contract with the Company or otherwise perform as agreed. +Deposit Insurance Fund (“DIF”): A fund maintained by the FDIC to provide insurance coverage for certain deposits. It is +funded through assessments on banks. +Derivative: A contract or agreement whose value is derived from changes in interest rates, foreign exchange rates, prices of +securities or commodities, credit worthiness for credit default swaps or financial or commodity indices. +Discontinued operations: The operating results of a component of an entity, as defined by Accounting Standards Codification +205, that are removed from continuing operations when that component has been disposed of or it is management’s intention to +sell the component. +Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”): Regulatory reform +legislation signed into law on July 21, 2010. This law broadly affects the financial services industry and contains numerous +provisions aimed at strengthening the sound operation of the financial services sector. +Exchange Act: The Securities Exchange Act of 1934, as amended. +Expanded Risk-Based Approach: The proposed framework for calculating risk-weighted assets for credit risk, operational +risk, credit valuation adjustment risk and market risk that was introduced by the Basel III Finalization Proposal. +eXtensible Business Reporting Language (“XBRL”): A language for the electronic communication of business and financial +data. +Federal Banking Agencies: The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance +Corporation. +Federal Deposit Insurance Corporation (“FDIC”): An independent U.S. governmental agency that administers the Deposit +Insurance Fund. +Federal Reserve: The Board of Governors of the Federal Reserve System. +FICO score: A measure of consumer credit risk provided by credit bureaus, typically produced from statistical modeling +software created by FICO (formerly known as “Fair Isaac Corporation”) utilizing data collected by the credit bureaus. +Financial Difficulty Modification (“FDM”): A FDM is deemed to occur when a loan modification is made to a borrower +experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant +payment delay, a term extension, or a combination of these modifications in the current reporting period. FDMs became +effective with the adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings +and Vintage Disclosures on January 1, 2023. +113 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_124.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_124.txt new file mode 100644 index 0000000000000000000000000000000000000000..74243c897a7c35e7abc918b75922c5e1980604e8 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_124.txt @@ -0,0 +1,43 @@ +Foreign exchange contracts: Contracts that provide for the future receipt or delivery of foreign currency at previously agreed- +upon terms. +Framework: The Capital One enterprise-wide risk management framework. +GSE or Agency: A government-sponsored enterprise or agency is a financial services corporation created by the United States +Congress. Examples of U.S. government agencies include Federal National Mortgage Association (“Fannie Mae”), Federal +Home Loan Mortgage Corporation (“Freddie Mac”), Government National Mortgage Association (“Ginnie Mae”) and the +Federal Home Loan Banks (“FHLB”). +Interest method: Method of amortization used to arrive at periodic interest income at a constant effective yield on the net +investment in a financial asset. +Interest rate sensitivity: The exposure to interest rate movements. +Interest rate swaps: Contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed +period. Interest rate swaps are the most common type of derivative contract that we use in our asset/liability management +activities. +Investment grade: Represents a Moody’s long-term rating of Baa3 or better; and/or a S&P long-term rating of BBB- or better; +and/or a Fitch long-term rating of BBB- or better; or if unrated, an equivalent rating using our internal risk ratings. Instruments +that fall below these levels are considered to be non-investment grade. +Investor entities: Entities that invest in community development entities (“CDE”) that provide debt financing to businesses and +non-profit entities in low-income and rural communities. +LCR Rule: The final rules published by the Basel Committee and as implemented by the Federal Banking Agencies in 2014 for +the Basel III Liquidity Coverage Ratio (“LCR”) in the United States. The LCR is calculated by dividing the amount of an +institution’s high quality, unencumbered liquid assets by its estimated net cash outflow, as defined and calculated in accordance +with the LCR Rule. +Leverage ratio: Tier 1 capital divided by average assets after certain adjustments, as defined by regulators. +Liquidity risk: The risk that the Company will not be able to meet its future financial obligations as they come due, or invest in +future asset growth because of an inability to obtain funds at a reasonable price within a reasonable time. +Loan-to-value (“LTV”) ratio: The relationship, expressed as a percentage, between the principal amount of a loan and the +appraised value of the collateral securing the loan. +LTD Proposal: The proposed rule released by the Federal Banking Agencies on August 29, 2023 that would require banking +organizations with $100 billion or more in total assets to comply with certain long-term debt requirements and clean holding +company requirements. +Loss severity: Loss given default. +Managed presentation: A non-GAAP presentation of business segment results derived from our internal management +accounting and reporting process, which employs various allocation methodologies, including funds transfer pricing, to assign +certain balance sheet assets, deposits and other liabilities and their related revenues and expenses directly or indirectly +attributable to each business segment. The results of our individual businesses reflect the manner in which management +evaluates performance and makes decisions about funding our operations and allocating resources and are intended to reflect +each segment as if it were a stand-alone business. +Market risk: 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. +Master netting agreement: An agreement between two counterparties that have multiple contracts with each other that +provides for the net settlement of all contracts through a single payment in the event of default or termination of any one +contract. +114 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_125.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_125.txt new file mode 100644 index 0000000000000000000000000000000000000000..94733ed1566a2fae4b5011970159cab519a1d1fe --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_125.txt @@ -0,0 +1,41 @@ +Mortgage servicing rights (“MSRs”): The right to service a mortgage loan when the underlying loan is sold or securitized. +Servicing includes collections for principal, interest and escrow payments from borrowers and accounting for and remitting +principal and interest payments to investors. +Net charge-off rate : Represents (annualized) net charge-offs divided by average loans held for investment for the period. +Negative net charge-offs and related rates are captioned as net recoveries. +Net interest margin: Represents (annualized) net interest income divided by average interest-earning assets for the period. +Nonperforming loans: Generally include loans that have been placed on nonaccrual status. We do not report loans classified as +held for sale as nonperforming. +NSFR Rule: The rule issued by the Federal Banking Agencies in October 2020 implementing the net stable funding ratio +(“NSFR”). The NSFR measures the stability of our funding profile and requires us to maintain minimum amounts of stable +funding to support our assets, commitments and derivatives exposures over a one-year period. +Patriot Act: The USA PATRIOT Act of 2001. +PR Rules: The U.S. prudential regulators’ margin rules for uncleared derivatives. +Proposed CFPB Rule: CFPB proposed rule to amend Regulation Z. +Proxy Statement: Proxy statement for the 2024 Annual Stockholder Meeting. +Public Fund Deposits: Deposits that are derived from a variety of political subdivisions such as school districts and +municipalities. +Purchase Plan: Our Associate Stock Purchase Plan, which is a compensatory plan under the accounting guidance for stock- +based compensation. +Purchase volume: Consists of purchase transactions, net of returns, for the period, and excludes cash advance and balance +transfer transactions. +Rating agency: An independent agency that assesses the credit quality and likelihood of default of an issue or issuer and +assigns a rating to that issue or issuer. +Recovery Plan: A plan that describes the Company’s approach for effectively responding to severely-adverse stress at both +CONA and the Company. The Recovery Plan establishes qualitative and quantitative triggers for CONA and the Company that +would signal the risk or existence of severely-adverse stress at the respective entity and identifies several specific remedial +actions for recovery status that the Company can use to effectively respond to the stress environment. The Recovery Plan is +separate from, but complementary to, the CFP. +Repurchase agreement: An instrument used to raise short-term funds whereby securities are sold with an agreement for the +seller to buy back the securities at a later date. +Restructuring charges: Charges associated with the realignment of resources supporting various businesses, primarily +consisting of severance and related benefits pursuant to our ongoing benefit programs and impairment of certain assets related +to the business locations and/or activities being exited. +Risk Committee: The Risk Committee of the Board of Directors. +Risk-weighted assets: On- and off-balance sheet assets that are assigned to one of several broad risk categories and weighted +by factors representing their risk and potential for default. +Securitized debt obligations: A type of asset-backed security and structured credit product constructed from a portfolio of +fixed-income assets. +Stress capital buffer requirement: A component of our standardized approach capital conservation buffer, which is +recalibrated annually based on the results of our supervisory stress tests. +115 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_126.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_126.txt new file mode 100644 index 0000000000000000000000000000000000000000..52b41e8677f10d1786075b78330348f67211e919 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_126.txt @@ -0,0 +1,23 @@ +Stress Capital Buffer Rule: The final rule issued by the Federal Reserve in March 2020 to implement the stress capital buffer +requirement. +Subprime: For purposes of lending in our Credit Card business, we generally consider FICO scores of 660 or below, or other +equivalent risk scores, to be subprime. For purposes of auto lending in our Consumer Banking business, we generally consider +FICO scores of 620 or below to be subprime. +Tangible common equity (“TCE”): A non-GAAP financial measure calculated as common equity less goodwill and other +intangible assets inclusive of any related deferred tax liabilities. +Troubled debt restructuring (“TDR”): A TDR is deemed to occur when the contractual terms of a loan agreement are +modified by granting a concession to a borrower that is experiencing financial difficulty. The accounting guidance for TDRs +was eliminated by ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and +Vintage Disclosures, which we adopted as of January 1, 2023. +Unfunded commitments: Legally binding agreements to provide a defined level of financing until a specified future date. +U.S. GAAP: Accounting principles generally accepted in the United States of America. Accounting rules and conventions +defining acceptable practices in preparing financial statements in the U.S. +U.S. Real Gross Domestic Product (“GDP”): An inflation-adjusted measure that reflects the value of all goods and services +produced by an economy in a given year. +Variable interest entity (“VIE”): An entity that, by design, either (i) lacks sufficient equity to permit the entity to finance its +activities without additional subordinated financial support from other parties; or (ii) has equity investors that do not have (a) +the ability to make significant decisions relating to the entity’s operations through voting rights, (b) the obligation to absorb the +expected losses, and/or (c) the right to receive the residual returns of the entity. +Virginia Financial Institution Holding Company Act: Chapter 7 of Title 6.2 of the Code of Virginia governing the +acquisition of interests in Virginia financial institutions. +116 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_127.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_127.txt new file mode 100644 index 0000000000000000000000000000000000000000..126fc7ffda2c79cbd4208f5a9562035229b9e8c2 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_127.txt @@ -0,0 +1,46 @@ +Acronyms +AI: Artificial intelligence +ABS: Asset-backed securities +ACL: Allowance for credit losses +AML: Anti-money laundering +AOCI: Accumulated other comprehensive income +ASU: Accounting Standards Update +ATM: Automated teller machine +AWS: Amazon Web Services, Inc. +BHC: Bank holding company +bps: Basis points +BSA: The Bank Secrecy Act +BTFP: Bank Term Funding Program +CAD: Canadian dollar +CAP: Compliance Assurance Process +CCAR: Comprehensive Capital Analysis and Review +CCP: Central Counterparty Clearinghouse, or Central Clearinghouse +CDE: Community development entities +CECL: Current expected credit loss +CEO: Chief Executive Officer +CET1: Common equity Tier 1 capital +CFPB: Consumer Financial Protection Bureau +CFTC: Commodity Futures Trading Commission +CIBC: Change in Bank Control Act +CIO: Chief Information Officer +CIRCIA: Cyber Incident Reporting for Critical Infrastructure Act +CISA: Cybersecurity and Infrastructure Security Agency +CISO: Chief Information Security Officer +CMBS: Commercial mortgage-backed securities +CME: Chicago Mercantile Exchange +CPRA: California Privacy Rights Act +COBNA: Capital One Bank (USA), National Association +COEP: Capital One (Europe) plc +COF: Capital One Financial Corporation +CONA: Capital One, National Association +COSO: Committee of the Treadway Commission +CRA: Community Reinvestment Act +CTRO: Chief Technology Risk Officer +CVA: Credit valuation adjustment +DCF: Discounted cash flow +DFAST: Dodd-Frank Act Stress Tests +DIB: Diversity Inclusion and Belonging +DIF: Deposit Insurance Fund +DRR: Designated Reserve Ratio +117 Capital One Financial Corporation (COF) +The secret object #5 is a "towel". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_128.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_128.txt new file mode 100644 index 0000000000000000000000000000000000000000..d323b2bcc6917e05a732e828618a654506134f62 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_128.txt @@ -0,0 +1,46 @@ +DTCC: Depository Trust and Clearing Corporation +DVA: Debit valuation adjustment +ECRP: Enterprise Cyber Response Plan +EU: European Union +EU GDPR: EU General Data Protection Regulation +EUR: Euro +Fannie Mae: Federal National Mortgage Association +FASB: Financial Accounting Standards Board +FCA: U.K. Financial Conduct Authority +FCAC: Financial Consumer Agency of Canada +FCM: Futures commission merchant +FCRA: Fair Credit Reporting Act +FDM: Financial difficulty modification +FDIC: Federal Deposit Insurance Corporation +FDICIA: Federal Deposit Insurance Corporation Improvement Act of 1991 +FFIEC: Federal Financial Institutions Examination Council +FHC: Financial Holding Company +FHLB: Federal Home Loan Banks +FICC - GSD: Fixed Income Clearing Corporation - Government Securities Division +FICO: Fair Isaac Corporation +FinCEN: Financial Crimes Enforcement Network +FINRA: Financial Industry Regulatory Authority +FIS: Fidelity Information Services +Fitch: Fitch Ratings +Freddie Mac: Federal Home Loan Mortgage Corporation +FVC: Fair Value Committee +GAAP: Generally accepted accounting principles in the U.S. +GBP: Pound sterling +GDP: U.S. Real Gross Domestic Product +Ginnie Mae: Government National Mortgage Association +GLBA: Gramm-Leach Bliley Act +G-SIB: Global systemically important banks +GSE or Agency: Government-sponsored enterprise +HFI: Held for Investment +HQLA: High-Quality Liquid Assets +ICE: Intercontinental Exchange +IRM: Independent Risk Management +IRS: Internal Revenue Service +LCH: LCH Group +LCR: Liquidity coverage ratio +LLC: Limited liability company +LTV: Loan-to-Value +Moody’s: Moody’s Investors Service +MSRs: Mortgage servicing rights +NSFR: Net stable funding ratio +118 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_129.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_129.txt new file mode 100644 index 0000000000000000000000000000000000000000..f2597967c3380de747dac0ee787f9c43d029d799 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_129.txt @@ -0,0 +1,34 @@ +NYSE: New York Stock Exchange +OCC: Office of the Comptroller of the Currency +OCI: Other comprehensive income +OFAC: Office of Foreign Assets Control +OPC: Canada’s Office of Privacy Commissioner +OSFI: Office of the Superintendent of Financial Institutions +OTC: Over-the-counter +PCA: Prompt corrective action +PCAOB: Public Company Accounting Oversight Board +PCCR: Purchased credit card relationship +PCD: Purchased Credit-Deteriorated +PIPEDA: Personal Information Protection and Electronic Document Act +PPI: Payment protection insurance +PSU: Performance share units +RMBS: Residential mortgage-backed securities +ROU: Right-of-use +RSU: Restricted stock unit +S&P: Standard & Poor’s +SEC: U.S. Securities and Exchange Commission +SOFR: Secured Overnight Financing Rate +TCE: Tangible common equity +TDR: Troubled debt restructuring +TILA: Truth in Lending Act +TSYS: Total System Services LLC +U.K.: United Kingdom +U.K. GDPR: U.K. General Data Protection Regulation +U.S.: United States of America +USD: United States Dollar +VAC: Valuations Advisory Committee +VaR: Value-At-Risk +VIE: Variable interest entity +VOE: Voting interest entity +XBRL: Extensible business reporting language +119 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_13.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..6014032692cc2a2f3869f0e4a755ce4306a0354d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_13.txt @@ -0,0 +1,40 @@ +INDEX OF MD&A AND SUPPLEMENTAL TABLES +MD&A Tables: Page +1 Average Balances, Net Interest Income and Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 +2 Rate/Volume Analysis of Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 +3 Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 +4 Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 +5 Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +6 Funding Sources Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +7 Business Segment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 +8 Credit Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 +8.1 Domestic Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 +9 Consumer Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 +10 Commercial Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 +11 Other Category Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 +12 Capital Ratios Under Basel III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 +13 Regulatory Risk-Based Capital Components and Regulatory Capital Metrics . . . . . . . . . . . . . . . . . . . . . . . . . 81 +14 Preferred Stock Dividends Paid Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 +15 Portfolio Composition of Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 +16 Loan Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +17 Credit Card Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +18 Consumer Banking Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 +19 Commercial Real Estate Portfolio by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +20 Commercial Loans by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +21 Credit Score Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +22 30+ Day Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +23 Aging and Geography of 30+ Day Delinquent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 +24 90+ Day Delinquent Loans Accruing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +25 Nonperforming Loans and Other Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +26 Net Charge-Offs (Recoveries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 +27 Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity . . . . . . . . . . . . . . . 99 +28 Liquidity Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +29 Deposits Composition and Average Deposits Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 +30 Amount of Time Deposits in Excess of $250,000 by Contractual Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 +31 Long-Term Debt Funding Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +32 Senior Unsecured Long-Term Debt Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +33 Interest Rate Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 +Supplemental Tables: +A Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +B Reconciliation of Non-GAAP Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +3 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_130.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_130.txt new file mode 100644 index 0000000000000000000000000000000000000000..d766b7ae7ee0a960574476dfce17fe2eb96561aa --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_130.txt @@ -0,0 +1,3 @@ +Item 7A. Quantitative and Qualitative Disclosures about Market Risk +For a discussion of the quantitative and qualitative disclosures about market risk, see “Item 7. MD&A—Market Risk Profile.” +120 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_131.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_131.txt new file mode 100644 index 0000000000000000000000000000000000000000..69ef555b6467dbf7c26d64169583979ba3ab3b6e --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_131.txt @@ -0,0 +1,36 @@ +Item 8. Financial Statements and Supplementary Data +Page +Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 +Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (PCAOB ID +42) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +123 +Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements (PCAOB ID 42) +124 +Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 +Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 +Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 +Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 2—Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 +Note 3—Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments . . . . . . . . . . . . . . . . . . . . . 164 +Note 5—Variable Interest Entities and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 +Note 6—Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +Note 7—Premises, Equipment and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 +Note 8—Deposits and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 +Note 9—Derivative Instruments and Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 +Note 10—Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 +Note 11—Regulatory and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 +Note 12—Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 +Note 13—Stock-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +Note 14—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 +Note 15—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 +Note 16—Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 +Note 17—Business Segments and Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 +Note 18—Commitments, Contingencies, Guarantees and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 +Note 19—Capital One Financial Corporation (Parent Company Only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 +Note 20—Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +121 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_132.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_132.txt new file mode 100644 index 0000000000000000000000000000000000000000..532364d78ebc67e0c7787180d07e538d4c0fa9cb --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_132.txt @@ -0,0 +1,36 @@ +MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING +The management of Capital One Financial Corporation (the “Company” or “Capital One”) is responsible for establishing and +maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control +over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the +Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the +Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of +financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally +accepted accounting principles. +Capital One’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance +of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; +(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in +accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made +only in accordance with authorizations of the Company’s management and directors; and (iii) 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 its financial statements. +Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, +projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate +because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. +Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of +December 31, 2023, based on the framework in “2013 Internal Control—Integrated Framework” issued by the Committee of +Sponsoring Organizations of the Treadway Commission (“COSO”), commonly referred to as the “2013 Framework.” +Based on this assessment, management concluded that, as of December 31, 2023, the Company’s internal control over financial +reporting was effective based on the criteria established by COSO in the 2013 Framework. Additionally, based upon +management’s assessment, the Company determined that there were no material weaknesses in its internal control over +financial reporting as of December 31, 2023. +The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, has been audited by +Ernst & Young LLP, an independent registered public accounting firm, as stated in their accompanying report, which expresses +an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. +/s/ RICHARD D. FAIRBANK +Richard D. Fairbank +Chair and Chief Executive Officer +/s/ ANDREW M. YOUNG +Andrew M. Young +Chief Financial Officer +February 22, 2024 +122 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_133.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_133.txt new file mode 100644 index 0000000000000000000000000000000000000000..fcd6ccfde210c08e7d16f3978e32c0ff4b98e301 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_133.txt @@ -0,0 +1,44 @@ +REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +To the Shareholders and the Board of Directors of Capital One Financial Corporation +Opinion on Internal Control Over Financial Reporting +We have audited Capital One Financial Corporation’s internal control over financial reporting as of December 31, 2023, based +on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the +Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Capital One Financial Corporation (the +Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, +based on the COSO criteria. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) +(PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, 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, 2023, and the related notes and our report dated February 22, 2024 expressed an unqualified +opinion thereon. +Basis for Opinion +The Company’s management is responsible for maintaining effective internal control over financial reporting and for its +assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report +on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control +over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be +independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and +regulations of the Securities and Exchange Commission and the PCAOB. +We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the +audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all +material respects. +Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material +weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and +performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a +reasonable basis for our opinion. +Definition and Limitations of Internal Control Over Financial Reporting +A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the +reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally +accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures +that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and +dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit +preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and +expenditures of the company are being made only in accordance with authorizations of management and directors of the +company; 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 financial reporting may not prevent or detect misstatements. Also, +projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate +because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. +/s/ Ernst & Young LLP +Tysons, Virginia +February 22, 2024 +123 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_134.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_134.txt new file mode 100644 index 0000000000000000000000000000000000000000..9c92cf86c0ac4e344c7a0aa28659bd21b4bb891d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_134.txt @@ -0,0 +1,34 @@ +REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +To the Shareholders and the Board of Directors of Capital One Financial Corporation +Opinion on the Financial Statements +We have audited the accompanying consolidated balance sheets of Capital One Financial Corporation (the Company) as of +December 31, 2023 and 2022, 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, 2023, and the related notes (collectively +referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all +material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its +cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted +accounting principles. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) +(PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in +Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission +(2013 framework), and our report dated February 22, 2024 expressed an unqualified opinion thereon. +Basis for Opinion +These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on +the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are +required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable +rules and regulations of the Securities and Exchange Commission and the PCAOB. +We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the +audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to +error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial +statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included +examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included +evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall +presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. +Critical Audit Matters +The critical audit matters communicated below are matters arising from the current period audit of the financial statements that +were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that +are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The +communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as +a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit +matters or on the accounts or disclosures to which they relate. +124 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_135.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_135.txt new file mode 100644 index 0000000000000000000000000000000000000000..c6f1c1fcfdc2966325f516a98fcacd9048ea10e4 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_135.txt @@ -0,0 +1,41 @@ +Allowance for credit losses – Credit Card +Description of the +Matter +On December 31, 2023, the Company’s allowance for credit losses for the credit card portfolio was +$11.7 billion. As more fully described in Note 1 and Note 4 of the consolidated financial statements, +the allowance for credit losses (ACL or allowance) represents management’s current estimate of +expected credit losses over the contractual terms of the Company’s held for investment (HFI) loan +portfolios as of the balance sheet date and is comprised of two elements. The first is ‘quantitative’ and +involves the use of loss forecasting models based upon various statistical analyses with adjustments +for current conditions and reasonable and supportable forecasts of conditions, which includes expected +economic conditions. The second is ‘qualitative’ and involves factors that represent management’s +judgment of the imprecision and risks inherent in the processes and assumptions used in establishing +the allowance for credit losses. Auditing the allowance for the credit card portfolio was especially +challenging and highly judgmental due to the significant judgment required in establishing certain +components of the qualitative element. The qualitative element requires management to make +significant judgments regarding current and forward-looking conditions, internal and external factors, +and uncertainty as it relates to economic, model, or forecast risks, where not already captured in the +modeled results. +How We Addressed +the Matter in Our +Audit +We obtained an understanding, evaluated the design, and tested the operating effectiveness of the +internal controls over the ACL process, including, among others, controls over the development, +operation, and monitoring of loss forecasting models and management review controls over key +assumptions and qualitative judgments used in reviewing the final credit card allowance results. Our +tests of controls included observation of certain of management’s quarterly ACL governance +meetings, at which key management judgments, qualitative adjustments, and final ACL results are +subjected to critical challenge by management groups independent of the group responsible for +producing the ACL estimate. +Our audit response included involving EY specialists to evaluate the conceptual soundness of the +comprehensive framework of the ACL, including certain qualitative elements, in addition to +evaluating model methodology, model performance, model governance, and testing key modeling +assumptions. We also performed testing on data inputs utilized in the qualitative element calculation, +as well as recalculated the qualitative element based on the framework. We evaluated the overall credit +card ACL, inclusive of qualitative elements, and whether the recorded ACL appropriately reflects +expected credit losses on the portfolio. Additionally, we performed searches for contrary evidence, +which included reviewing historical loss statistics, peer bank metrics, and subsequent events and +considered whether such information indicated that management’s judgements were not reasonable or +consistently applied. +Goodwill Impairment Assessment +125 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_136.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_136.txt new file mode 100644 index 0000000000000000000000000000000000000000..d6c3e13f0a78b5313c2331c6a831d18a6b32d81e --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_136.txt @@ -0,0 +1,42 @@ +Description of the +Matter +At December 31, 2023, the Company’s goodwill was $15.1 billion recorded across four reporting +units, of which $5.1 billion related to the commercial banking reporting unit. As more fully described +in Note 1 and Note 6 of the consolidated financial statements, goodwill is tested for impairment at +least annually at the reporting unit level by comparing the fair value of the reporting unit to its +carrying value. Management uses a discounted cash flow analysis (DCF) to calculate the fair value of +its reporting units. Auditing the annual goodwill impairment test for the commercial banking reporting +unit was especially challenging, and highly judgmental due to the estimation uncertainty involved in +determining the fair value of the reporting unit. The fair value estimate and resulting goodwill +impairment determination are impacted by various significant assumptions, including prospective +financial information (PFI). These PFI assumptions require management to make judgments about +future loan and deposit growth, revenue and expenses, and credit losses. Management utilizes a +financial forecasting process to estimate the PFI and an estimation process to determine the +appropriate discount rates. +How We Addressed +the Matter in Our +Audit +We obtained an understanding, evaluated the design, and tested the operating effectiveness of the +internal controls over the Company’s PFI forecasting process and management’s goodwill impairment +assessment process, including controls over the determination of significant assumptions. +To test management’s annual goodwill impairment assessment for the commercial banking reporting +unit, we evaluated certain of management’s PFI assumptions with historical performance (e.g., trend +analysis), current industry and economic trends, changes in the Company’s strategies, and the +customer base or product mix. We also evaluated the consistency of the PFI by comparing the +projections to other analyses used within the organization and inquiries performed of senior +management regarding strategic plans for the reporting unit. We compared prior year forecasts to +current year actual performance, as well as fourth quarter 2023 forecasts to actual fourth quarter 2023 +results. We performed sensitivity analyses related to the significant assumptions to evaluate the change +in the fair value of the reporting unit resulting from changes in the assumptions. +Our audit response also included involving EY valuation specialists who assisted in assessing the +Company’s DCF methodology, testing of the significant assumptions, developing an independent +estimate of the fair value of the commercial banking reporting unit and comparing the result to the +Company’s fair value estimate, and evaluating the total fair value of the Company’s reporting units +through comparison to the Company’s market capitalization and analysis of the resulting control +premium to applicable market transactions. +/s/ Ernst & Young LLP +We have served as the Company’s auditor since 1994. +Tysons, Virginia +February 22, 2024 +126 Capital One Financial Corporation (COF) +The secret instrument is a "trumpet". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_137.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_137.txt new file mode 100644 index 0000000000000000000000000000000000000000..633d77f646d5c44c639ee1919c9c98203a2baffb --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_137.txt @@ -0,0 +1,52 @@ +Year Ended December 31, +(Dollars in millions, except per share-related data) 2023 2022 2021 +Interest income: +Loans, including loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,410 $ 28,910 $ 24,263 +Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,550 1,884 1,446 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,978 443 60 +Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,938 31,237 25,769 +Interest expense: +Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,489 2,535 956 +Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959 384 119 +Senior and subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,204 1,074 488 +Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 130 35 +Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,697 4,123 1,598 +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,241 27,114 24,171 +Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426 5,847 (1,944) +Net interest income after provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,815 21,267 26,115 +Non-interest income: +Interchange fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,793 4,606 3,860 +Service charges and other customer-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,667 1,625 1,578 +Net securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) (9) 2 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120 914 824 +Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,546 7,136 6,264 +Non-interest expense: +Salaries and associate benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,302 8,425 7,421 +Occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160 2,050 2,003 +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 +Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268 1,807 1,440 +Communications and data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383 1,379 1,262 +Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 70 29 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,112 1,415 1,544 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,316 19,163 16,570 +Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,045 9,240 15,809 +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158 1,880 3,415 +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,394 +Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 (4) +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,390 +Dividends and undistributed earnings allocated to participating securities . . . . . . . . . . . . . . . . . . . . . . . (77) (88) (105) +Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228) (228) (274) +Issuance cost for redeemed preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 (46) +Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,582 $ 7,044 $ 11,965 +Basic earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.05 +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00 0.00 (0.01) +Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.04 +Diluted earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.95 +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00 0.00 (0.01) +Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.94 +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED STATEMENTS OF INCOME +See Notes to Consolidated Financial Statements. +127 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_138.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_138.txt new file mode 100644 index 0000000000000000000000000000000000000000..c79df5d20a9424b5bd9c9fb095e2a0b0b9f427b9 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_138.txt @@ -0,0 +1,14 @@ +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,887 $ 7,360 $ 12,390 +Other comprehensive income (loss), net of tax: +Net unrealized gains (losses) on securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 907 (7,973) (1,889) +Net unrealized gains (losses) on hedging relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 (2,300) (1,244) +Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 1 10 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (18) 3 +Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,648 (10,290) (3,120) +Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,535 $ (2,930) $ 9,270 +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME +See Notes to Consolidated Financial Statements. +128 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_139.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_139.txt new file mode 100644 index 0000000000000000000000000000000000000000..a52db53f25635a6e381744f9b8a969e95e0f1a38 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_139.txt @@ -0,0 +1,55 @@ + +(Dollars in millions, except per share-related data) December 31, 2023 December 31, 2022 +Assets: +Cash and cash equivalents: +Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,903 $ 5,193 +Interest-bearing deposits and other short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,394 25,663 +Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,297 30,856 +Restricted cash for securitization investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 400 +Securities available for sale (amortized cost of $88.1 billion and $87.0 billion and allowance for credit losses +of $4 million and $3 million as of December 31, 2023 and 2022, respectively) . . . . . . . . . . . . . . . . . . . . . . . . 79,117 76,919 +Loans held for investment: +Unsecuritized loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,229 283,282 +Loans held in consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,243 29,049 +Total loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,472 312,331 +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,296) (13,240) +Net loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,176 299,091 +Loans held for sale ($347 million and $191 million carried at fair value as of December 31, 2023 and 2022, +respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 854 203 +Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,375 4,351 +Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,478 2,104 +Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,065 14,777 +Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,644 26,548 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 478,464 $ 455,249 +Liabilities: +Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 649 $ 527 +Deposits: +Non-interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,024 32,203 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,389 300,789 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 332,992 +Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,043 16,973 +Other debt: +Federal funds purchased and securities loaned or sold under agreements to repurchase . . . . . . . . . . . . . . . . 538 883 +Senior and subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,248 30,826 +Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 33 +Total other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,813 31,742 +Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,457 20,433 +Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,375 402,667 +Commitments, contingencies and guarantees (see Note 18) +Stockholders’ equity: +Preferred stock (par value $0.01 per share; 50,000,000 shares authorized; 4,975,000 shares issued and +outstanding as of both December 31, 2023 and 2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 +Common stock (par value $0.01 per share; 1,000,000,000 shares authorized; 696,242,668 and 690,334,422 +shares issued as of December 31, 2023 and 2022, respectively; 380,389,609 and 381,318,702 shares +outstanding as of December 31, 2023 and 2022, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7 +Additional paid-in capital, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,541 34,725 +Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,945 57,184 +Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,268) (9,916) +Treasury stock, at cost (par value $0.01 per share; 315,853,059 and 309,015,720 shares as of December 31, +2023 and 2022, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,136) (29,418) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,089 52,582 +Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 478,464 $ 455,249 +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED BALANCE SHEETS +See Notes to Consolidated Financial Statements. +129 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_14.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..c6a11706bf5c2b74620ccf63daf40eeb39a353ea --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_14.txt @@ -0,0 +1,47 @@ +PART I +Item 1. Business +OVERVIEW +General +Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a +diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation +and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, +small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels. +As of December 31, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National +Association (“CONA”). On October 1, 2022, the Company completed the merger of Capital One Bank (USA), National +Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). The Company is +hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and +after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +References to “this Report” or our “2023 Form 10-K” or “2023 Annual Report” are to our Annual Report on Form 10-K for the +fiscal year ended December 31, 2023. All references to 2023, 2022 and 2021, refer to our fiscal years ended, or the dates, as the +context requires, December 31, 2023, December 31, 2022 and December 31, 2021, respectively. Certain business terms used in +this document are defined in “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of +Operations (“MD&A”)—Glossary and Acronyms” and should be read in conjunction with the Consolidated Financial +Statements included in this Report. +We were the third largest issuer of Visa ® (“Visa”) and MasterCard ® (“MasterCard”) credit cards in the U.S. based on the +outstanding balance of credit card loans as of December 31, 2023. In addition to credit cards, we also offer debit cards, bank +lending, treasury management and depository services, auto loans and other consumer lending products in markets across the +U.S. As one of the nation’s largest banks based on deposits as of December 31, 2023, we service banking customer accounts +through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). +We also offer products and services outside of the U.S. principally through Capital One (Europe) plc (“COEP”), an indirect +subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both +COEP and our Canadian branch of CONA have the authority to provide credit card loans. +Agreement to Acquire Discover +On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among +Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware +corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will +merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following +the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in +the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a +Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving +entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the +“Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and +Discover. +At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective +time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 +shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the +effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, +Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of +Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the +right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less +favorable than the applicable series of Discover preferred stock. The closing of the Transaction is subject to the satisfaction of +4 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_140.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_140.txt new file mode 100644 index 0000000000000000000000000000000000000000..ec2b1f5f53dc2a6c89418ef02bc6d90c755a50da --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_140.txt @@ -0,0 +1,66 @@ +(Dollars in millions) +Preferred Stock Common Stock Additional +Paid-In +Capital +Retained +Earnings +Accumulated +Other +Comprehensive +Income (Loss) +Treasury +Stock +Total +Stockholders’ +EquityShares Amount Shares Amount +Balance as of December 31, 2020 + 4,975,000 $ 0 679,932,837 $ 7 $ 33,480 $ 40,088 $ 3,494 $ (16,865) $ 60,204 +Comprehensive income (loss) . . . . 12,390 (3,120) 9,270 +Dividends—common stock(1) . . . . 28,410 0 4 (1,152) (1,148) +Dividends—preferred stock . . . . . (274) (274) +Purchases of treasury stock . . . . . . (7,605) (7,605) +Issuances of common stock and +restricted stock, net of forfeitures . 4,178,919 0 253 253 +Exercises of stock options . . . . . . . 917,778 0 55 55 +Issuances of preferred stock . . . . . 2,100,000 0 2,052 2,052 +Redemptions of preferred stock . . (2,100,000) 0 (2,054) (46) (2,100) +Compensation expense for +restricted stock units and stock +options . . . . . . . . . . . . . . . . . . . . . . 322 322 +Balance as of December 31, 2021 + 4,975,000 $ 0 685,057,944 $ 7 $ 34,112 $ 51,006 $ 374 $ (24,470) $ 61,029 +Comprehensive income (loss) . . . . 7,360 (10,290) (2,930) +Dividends—common stock(1) . . . . 33,511 0 4 (954) (950) +Dividends—preferred stock . . . . . (228) (228) +Purchases of treasury stock . . . . . . (4,948) (4,948) +Issuances of common stock and +restricted stock, net of forfeitures . 4,909,173 0 276 276 +Exercises of stock options . . . . . . . 333,794 0 19 19 +Compensation expense for +restricted stock units . . . . . . . . . . . 314 314 +Balance as of December 31, 2022 + 4,975,000 $ 0 690,334,422 $ 7 $ 34,725 $ 57,184 $ (9,916) $ (29,418) $ 52,582 +Cumulative effects of accounting +standards adoption (2)(3) . . . . . . . . . 37 37 +Comprehensive income . . . . . . . . . 4,887 1,648 6,535 +Dividends—common stock(1) . . . . 39,420 0 4 (935) (931) +Dividends—preferred stock . . . . . (228) (228) +Purchases of treasury stock . . . . . . (718) (718) +Issuances of common stock and +restricted stock, net of forfeitures . 5,731,927 0 299 299 +Exercises of stock options . . . . . . . 136,899 0 10 10 +Compensation expense for +restricted stock units . . . . . . . . . . . 503 503 +Balance as of December 31, 2023 4,975,000 $ 0 696,242,668 $ 7 $ 35,541 $ 60,945 $ (8,268) $ (30,136) $ 58,089 +________ +(1) We declared dividends per share on our common stock of $0.60 in each quarter of 2023 and 2022, and in the fourth quarter of 2021, $1.20 in the third +quarter of 2021 and $0.40 in the first two quarters of 2021. +(2) Impact from the adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures as +of January 1, 2023. +(3) We have equity method investments in certain non-public entities which adopted ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), +Derivatives and Hedging (Topic 815), and Leases (Topic 842) as of January 1, 2023. The impact to retained earnings was recorded in the second quarter +of 2023, on a one quarter lag consistent with our standard operating procedures for equity method investments. +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY +See Notes to Consolidated Financial Statements. +130 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_141.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_141.txt new file mode 100644 index 0000000000000000000000000000000000000000..cbacd722ab7590dc1f99c44a094ca0dc49f42ee8 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_141.txt @@ -0,0 +1,40 @@ +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Operating activities: +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,887 $ 7,360 $ 12,394 +Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 (4) +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,390 +Adjustments to reconcile net income (loss) to net cash from operating activities: +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426 5,847 (1,944) +Depreciation and amortization, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,226 3,210 3,481 +Deferred tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (723) (772) 605 +Net securities losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 9 (2) +Loss (gain) on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (196) 1 +Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 314 331 +Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 40 46 +Loans held for sale: +Originations and purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,602) (8,822) (9,141) +Proceeds from sales and paydowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,432 9,679 9,123 +Changes in operating assets and liabilities: +Changes in interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (359) (641) 17 +Changes in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716 (2,973) (4,114) +Changes in interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 246 (71) +Changes in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,846 511 1,594 +Net change from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 (3) (6) +Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,575 13,809 12,310 +Investing activities: +Securities available for sale: +Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,446) (14,850) (27,884) +Proceeds from paydowns and maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,841 19,074 26,969 +Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290 2,570 2,776 +Loans: +Net changes in loans originated as held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,822) (35,885) (33,833) +Principal recoveries of loans previously charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,288 2,091 2,506 +Changes in premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (961) (934) (698) +Net cash used in acquisition activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,785) (1,176) (669) +Net cash used in other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,325) (628) (668) +Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,920) (29,738) (31,501) +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED STATEMENTS OF CASH FLOWS +See Notes to Consolidated Financial Statements. +131 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_142.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_142.txt new file mode 100644 index 0000000000000000000000000000000000000000..2a2c96004b4bc0fd84f6cd55c4e642e4599d2973 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_142.txt @@ -0,0 +1,33 @@ +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Financing activities: +Deposits and borrowings: +Changes in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,172 $ 22,539 $ 5,687 +Issuance of securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,292 9,728 6,232 +Maturities and paydowns of securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,483) (7,060) (3,442) +Issuance of senior and subordinated notes and long-term FHLB advances . . . . . . . . . . . . . . . . . . . . . . . . . 8,218 21,272 4,486 +Maturities and paydowns of senior and subordinated notes and long-term FHLB advances . . . . . . . . . . . (8,436) (15,561) (3,851) +Changes in other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (351) 44 129 +Common stock: +Net proceeds from issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299 276 253 +Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (931) (950) (1,148) +Preferred stock: +Net proceeds from issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 2,052 +Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228) (228) (274) +Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 (2,100) +Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (718) (4,948) (7,605) +Proceeds from share-based payment activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 19 55 +Net cash from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,844 25,131 474 +Changes in cash, cash equivalents and restricted cash for securitization investors . . . . . . . . . . . . . . . . . . . . . . 12,499 9,202 (18,717) +Cash, cash equivalents and restricted cash for securitization investors, beginning of the period . . . . . . . . . . . 31,256 22,054 40,771 +Cash, cash equivalents and restricted cash for securitization investors, end of the period . . . . . . . . . . . . . . . . $ 43,755 $ 31,256 $ 22,054 +Supplemental cash flow information: +Non-cash items: +Net transfers from loans held for investment to loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,195 $ 697 $ 4,843 +Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,823 3,609 2,158 +Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,355 1,852 2,527 +CAPITAL ONE FINANCIAL CORPORATION +CONSOLIDATED STATEMENTS OF CASH FLOWS +See Notes to Consolidated Financial Statements. +132 Capital One Financial Corporation (COF) +The secret animal #1 is a "lion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_143.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_143.txt new file mode 100644 index 0000000000000000000000000000000000000000..3645276b0287fd21f7ac98d4523e5081da1f2bde --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_143.txt @@ -0,0 +1,47 @@ +NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES +The Company +Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a +diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation +and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, +small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels. +As of December 31, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National +Association (“CONA”). On October 1, 2022, the Company complet ed the merger of Capital One Bank (USA), National +Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). +The Company is hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) +CONA from and after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +We also offer products outside of the United States of America (“U.S.”) principally through Capital One (Europe) plc +(“COEP”), an indirect subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of +CONA in Canada. Both COEP and our Canadian branch of CONA have the authority to provide credit card loans. +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking +and Commercial Banking. We provide details on our business segments, the integration of any recent material acquisitions into +our business segments, and the allocation methodologies and accounting policies used to derive our business segment results in +“Note 17—Business Segments and Revenue from Contracts with Customers.” +Basis of Presentation and Use of Estimates +The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting +principles in the U.S. (“U.S. GAAP”). The preparation of the consolidated financial statements in conformity with U.S. GAAP +requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial +statements and in the related disclosures. These estimates are based on information available as of the date of the consolidated +financial statements. While management makes its best judgments, actual amounts or results could differ from these estimates. +Principles of Consolidation +The consolidated financial statements include the accounts of Capital One Financial Corporation and all other entities in which +we have a controlling financial interest. We determine whether we have a controlling financial interest in an entity by first +evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). All significant +intercompany account balances and transactions have been eliminated. +Voting Interest Entities +VOEs are entities that have sufficient equity and provide the equity investors voting rights that give them the power to make +significant decisions relating to the entity’s operations. Since a controlling financial interest in an entity is typically obtained +through ownership of a majority voting interest, we consolidate our majority-owned subsidiaries and other voting interest +entities in which we hold, directly or indirectly, more than 50% of the voting rights or where we exercise control through other +contractual rights. +Investments in which we do not hold a controlling financial interest but have significant influence over the entity’s financial and +operating decisions are accounted for under the equity method. If we do not have significant influence, we measure equity +investments at fair value with changes in fair value recorded through net income, except those that do not have a readily +determinable fair value (for which a measurement alternative is applied). We report equity investments in other assets on our +consolidated balance sheets and include our share of income or loss and dividends from those investments in other non-interest +income in our consolidated statements of income. The carrying value of other investments included in other assets, excluding +tax advantage investments, totaled $1.0 billion and $901 million as of December 31, 2023 and 2022, respectively, which +primarily included equity investments measured using the alternative measurement method and equity method investments. The +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +133 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_144.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_144.txt new file mode 100644 index 0000000000000000000000000000000000000000..961847ef5164d266b453f6a6fc88f12d6c6bc9e6 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_144.txt @@ -0,0 +1,44 @@ +carrying value of equity investments measured using the alternative measurement method totaled $669 million and $583 million +as of December 31, 2023 and 2022, respectively. +Variable Interest Entities +VIEs are entities that, by design, either (i) lack sufficient equity to permit the entity to finance its activities without additional +subordinated financial support from other parties; or (ii) have equity investors that do not have the ability to make significant +decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or +do not have the right to receive the residual returns of the entity. The entity that is deemed the primary beneficiary of a VIE is +required to consolidate the VIE. An entity is deemed to be the primary beneficiary of a VIE if that entity has both (i) the power +to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to +absorb losses or the right to receive benefits that could potentially be significant to the VIE. +In determining whether we are the primary beneficiary of a VIE, we consider both qualitative and quantitative factors regarding +the nature, size and form of our involvement with the VIE, such as our role in establishing the VIE and our ongoing rights and +responsibilities; our economic interests, including debt and equity investments, servicing fees and other arrangements deemed +to be variable interests in the VIE; the design of the VIE, including the capitalization structure, subordination of interests, +payment priority, relative share of interests held across various classes within the VIE’s capital structure and the reasons why +the interests are held by us. +We perform on-going reassessments to evaluate whether changes in an entity’s capital structure or changes in the nature of our +involvement with the entity result in a change to the VIE designation or a change to our consolidation conclusion. See “Note 5 +—Variable Interest Entities and Securitizations” for further details. +Balance Sheet Offsetting of Financial Assets and Liabilities +Derivative contracts that we execute bilaterally in the over-the-counter (“OTC”) market or are centrally cleared are generally +governed by enforceable master netting agreements where we generally have the right to offset exposure with the same +counterparty. Either counterparty can generally request to net settle all contracts through a single payment upon default on, or +termination of, any one contract. We elect to offset the derivative assets and liabilities under master netting agreements for +balance sheet presentation where a right of setoff exists. For derivative contracts entered into under master netting agreements +for which we have not been able to confirm the enforceability of the setoff rights, or those not subject to master netting +agreements, we do not offset our derivative positions for balance sheet presentation. See “Note 9—Derivative Instruments and +Hedging Activities” for more details. +We also elect to present securities purchased or sold under resale or repurchase agreements on a net basis when a legally +enforceable master netting agreement exists and other applicable criteria are met. Security collateral received from or pledged +to the counterparties are not eligible for netting and are presented gross in our consolidated balance sheet. See “Note 8— +Deposits and Borrowings” and “Note 9—Derivative Instruments and Hedging Activities” for more details. +Cash and Cash Equivalents +Cash and cash equivalents include cash and due from banks, interest-bearing deposits and other short-term investments, all of +which, if applicable, have stated maturities of three months or less when acquired. +Securities Resale and Repurchase Agreements +Securities purchased under resale agreements and securities loaned or sold under agreements to repurchase, principally U.S. +government and agency obligations, are not accounted for as sales but as collateralized financing transactions and recorded at +the amounts at which the securities were acquired or sold, plus accrued interest. We continually monitor the market value of +these securities and deliver additional collateral to or obtain additional collateral from counterparties, as appropriate. See +“Note 8—Deposits and Borrowings.” +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +134 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_145.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_145.txt new file mode 100644 index 0000000000000000000000000000000000000000..56bfbbad379dffe62f061876d72d5c3ee7596ecb --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_145.txt @@ -0,0 +1,49 @@ +Investment Securities +Our investment portfolio consists primarily of the following: U.S. Treasury securities; U.S. government-sponsored enterprise or +agency (“Agency”) and non-agency residential mortgage-backed securities (“RMBS”); Agency commercial mortgage-backed +securities (“CMBS”); and other securities. The accounting and measurement framework for our investment securities differs +depending on the security classification. +We classify securities as available for sale or held to maturity based on our investment strategy and management’s assessment +of our intent and ability to hold the securities until maturity. We did not have any securities that were classified as held to +maturity as of December 31, 2023 and 2022. +We report securities available for sale on our consolidated balance sheets at fair value. The amortized cost of investment +securities reflects the amount for which the security was acquired, adjusted for accrued interest, amortization of premiums, +discounts, and net deferred fees and costs, any applicable fair value hedge accounting adjustments, collection of cash, and +charge-offs. Unrealized gains or losses are recorded, net of tax, as a component of accumulated other comprehensive income +(“AOCI”). Unamortized premiums, discounts and other basis adjustments for available for sale securities are generally +recognized in interest income over the contractual lives of the securities using the interest method. However, premiums on +certain callable investment securities are amortized to the earliest call date. We record purchases and sales of investment +securities available for sale on a trade date basis. Realized gains or losses from the sale of debt securities are computed using +the first-in first-out method of identification, and are included in non-interest income in our consolidated statements of income. +We elect to present accrued interest for securities available for sale within interest receivable on our consolidated balance +sheets. +An individual debt security is impaired when the fair value of the security is less than its amortized cost. If we intend to sell an +available for sale security in an unrealized loss position or it is more likely than not that we will be required to sell the security +prior to recovery of its amortized cost basis, any allowance for credit losses is reversed through our provision for credit losses +and the difference between the amortized cost basis of the security and its fair value is recognized in our consolidated +statements of income. +For impaired debt securities that we have both the intent and ability to hold, the securities are evaluated to determine if a credit +loss exists. The allowance for credit losses on our investment securities is recognized through our provision for credit losses and +limited by the unrealized losses of a security measured as the difference between the security’s amortized cost and fair value. +See further discussion below under the “Allowance for Credit Losses - Available for Sale Investment Securities” section of this +Note. +We charge off any portion of an investment security that we determine is uncollectible. The amortized cost basis, excluding +accrued interest, is charged off through the allowance for credit losses. Accrued interest is charged off as a reduction to interest +income. Recoveries of previously charged off principal amounts are recognized in our provision for credit losses when +received. +Allowance for Credit Losses - Available for Sale Investment Securities +We maintain an allowance for credit losses that represents management’s current estimate of expected credit losses over the +contractual terms of our investment securities classified as available for sale. When an investment security available for sale is +impaired due to credit factors, we recognize that impairment through the provision for credit losses in our consolidated +statements of income and correspondingly establish an allowance for credit losses on our consolidated balance sheets. Credit +losses recognized in the allowance for credit losses are limited to the amount by which the investment security’s amortized cost +basis exceeds its fair value. Investment securities in unrealized gain positions do not have any allowance for credit losses as the +investment security could be sold at its fair value to prevent realization of any credit losses. We exclude accrued interest from +the fair value and amortized cost basis of an investment security for purposes of measuring impairment. Charge-offs of +uncollectible amounts of investment securities are deducted from the allowance for credit losses. +For certain of our securities available for sale, we have determined that there is no risk of impairment due to credit factors. +These investment securities include high quality debt instruments that are issued and guaranteed by the United States +government and its agencies, certain government-sponsored enterprises, and certain foreign sovereign governments or +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +135 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_146.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_146.txt new file mode 100644 index 0000000000000000000000000000000000000000..05218a36ac9c2526c373bacfcfd4f6f53cd15395 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_146.txt @@ -0,0 +1,48 @@ +supranational organizations. Management performs periodic assessments to reevaluate this conclusion by considering any +changes in historical losses, current conditions, and reasonable and supportable forecasts. +We evaluate impairment on a quarterly basis at the individual security level and determine whether any portion of the decline in +fair value is due to a credit loss. We make this determination through the use of quantitative and qualitative analyses. Our +qualitative analysis includes factors such as the extent to which fair value is less than amortized cost, any changes in the +security’s credit rating, past defaults or delayed payments, and adverse conditions impacting the security or issuer. A credit loss +exists to the extent that management does not expect to recover the amortized cost basis. +For investment securities which require further assessment, we perform a quantitative analysis using a discounted cash flow +methodology and compare the present value of expected future cash flows to the security’s amortized cost basis. Projected +future cash flows reflect management’s best estimate and are based on our understanding of past events, current conditions, +reasonable and supportable forecasts, and are discounted by the security’s effective interest rate adjusted for prepayments. The +allowance for credit losses for investment securities reflects the difference by which the amortized cost basis exceeds the +present value of future cash flows and is limited to the amount by which the security’s amortized cost exceeds its fair value. See +“Note 2—Investment Securities” for additional information. +Loans +Our loan portfolio consists of loans held for investment, including loans held in our consolidated securitization trusts, and loans +held for sale and is divided into three portfolio segments: credit card, consumer banking and commercial banking loans. Credit +card loans consist of domestic and international credit card loans. Consumer banking loans consist of auto and retail banking +loans. Commercial banking loans consist of commercial and multifamily real estate loans as well as commercial and industrial +loans. +Loan Classification +We classify loans as held for investment or held for sale based on our investment strategy and management’s intent and ability +with regard to the loans, which may change over time. The accounting and measurement framework for loans differs depending +on the loan classification, whether we elect the fair value option, whether the loans are originated or purchased and whether +purchased loans are considered to have experienced a more-than-insignificant deterioration in credit quality since origination. +The presentation within the consolidated statements of cash flows is based on management’s intent at acquisition or origination. +Cash flows related to loans that are acquired or originated with the intent to hold for investment are included in cash flows from +investing activities on our consolidated statements of cash flows. Cash flows related to loans that are acquired or originated +with the intent to sell are included in cash flows from operating activities on our consolidated statements of cash flows. +Loans Held for Investment +Loans that we have the ability and intent to hold for the foreseeable future and loans associated with consolidated securitization +transactions are classified as held for investment. Loans classified as held for investment, except for credit card loans, are +reported at their amortized cost basis, excluding accrued interest. For these loans, we elect to present accrued interest within +interest receivable on our consolidated balance sheets. For credit card loans classified as held for investment, earned finance +charges and fees are included in either loans held for investment (if they have been billed to the customer) or interest receivable +(if they have not yet been billed to the customer). +Interest income is recognized on performing loans on an accrual basis. We defer loan origination fees and direct loan +origination costs on originated loans, premiums and discounts on purchased loans and loan commitment fees. We recognize +these amounts in interest income as yield adjustments over the life of the loan and/or commitment period using the interest +method. For credit card loans, loan origination fees and direct loan origination costs are amortized on a straight-line basis over a +12-month period. The amortized cost of loans held for investment is subject to our allowance for credit losses methodology +described below under the “Allowance for Credit Losses - Loans Held for Investment” section of this Note. +Loans Held for Sale +Loans that we intend to sell or for which we do not have the ability and intent to hold for the foreseeable future are classified as +held for sale. Multifamily commercial real estate loans originated with the intent to sell to government-sponsored enterprises +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +136 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_147.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_147.txt new file mode 100644 index 0000000000000000000000000000000000000000..7997813356c645b5170df284dcb6c4720c9bbc76 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_147.txt @@ -0,0 +1,50 @@ +are accounted for under the fair value option. We elect the fair value option on these loans as part of our management of interest +rate risk along with the corresponding forward sale commitments. Loan origination fees and direct loan origination costs are +recognized as incurred and are reported in other non-interest income in the consolidated statements of income. Interest income +is calculated based on the loan's stated rate of interest and is reported in interest income in the consolidated statements of +income. Fair value adjustments are recorded in other non-interest income in the consolidated statements of income. +All other loans classified as held for sale are recorded at the lower of cost or fair value. Loan origination fees, direct loan +origination costs and any discounts and premiums are deferred until the loan is sold and are then recognized as part of the total +gain or loss on sale. The fair value of loans held for sale is generally determined on an aggregate portfolio basis for each loan +type, however, fair value may be determined on an individual basis when circumstances warrant. Fair value adjustments are +recorded in other non-interest income in the consolidated statements of income. +If a loan is transferred from held for investment to held for sale, then on the transfer date, any decline in fair value related to +credit is recorded as a charge-off and any remaining allowance for credit losses is reversed through our provision for credit +losses. The loan is then reclassified to held for sale at its amortized cost at the date of the transfer. A valuation allowance is +established, if needed, such that the loan held for sale is recorded at the lower of cost or fair value. Subsequent to transfer, we +report write-downs or recoveries in fair value up to the carrying value at the date of transfer and realized gains or losses on +loans held for sale in our consolidated statements of income as a component of other non-interest income. We calculate the gain +or loss on loan sales as the difference between the proceeds received and the carrying value of the loans sold, net of the fair +value of any interests retained. +Loans Acquired +All purchased loans, including loans transferred in a business combination, are initially recorded at fair value, which includes +consideration of expected future losses, as of the date of the acquisition. To determine the fair value of loans at acquisition, we +estimate discounted contractual cash flows due using an observable market rate of interest, when available, adjusted for factors +that a market participant would consider in determining fair value. In determining fair value, contractual cash flows are adjusted +to include prepayment estimates based upon historical payment trends, forecasted default rates and loss severities and other +relevant factors. The difference between the fair value and the contractual cash flows is recorded as a loan premium or discount, +which may relate to either credit or non-credit factors, at acquisition. +We account for purchased loans under the accounting guidance for purchased financial assets with credit deterioration when, at +the time of purchase, the loans have experienced a more-than-insignificant deterioration in credit quality since origination. +These loans are herein referred to as purchased credit-deteriorated (“PCD”) loans and require the recognition of an allowance +for credit losses at the time of acquisition. +We recognize an allowance for credit losses on purchased loans that have not experienced a more-than-insignificant +deterioration in credit quality since origination at the time of purchase through earnings in a manner that is consistent with +originated loans. The policies relating to the allowance for credit losses on loans is described below in the “Allowance for +Credit Losses - Loans Held for Investment” section of this Note. +Loan Modifications and Restructurings +Capital One adopted Accounting Standards Update (“ASU”) No. 2022-02, Financial Instruments - Credit Losses (Topic 326): +Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023, and elected the modified retrospective adoption +method. The ASU eliminates the accounting guidance for troubled debt restructurings, and establishes disclosure requirements +for certain loan refinancings and restructurings for borrowers experiencing financial difficulty. We provide information on +modified loans, including the performance of those loans subsequent to modification, in “Note 3—Loans.” +As part of our loss mitigation efforts, we may provide modifications to a borrower experiencing financial difficulty to improve +long-term collectability of the loan and to avoid the need for foreclosure or repossession of collateral, if any. Loan +modifications to a borrower experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, a +delay in payment, including payment deferrals or a term extension are reported as a Financial Difficulty Modification (“FDM”). +As restructurings offered to borrowers experiencing financial difficulty are typically not at market terms, FDMs are generally +accounted for as a continuation of the existing loan. See “Note 3—Loans” for additional information on our loan modifications +and restructurings. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +137 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_148.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_148.txt new file mode 100644 index 0000000000000000000000000000000000000000..9d50518812bc21bbc6a3a0ba9247dd8aae088ee1 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_148.txt @@ -0,0 +1,41 @@ +Loan Modifications and Restructurings Prior to Adoption of ASU No. 2022-02 +In periods prior to 2023, a loan modification in which a concession is granted to a borrower experiencing financial difficulty +was accounted for and reported as a troubled debt restructuring (“TDR”). These loan modifications typically include short-term +payment deferrals, an extension of the loan term, a reduction in the interest rate, a reduction in the loan balance, or a +combination of these modifications. See “Note 3—Loans” for additional information on our loan modifications and +restructurings. +Delinquent and Nonperforming Loans +The entire balance of a loan is considered contractually delinquent if the minimum required payment is not received by the first +statement cycle date equal to or following the due date specified on the customer’s billing statement. Delinquency is reported +on loans that are 30 or more days past due. Interest and fees continue to accrue on past due loans until the date the loan is +placed on nonaccrual status, if applicable. For loan modifications, delinquency and nonaccrual status are reported in accordance +with the revised terms of the loans. We generally place consumer and commercial loans on nonaccrual status when we believe +the collectability of interest and principal is not reasonably assured. +Nonperforming loans generally include loans that have been placed on nonaccrual status. Loans classified as held for sale are +excluded from nonperforming classification consideration. +Our policies for classifying loans as nonperforming, by loan category, are as follows: +• Credit card loans: As permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council +(“FFIEC”), our policy is generally to exempt credit card loans from being classified as nonperforming, as these loans are +generally charged off in the period the account becomes 180 days past due. Consistent with industry conventions, we +generally continue to accrue interest and fees on delinquent credit card loans until the loans are charged off, though any +amounts deemed uncollectible are reserved for in our allowance for credit losses. +• Consumer banking loans: We classify consumer banking loans as nonperforming when we determine that the +collectability of all interest and principal on the loan is not reasonably assured, which is generally when the loan +becomes 90 days past due. +• Commercial banking loans: We classify commercial banking loans as nonperforming as of the date we determine that the +collectability of all interest and principal on the loan is not reasonably assured. +• Modified loans and troubled debt restructurings: Modified loans, including TDRs for periods ending on or before +December 31, 2022 and FDMs for periods beginning on or after January 1, 2023, that are current at the time of the +restructuring remain in accrual status if there is demonstrated performance prior to the restructuring and continued +performance under the modified terms is expected. Otherwise, the modified loan is classified as nonperforming. +Interest and fees accrued but not collected at the date a loan is placed on nonaccrual status are reversed against earnings. In +addition, the amortization of deferred loan fees, costs, premiums and discounts is suspended. Interest and fee income are +subsequently recognized only upon the receipt of cash payments. However, if there is doubt regarding the ultimate collectability +of loan principal, cash received is generally applied against the principal balance of the loan. Nonaccrual loans are generally +returned to accrual status when all principal and interest is current and repayment of the remaining contractual principal and +interest is reasonably assured, or when the loan is both well-secured and in the process of collection and collectability is no +longer doubtful. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +138 Capital One Financial Corporation (COF) +The secret object #2 is a "key". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_149.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_149.txt new file mode 100644 index 0000000000000000000000000000000000000000..4e1c54e23528bcda5fa87694f14d1922a37ae135 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_149.txt @@ -0,0 +1,47 @@ +Charge-Offs +We charge off loans when we determine that the loan is uncollectible. The amortized cost basis, excluding accrued interest, is +charged off as a reduction to the allowance for credit losses based on the time frames presented below. Accrued interest on +loans other than credit card loans determined to be uncollectible is reversed as a reduction of interest income when the loan is +classified as nonperforming. For credit card loans, accrued interest is charged off simultaneously with the charge-off of other +components of amortized cost and as a reduction of interest income. When received, recoveries of previously charged off +amounts are recorded as an increase to the allowance for credit losses (see the “Allowance for Credit Losses - Loans Held for +Investment” section of this Note for information on how we account for expected recoveries). Costs to recover charged off +loans are recorded as collection expense and included in our consolidated statements of income as a component of other non- +interest expense as incurred. Our charge-off time frames by loan type are presented below. +• Credit card loans: We generally charge off credit card loans in the period the account becomes 180 days past due. We +charge off delinquent credit card loans for which revolving privileges have been revoked as part of loan workout when +the account becomes 120 days past due. Credit card loans in bankruptcy are generally charged off by the end of the +month following 30 days after the receipt of a complete bankruptcy notification from the bankruptcy court. Credit card +loans of deceased account holders are generally charged off 5 days after receipt of notification. +• Consumer banking loans: We generally charge off consumer banking loans at the earlier of the date when the account is +a specified number of days past due or upon repossession of the underlying collateral. Our charge-off period for auto +loans is 120 days past due. Small business banking loans generally charge off at 120 days past due or based on the date +the amortized cost basis is deemed uncollectible. Auto loans that have not been previously charged off where the +borrower has filed for bankruptcy and the loan has not been reaffirmed charge off in the period that is 60 days from the +bankruptcy notification date, regardless of delinquency status. Auto loans that have not been previously charged off and +have been discharged under Chapter 7 bankruptcy are charged off at the end of the month in which the bankruptcy +discharge occurs. Remaining consumer loans generally are charged off within 40 days of receipt of notification from the +bankruptcy court. In certain bankruptcy discharges, the loan is written down to the collateral value and the charged off +amount is reported as principal reduction. Impairment is determined using the present value of expected cash flows or a +collateral evaluation for certain auto loans where the collateral value is lower than the amortized cost. Consumer loans of +deceased account holders are charged off by the end of the month following 60 days of receipt of notification. +• Commercial banking loans: We charge off commercial loans in the period we determine that the amortized cost basis is +uncollectible. +Allowance for Credit Losses - Loans Held for Investment +We maintain an allowance for credit losses (“allowance”) that represents management’s current estimate of expected credit +losses over the contractual terms of our loans held for investment. We measure the allowance on a quarterly basis through +consideration of past events, including historical experience, current conditions and reasonable and supportable forecasts. +We measure current expected credit losses (“CECL”) over the contractual terms of our loans. The contractual terms are adjusted +for expected prepayments but are not extended for renewals or extensions, except when an extension or renewal arises from a +borrower option that is not unconditionally cancellable. +We aggregate loans sharing similar risk characteristics into pools for purposes of measuring expected credit losses. Pools are +reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics. Expected credit +losses for loans that do not share similar risk characteristics with other financial assets are measured individually. +Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance, with +a corresponding reduction to our provision for credit losses. At times expected recoveries may result in a negative allowance. +We limit the allowance recovery expectations to amounts previously charged off and expected to be charged off. Charge-offs of +uncollectible amounts result in a reduction to the allowance and recoveries of previously charged off amounts result in an +increase to the allowance. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +139 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_15.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..b003f7e0973023e4a521fd53a75596c70e67be05 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_15.txt @@ -0,0 +1,25 @@ +customary closing conditions, including receipt of required regulatory approvals and approval by the stockholders of each of +Capital One and Discover. +Other Business Developments +We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including +credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore +opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to +deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the +potential disposition of certain of our assets, branches, partnership agreements or lines of business. +Additional Information +Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “COF” and is included in the +Standard & Poor’s (“S&P”) 100 Index. We maintain a website at www.capitalone.com. Documents available under +“Governance & Leadership” in the Investor Relations section of our website include: +• our Certificate of Incorporation, Bylaws, Corporate Governance Guidelines, and Code of Conduct; and +• charters for the Audit, Compensation, Governance and Nominating, and Risk Committees of the Board of Directors. +These documents also are available in print to any stockholder who requests a copy. We intend to disclose any future +amendments to, or waivers from, our Code of Conduct on the website following the date of any such amendment or waiver. +In addition, we make available free of charge through our website all of our U.S. Securities and Exchange Commission (“SEC”) +filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and +amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably +practicable after electronically filing or furnishing such material to the SEC at www.sec.gov. We also routinely post financial +and other information, which could be deemed to be material to investors, on our investor relations website. Information +regarding our corporate social responsibility and environmental sustainability initiatives is also available on our website. The +content of any of our websites referred to in this Report is not incorporated by reference into this Report or any other filings +with the SEC. +5 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_150.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_150.txt new file mode 100644 index 0000000000000000000000000000000000000000..ad7960a3836b866d8f298cd0c1a8142ed184ec3f --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_150.txt @@ -0,0 +1,44 @@ +When developing an estimate of expected credit losses, we use both quantitative and qualitative methods in considering all +available information relevant to assessing collectability. This may include internal information, external information, or a +combination of both relating to past events, current conditions, and reasonable and supportable forecasts. Judgment is applied to +the development and duration of reasonable and supportable forecasts used in our estimation of lifetime losses. We estimate +expected credit losses over the duration of those forecasts and then revert, on a rational and systematic basis, to historical losses +at each relevant loss component of the estimate. Expected losses for contractual terms extending beyond the reasonable and +supportable forecast and reversion periods are based on those historical losses. +Management will consider and may qualitatively adjust for conditions, changes and trends in loan portfolios that may not be +captured in modeled results. These adjustments are referred to as qualitative factors and represent management’s judgment of +the imprecision and risks inherent in the processes and assumptions used in establishing the allowance for credit losses. +Management’s judgment may involve an assessment of current and forward-looking conditions including but not limited to +changes in lending policies and procedures, nature and volume of the portfolio, external factors, and uncertainty as it relates to +economic, model or forecast risks, where not already captured in the modeled results. +Expected credit losses for collateral-dependent loans are based on the fair value of the underlying collateral. When we intend to +liquidate the collateral, the fair value of the collateral is adjusted for expected costs to sell. A loan is deemed to be a collateral- +dependent loan when (i) we determine foreclosure or repossession of the underlying collateral is probable, or (ii) foreclosure or +repossession is not probable, but the borrower is experiencing financial difficulty and we expect repayment to be provided +substantially through the operation or sale of the collateral. The allowance for a collateral-dependent loan reflects the difference +between the loan’s amortized cost basis and the fair value (less selling costs, where applicable) of the loan’s underlying +collateral. +Our credit card and consumer banking loan portfolios consist of smaller-balance, homogeneous loans. The consumer banking +loan portfolio is divided into two primary portfolio segments: auto loans and retail banking loans. We assess our credit card and +consumer banking loan portfolios based on common risk characteristics, such as origination year, contract type, interest rate, +borrower credit score and geography. The commercial banking loan portfolio is primarily composed of larger-balance, non- +homogeneous loans. These loans are subject to reviews that result in internal risk ratings. In assessing the risk rating of a +particular commercial banking loan, among the factors we consider are the financial condition of the borrower, geography, +collateral performance, historical loss experience and industry-specific information that management believes is relevant in +determining and measuring expected credit losses. Subjective assessment and interpretation are involved. Emphasizing one +factor over another or considering additional factors could impact the risk rating assigned to that commercial banking loan. +For consumer banking and commercial banking loans, the contractual period typically does not include renewals or extensions +because the renewals and extensions are generally not at the borrower’s exclusive option to exercise. The undrawn credit +exposure associated with our credit card loans is unconditionally cancellable. For this reason, expected credit losses are +measured based only on the drawn balance at each quarterly measurement date and not on the undrawn exposure. Because +credit card loans do not have a defined contractual life, management estimates both the volume and application of payments to +determine a contractual life of the drawn balance at the measurement date over which expected credit losses are developed for +credit card loans. +For consumer banking and commercial banking loans, we have made a policy election to not measure an allowance on accrued +interest for loans held for investment because we reverse uncollectible accrued interest in a timely manner. See the “Delinquent +and Nonperforming Loans” and “Charge-Offs - Loans” sections of this Note for information on what we consider timely. For +credit card loans, we do not make this election, and we reserve for uncollectible accrued interest relating to credit card loans in +the allowance. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +140 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_151.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_151.txt new file mode 100644 index 0000000000000000000000000000000000000000..99fabda12608fbc3d89b382f37dca7987893a1b0 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_151.txt @@ -0,0 +1,48 @@ +The allowance related to credit card and consumer banking loans assessed on a pooled basis is based on a modeled calculation, +which is supplemented by management judgment as described above. Because of the homogeneous nature of our consumer loan +portfolios, the allowance is based on the aggregated portfolio segment evaluations. The allowance is established through a +process that begins with estimates of historical losses in each pool based upon various statistical analyses, with adjustments for +current conditions and reasonable and supportable forecasts of conditions, which includes expected economic conditions. Loss +forecast models are utilized to estimate expected credit losses and consider several portfolio indicators including, but not +limited to, expected economic conditions, historical loss experience, account seasoning, the value of collateral underlying +secured loans, estimated foreclosures or defaults based on observable trends, delinquencies, bankruptcy filings, unemployment, +borrower credit scores and general business trends. Management also considers an evaluation of overall portfolio credit quality +based on indicators such as changes in our credit evaluation, underwriting and collection management policies, the effect of +other external factors such as competition and legal and regulatory requirements, general economic conditions and business +trends, and uncertainties in forecasting and modeling techniques used in estimating our allowance. +The allowance related to commercial banking loans assessed on a pooled basis is based on our historical loss experience for +loans with similar risk characteristics and consideration of the current credit quality of the portfolio, which is supplemented by +management judgment as described above. These are adjusted for current conditions, and reasonable and supportable forecasts +of conditions likely to cause future losses which vary from historical levels. We apply internal risk ratings to commercial +banking loans, which we use to assess credit quality and derive a total loss estimate based on an estimated probability of default +(“default rate”) and loss given default (“loss severity”). Management may also apply judgment to adjust the loss factors derived, +taking into consideration both quantitative and qualitative factors, including general economic conditions, industry-specific and +geographic trends, portfolio concentrations, trends in internal credit quality indicators, and current and past underwriting +standards that have occurred but are not yet reflected in the historical data underlying our loss estimates. +The allowance related to smaller-balance homogeneous credit card and consumer banking loans whose terms have been +modified is calculated on a pool basis using historical loss experience, adjusted for current conditions and reasonable and +supportable forecasts of conditions likely to cause future losses which vary from historical levels for the respective class of +assets. The allowance related to consumer banking loans that are assessed at a loan-level is determined based on key +considerations that include the borrower’s overall financial condition, resources and payment history, prospects for support +from financially responsible guarantors, and when applicable, the estimated realizable value of any collateral. The allowance +related to commercial banking loans that are assessed at a loan-level is generally determined in accordance with our policy for +estimating expected credit losses for collateral-dependent loans as described above. +Off-balance sheet credit exposures +In addition to the allowance, we also measure expected credit losses related to unfunded lending commitments that are not +unconditionally cancellable in our Commercial Banking business. This reserve is measured using the same measurement +objectives as the allowance for loans held for investment and is recorded within other liabilities on our consolidated balance +sheets. These commitments are segregated by risk according to our internal risk rating scale, which we use to assess credit +quality and derive an expected credit loss estimate. We assess these risk classifications, taking into consideration both +quantitative and qualitative factors, including historical loss experience, adjusted for current conditions and reasonable and +supportable forecasts of conditions likely to cause future losses which vary from historical levels, and utilization assumptions to +estimate the reserve for unfunded lending commitments. Expected credit losses are not measured on unfunded lending +commitments that are unconditionally cancellable, including all of our unfunded credit card and consumer banking lending +commitments and certain of our unfunded commercial banking lending commitments. +Determining the appropriateness of the allowance and the reserve for unfunded lending commitments is complex and requires +judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the loan portfolio, +in light of the factors then prevailing, may result in significant changes in the reserve for unfunded lending commitments in +future periods. See “Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments” for additional +information. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +141 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_152.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_152.txt new file mode 100644 index 0000000000000000000000000000000000000000..44e390ef2870b140f78476f49d40add378b525e4 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_152.txt @@ -0,0 +1,47 @@ +Securitization of Loans +Our loan securitization activities primarily involve the securitization of credit card and auto loans, which provides a source of +funding for us. Loan securitization involves the transfer of a pool of loan receivables from our portfolio to a trust. The trust then +sells undivided interests in the pool of loan receivables to third-party investors through the issuance of debt securities and +transfers the proceeds from the debt issuance to us as consideration for the loan receivables transferred. The debt securities are +collateralized by the loan receivables transferred from our portfolio. We remove loans from our consolidated balance sheets if +securitizations qualify as sales to unconsolidated VIEs, recognize assets retained and liabilities assumed at fair value and record +a gain or loss on the transferred loans. Alternatively, if the transfer does not qualify as a sale but instead is considered a secured +borrowing, the assets will remain on our consolidated balance sheets with an offsetting liability recognized for the amount of +proceeds received. See “Note 5—Variable Interest Entities and Securitizations” for additional details. +Premises, Equipment and Leases +Premises and Equipment +Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation and amortization. +Land is carried at cost. We capitalize direct costs incurred during the application development stage of internally developed +software projects. Depreciation and amortization expenses are calculated using the straight-line method over the estimated +useful lives of the assets. Useful lives for premises and equipment are generally estimated as follows: +Premises and Equipment Useful Lives +Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-39 years +Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10 years +Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 years +Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesser of the useful life or the +remaining lease term +Expenditures for maintenance and repairs are expensed as incurred and gains or losses upon disposition are recognized in our +consolidated statements of income as realized. See “Note 7—Premises, Equipment and Leases” for additional information. +Leases +Lease classification is determined at inception for all lease transactions with an initial term greater than one year. Operating +leases are included as right-of-use (“ROU”) assets within other assets, and operating lease liabilities are classified as other +liabilities on our consolidated balance sheets. Finance leases are included in premises and equipment, and other borrowings on +our consolidated balance sheets. Our operating lease expense is included in occupancy and equipment within non-interest +expense in our consolidated statements of income. Lease expense for minimum lease payments are recognized on a straight-line +basis over the lease term. See “Note 7—Premises, Equipment and Leases” for additional information. +Goodwill and Other Intangible Assets +Goodwill represents the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling +interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date and is +assigned to one or more reporting units at acquisition. A reporting unit is defined as an operating segment, or a business unit +that is one level below an operating segment. We have four reporting units: Credit Card, Auto Finance, Other Consumer +Banking, and Commercial Banking. Goodwill is not amortized but is tested for impairment at the reporting unit level annually +or more frequently if adverse circumstances indicate that it is more likely than not that the carrying amount of a reporting unit +exceeds its fair value. These indicators could include a sustained, significant decline in the Company’s stock price, a decline in +expected future cash flows, significant disposition activity, a significant adverse change in the economic or business +environment, and the testing for recoverability of a significant asset group, among others. +Intangible assets with finite useful lives are amortized on either an accelerated or straight-line basis over their estimated useful +lives and are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount of the assets +may not be recoverable. See “Note 6—Goodwill and Other Intangible Assets” for additional information. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +142 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_153.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_153.txt new file mode 100644 index 0000000000000000000000000000000000000000..dca2b1efebe9ea7112797030931ce37fefa3cdbd --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_153.txt @@ -0,0 +1,46 @@ +Mortgage Servicing Rights +Mortgage servicing rights (“MSRs”) are initially 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. Commercial MSRs are subsequently accounted for +under the amortization method. We evaluate for impairment as of each reporting date and recognize any impairment in other +non-interest income. See “Note 6—Goodwill and Other Intangible Assets” for additional information. +Foreclosed Property and Repossessed Assets +Foreclosed property and repossessed assets obtained through our lending activities typically include commercial real estate or +personal property, such as automobiles, and are recorded at net realizable value. For foreclosed property and repossessed assets, +we generally reclassify the loan to repossessed assets upon repossession of the property in satisfaction of the loan. Net +realizable value is the estimated fair value of the underlying collateral less estimated selling costs and is based on appraisals, +when available. Subsequent to initial recognition, foreclosed property and repossessed assets are recorded at the lower of our +initial cost basis or net realizable value, which is routinely monitored and updated. Any changes in net realizable value and +gains or losses realized from disposition of the property are recorded in other non-interest expense. See “Note 16—Fair Value +Measurement” for details. +Restricted Equity Investments +We have investments in Federal Home Loan Banks (“FHLB”) stock and in Federal Reserve Bank stock. These investments, +which are included in other assets on our consolidated balance sheets, are not marketable, are carried at cost, and are reviewed +for impairment if there is any indicator of impairment. +Litigation +We establish reserves for litigation-related matters that arise from the ordinary course of our business activities when it is +probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably +estimated. Professional service costs, including fees for attorneys and experts, expected to be incurred in connection with a loss +contingency are expensed as services are provided. See “Note 18—Commitments, Contingencies, Guarantees and Others” for +additional information. +Customer Rewards Reserve +We offer products, primarily credit cards, which include programs that allow members to earn rewards based on account +activity that can be redeemed for cash (primarily in the form of statement credits), gift cards, travel, or covering eligible +charges. The amount of reward that a customer earns varies based on the terms and conditions of the rewards program and +product. When rewards are earned by a customer, rewards expense is generally recorded as an offset to interchange income, +with a corresponding increase to the customer rewards reserve. The customer rewards reserve is computed based on the +estimated future cost of earned rewards that are expected to be redeemed and is reduced as rewards are redeemed. In estimating +the customer rewards reserve, we consider historical redemption and spending behavior, as well as the terms and conditions of +the current rewards programs, among other factors. Our customer rewards reserve assumes the vast majority of all rewards +earned will eventually be redeemed. +Revenue Recognition +Interest Income and Fees +Interest income and fees on loans and investment securities are recognized based on the contractual provisions of the underlying +arrangements. +Loan origination fees, direct loan origination costs, premiums and discounts on loans held for investment are deferred and +generally amortized into interest income as yield adjustments over the contractual life and/or commitment period using the +interest method. Costs deferred include, among other things, incentives paid to our network of auto dealers for loan referrals. In +certain circumstances, we elect to factor prepayment estimates into the calculation of the constant effective yield necessary to +apply the interest method. Prepayment estimates are based on historical prepayment data, existing and forecasted interest rates, +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +143 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_154.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_154.txt new file mode 100644 index 0000000000000000000000000000000000000000..99f7bfe16a957db3c3f8cd2b350944ccf22745c0 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_154.txt @@ -0,0 +1,47 @@ +and economic 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. +The unamortized premiums, discounts and other basis adjustments on investment securities are included as components of the +investment securities’ carrying value and are generally recognized in interest income as yield adjustments over the contractual +lives of the securities using the interest method. However, premiums for certain callable investment securities are amortized to +the earliest call date. +Finance charges and fees on credit card loans are recorded in revenue when earned and presented on our consolidated balance +sheets within either loan receivables (if they have been billed to the customer) or interest receivable (if they have not yet been +billed to the customer). Annual membership fees are classified as service charges and other customer-related fees in our +consolidated statements of income and are deferred and amortized into income over 12 months on a straight-line basis. +Interchange Income +Interchange income generally represents fees for standing ready to authorize and providing settlement on credit and debit card +transactions processed through the MasterCard® (“MasterCard”) and Visa® (“Visa”) interchange networks. The levels and +structure of interchange rates set by MasterCard and Visa can vary based on cardholder purchase volumes, among other factors. +We recognize interchange income upon settlement. See “Note 17—Business Segments and Revenue from Contracts with +Customers” for additional details. +Card Partnership Agreements +We have contractual agreements with certain retailers and other partners to provide lending and other services to a mutual +customer base. We primarily issue private-label and cobrand credit card loans to these customers over the terms of the +partnership agreements. +Certain partners assist in or perform marketing activities on our behalf and promote our products and services to their +customers. As compensation for providing these services, we often pay royalties, bounties or other special bonuses to these +partners. Our payments to partners are generally recorded as reductions of revenue or as marketing expenses, depending on +their nature. Our credit card partnership agreements may also provide for profit or revenue sharing payments which are +presented as a reduction of the related revenue line item(s) when owed to the partner. +When a partner agrees to share a portion of the credit losses associated with the partnership, we evaluate the contractual +provisions for the loss share payments as well as applicable accounting guidance to determine whether to present the sharing of +losses on a gross or net basis in our consolidated financial statements. When loss sharing amounts due from partners are +presented on a net basis, they are recorded as a reduction to our provision for credit losses in our consolidated statements of +income and reduce the charge-off amounts that we report. The allowance for credit losses attributable to these portfolios is also +reduced by the expected reimbursements from these partners for loss sharing amounts. See “Note 4—Allowance for Credit +Losses and Reserve for Unfunded Lending Commitments” for additional information related to our loss sharing arrangements. +Stock-Based Compensation +We are authorized to issue stock–based compensation to employees and directors in various forms, primarily as restricted stock +units (“RSUs”) and performance share units (“PSUs”). In addition, we also issue cash-settled RSUs which are not counted +against the common shares reserved for issuance or available for issuance because they are settled in cash. +For awards settled in shares, we generally recognize compensation expense on a straight-line basis over the award’s requisite +service period based on the fair value of the award at the grant date. If an award settled in shares contains a performance +condition with graded vesting, we recognize compensation expense using the accelerated attribution method. Restricted stock +units that are cash-settled are accounted for as liability awards which results in quarterly expense fluctuations based on changes +in our stock price through the date that the awards are settled. Awards to participants that are eligible for retirement or become +eligible during the vesting period are expensed immediately or over the time period between the grant date and when the +participant becomes retirement eligible, respectively. Stock-based compensation expense is included in salaries and associate +benefits in the consolidated statements of income. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +144 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_155.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_155.txt new file mode 100644 index 0000000000000000000000000000000000000000..45caa7bd14993cabc651fa0fda2861edaef585f2 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_155.txt @@ -0,0 +1,43 @@ +For RSUs and PSUs, the fair value of stock-based compensation used in determining compensation expense will generally +equal the fair market value of our common stock on the date of grant. Certain share-settled awards have discretionary vesting +conditions which result in the remeasurement of these awards at fair value each reporting period and the potential for +compensation expense to fluctuate with changes in our stock price. See “Note 13—Stock-Based Compensation Plans” for +additional details. +Marketing Expenses +Marketing expense includes the cost of our various promotional efforts to attract and retain customers such as advertising, +promotional materials, and certain customer incentives, including spend-based bonuses. We expense marketing costs as +incurred. +Income Taxes +We recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements +using the provisions of the enacted tax laws. Current income tax expense represents our estimated taxes to be paid or refunded +for the current period and includes income tax expense related to our uncertain tax positions, as well as tax-related interest and +penalties. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of +assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are +expected to reverse. We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to +be realized. We record the effect of remeasuring deferred tax assets and liabilities due to a change in tax rates or laws as a +component of income tax expense related to continuing operations for the period in which the change is enacted. We release +income tax effects stranded in AOCI when an entire portfolio of the type of item is sold, terminated or extinguished. Income tax +benefits are recognized when, based on their technical merits, they are more likely than not to be sustained upon examination. +The amount recognized is the largest amount of benefit that is more likely than not to be realized upon settlement. See “Note 15 +—Income Taxes” for additional details. +Earnings Per Share +Earnings per share is calculated and reported under the “two-class” method. The “two-class” method is an earnings allocation +method under which earnings per share is calculated for each class of common stock and participating security considering both +dividends declared or accumulated and participation rights in undistributed earnings as if all such earnings had been distributed +during the period. We have unvested share-based payment awards which have a right to receive non-forfeitable dividends and +are therefore deemed to be participating securities. +We calculate basic earnings per share by dividing net income, after deducting dividends on preferred stock and participating +securities as well as undistributed earnings allocated to participating securities, by the average number of common shares +outstanding during the period, net of any treasury shares. We calculate diluted earnings per share in a similar manner after +consideration of the potential dilutive effect of common stock equivalents on the average number of common shares +outstanding during the period. Common stock equivalents include stock options, RSUs and PSUs. Common stock equivalents +are calculated based upon the treasury stock method using an average market price of common shares during the period. +Dilution is not considered when a net loss is reported. Common stock equivalents that have an antidilutive effect are excluded +from the computation of diluted earnings per share. See “Note 12—Earnings Per Common Share” for additional details. +Derivative Instruments and Hedging Activities +All derivative financial instruments, whether designated in a qualifying hedge accounting relationship or not, are reported at +their fair value on our consolidated balance sheets as either assets or liabilities. See “Note 9—Derivative Instruments and +Hedging Activities” for additional details. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +145 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_156.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_156.txt new file mode 100644 index 0000000000000000000000000000000000000000..fab3d5dc01b9ddf584db682736aff2feb5e4d567 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_156.txt @@ -0,0 +1,17 @@ +Fair Value +Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a +liability in an orderly transaction between market participants on the measurement date. See “Note 16—Fair Value +Measurement” for additional information. +Accounting for Acquisitions +We account for business combinations under the acquisition method of accounting. Under the acquisition method, tangible and +intangible identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree are recorded at fair +value as of the acquisition date, with limited exceptions. Transaction costs and costs to restructure the acquired company are +expensed as incurred. Goodwill is recognized as the excess of the acquisition price over the estimated fair value of the +identifiable net assets acquired. Likewise, if the fair value of the net assets acquired is greater than the acquisition price, a +bargain purchase gain is recognized and recorded in other non-interest income. +If the acquired set of activities and assets do not meet the accounting definition of a business, the transaction is accounted for as +an asset acquisition. In an asset acquisition, the assets acquired are recorded at the purchase price plus any transaction costs +incurred and no goodwill is recognized. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +146 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_157.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_157.txt new file mode 100644 index 0000000000000000000000000000000000000000..20c623820ec581fabe41f5e53cc81be8fce5a604 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_157.txt @@ -0,0 +1,36 @@ +Accounting Standards Adopted During the Twelve Months Ended December 31, 2023 +Standard Guidance Adoption Timing and Financial Statement Impacts +Modified Borrowings Experiencing +Financial Difficulty and Vintage +Disclosures +ASU No. 2022-02, Financial +Instruments - Credit Losses (Topic +326): Troubled Debt Restructurings +and Vintage Disclosures +Issued March 2022 +Eliminates accounting guidance for troubled +debt restructurings (“TDRs”) by creditors, and +enhances disclosure requirements for certain +loan refinancings and restructurings by +creditors when a borrower is experiencing +financial difficulty. +Requires an entity to disclose current-period +gross write-offs by year of origination for +financing receivables and net investments in +leases. +We adopted this guidance in the first quarter of +2023 using a modified retrospective adoption +method, which results in a cumulative-effect +adjustment to retained earnings in the period of +adoption and prospective application of the +enhanced disclosure requirements. +Our adoption of this standard did not have a +material impact on our consolidated financial +statements. +See “Note 3—Loans” and “Note 4—Allowance +for Credit Losses and Reserve for Unfunded +Lending Commitments” for additional +disclosures. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +147 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_158.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_158.txt new file mode 100644 index 0000000000000000000000000000000000000000..cdd41fd6f69790971e72fa98d7a1146169c6abe5 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_158.txt @@ -0,0 +1,67 @@ +NOTE 2—INVESTMENT SECURITIES +Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“Agency”) and +non-agency residential mortgage-backed securities (“RMBS”), agency commercial mortgage-backed securities (“CMBS”), U.S. +Treasury securities and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) +guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation +(“Freddie Mac”) issued securities. The carrying value of our investments in Agency and U.S. Treasury securities represented +97% of our total investment securities portfolio as of both December 31, 2023 and 2022. +The table below presents the amortized cost, allowance for credit losses, gross unrealized gains and losses, and fair value +aggregated by major security type as of December 31, 2023 and 2022. Accrued interest receivable of $227 million and +$215 million as of December 31, 2023 and 2022, respectively, is not included in the table below. +Table 2.1: Investment Securities Available for Sale +December 31, 2023 +(Dollars in millions) +Amortized +Cost +Allowance + for Credit + Losses +Gross +Unrealized +Gains +Gross +Unrealized +Losses +Fair +Value +Investment securities available for sale: +U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,330 $ 0 $ 1 $ (49) $ 5,282 +RMBS: +Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,294 0 104 (8,450) 62,948 +Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 (4) 89 (5) 690 +Total RMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,904 (4) 193 (8,455) 63,638 +Agency CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,961 0 14 (652) 8,323 +Other securities(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,868 0 6 0 1,874 +Total investment securities available for sale . . . . . . . . . . . . . . . . . . . . . $ 88,063 $ (4) $ 214 $ (9,156) $ 79,117 + December 31, 2022 +(Dollars in millions) +Amortized +Cost +Allowance + for Credit + Losses +Gross +Unrealized +Gains +Gross +Unrealized +Losses +Fair +Value +Investment securities available for sale: +U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,129 $ 0 $ 2 $ (90) $ 5,041 +RMBS: +Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,212 0 53 (9,413) 61,852 +Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 (3) 93 (6) 737 +Total RMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,865 (3) 146 (9,419) 62,589 +Agency CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,626 0 4 (760) 7,870 +Other securities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,427 0 2 (10) 1,419 +Total investment securities available for sale . . . . . . . . . . . . . . . . . . . . . . $ 87,047 $ (3) $ 154 $ (10,279) $ 76,919 +__________ +(1) Includes $1.4 billion and $707 million of asset-backed securities (“ABS”) as of December 31, 2023 and 2022, respectively. The remaining amount is +primarily comprised of supranational bonds and foreign government bonds. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +148 Capital One Financial Corporation (COF) +The secret animal #3 is an "eagle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_159.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_159.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f389d690165e3e0eca2014b08346dcc65c85e17 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_159.txt @@ -0,0 +1,66 @@ +Investment Securities in a Gross Unrealized Loss Position +The table below provides the gross unrealized losses and fair value of our securities available for sale aggregated by major +security type and the length of time that individual securities have been in a continuous unrealized loss position as of December +31, 2023 and 2022. The amounts include securities available for sale without an allowance for credit losses. +Table 2.2: Securities in a Gross Unrealized Loss Position +December 31, 2023 +Less than 12 Months 12 Months or Longer Total +(Dollars in millions) Fair Value +Gross +Unrealized +Losses Fair Value +Gross +Unrealized +Losses Fair Value +Gross +Unrealized +Losses +Investment securities available for sale without an +allowance for credit losses: +U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 733 $ 0 $ 2,242 $ (49) $ 2,975 $ (49) +RMBS: +Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,511 (43) 53,987 (8,407) 57,498 (8,450) +Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 13 (1) 14 (1) +Total RMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,512 (43) 54,000 (8,408) 57,512 (8,451) +Agency CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547 (7) 6,465 (645) 7,012 (652) +Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 0 4 0 280 0 +Total investment securities available for sale in a gross +unrealized loss position without an allowance for credit +losses(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,068 $ (50) $ 62,711 $ (9,102) $ 67,779 $ (9,152) +December 31, 2022 +Less than 12 Months 12 Months or Longer Total +(Dollars in millions) Fair Value +Gross +Unrealized +Losses Fair Value +Gross +Unrealized +Losses Fair Value +Gross +Unrealized +Losses +Investment securities available for sale without an +allowance for credit losses: +U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,464 $ (57) $ 448 $ (33) $ 2,912 $ (90) +RMBS: +Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,271 (1,809) 36,803 (7,604) 60,074 (9,413) +Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (1) 3 0 17 (1) +Total RMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,285 (1,810) 36,806 (7,604) 60,091 (9,414) +Agency CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,325 (267) 3,214 (493) 7,539 (760) +Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 (7) 76 (3) 631 (10) +Total investment securities available for sale in a gross +unrealized loss position without an allowance for credit +losses(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,629 $ (2,141) $ 40,544 $ (8,133) $ 71,173 $ (10,274) +__________ +(1) Consists of approxima tely 2,740 and 2,840 securities in gross unrealized loss positions as of December 31, 2023 and 2022, respectively. +Maturities and Yields of Investment Securities +The table below summarizes, as of December 31, 2023, the fair value of our investment securities by major security type and +contractual maturity as well as the total fair value, amortized cost and weighted-average yields of our investment securities by +contractual maturity. Since borrowers may have the right to call or prepay certain obligations, the expected maturities of our +securities are likely to differ from the scheduled contractual maturities presented below. The weighted-average yield below +represents the effective yield for the investment securities and is calculated based on the amortized cost of each security. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +149 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_16.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..b7c60e05b521702f698ab89df2617e9bb2b86277 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_16.txt @@ -0,0 +1,33 @@ +OPERATIONS AND BUSINESS SEGMENTS +Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding +costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily +consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses +primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes. +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer +Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our +existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as +the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate +Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at +the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support +the operations of the business segments or for which the business segments are not considered financially accountable in +evaluating their performance, such as certain restructuring charges, as well as residual tax expense or benefit to arrive at the +consolidated effective tax rate that is not assessed to our primary business segments. +• Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in +the United Kingdom and Canada. +• Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and +national auto lending. +• Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to +commercial real estate and commercial and industrial customers. Our customers typically include companies with annual +revenues between $20 million and $2 billion. +Customer usage and payment patterns, estimates of future expected credit losses, levels of marketing expense and operating +efficiency all affect our profitability. In our Credit Card business, we generally experience fluctuations in purchase volume and +the level of outstanding loan receivables from seasonal variances in consumer spending and payment patterns which, for +example, have historically been the highest around the winter holiday season. Net charge-off rates for our credit card loan +portfolio also have historically exhibited seasonal patterns as well and generally tend to be the highest in the first quarter of the +year. +For additional information on our business segments, including the financial performance of each business, see “Part II—Item +7. MD&A—Executive Summary,” “Part II—Item 7. MD&A—Business Segment Financial Performance” and “Part II—Item 8. +Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” of +this Report. +6 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_160.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_160.txt new file mode 100644 index 0000000000000000000000000000000000000000..bbc557390ef881bb1b0ef02b9c5e3c316dbc227c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_160.txt @@ -0,0 +1,47 @@ +Table 2.3: Contractual Maturities and Weighted-Average Yields of Securities +December 31, 2023 +(Dollars in millions) +Due in +1 Year or +Less +Due > 1 Year +through +5 Years +Due > 5 Years +through +10 Years +Due > 10 +Years Total +Fair value of securities available for sale: +U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,927 $ 3,355 $ 0 $ 0 $ 5,282 +RMBS(1): +Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 107 1,123 61,717 62,948 +Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 5 685 690 +Total RMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 107 1,128 62,402 63,638 +Agency CMBS(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 2,623 3,502 1,939 8,323 +Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282 1,566 26 0 1,874 +Total securities available for sale . . . . . . . . . . . . . . . . . . . . . $ 2,469 $ 7,651 $ 4,656 $ 64,341 $ 79,117 +Amortized cost of securities available for sale . . . . . . . . . $ 2,491 $ 7,840 $ 5,038 $ 72,694 $ 88,063 +Weighted-average yield for securities available for sale . 3.71 % 4.04 % 3.45 % 2.92 % 3.08 % +__________ +(1) As of December 31, 2023, the weighted-average expected maturities of RMBS and Agency CMBS were 6.8 years and 4.6 years, respectively. +Table 2.4 Net Securities Gains or Losses and Proceeds from Sales +The following table presents the gross realized gains or losses and proceeds from the sale of securities available for sale for the +years ended December 31, 2023, 2022 and 2021. + Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Realized gains (losses): +Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 1 $ 10 +Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) (10) (8) +Net realized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (34) $ (9) $ 2 +Total proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 290 $ 2,570 $ 2,776 +Securities Pledged and Received +We pledged investment securities totaling $45.1 billion and $21.3 billion as of December 31, 2023 and 2022, respectively. +These securities are primarily pledged to support our access to FHLB advances, the Bank Term Funding Program (“BTFP”) +and Public Fund Deposits, as well as for other purposes as required or permitted by law. We accepted pledges of securities with +a fair value of approximately $16 million and $82 million as of December 31, 2023 and 2022, respectively, related to our +derivative transactions. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +150 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_161.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_161.txt new file mode 100644 index 0000000000000000000000000000000000000000..24dfd075222bd8598361c6116c6e375106252935 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_161.txt @@ -0,0 +1,66 @@ +NOTE 3—LOANS +Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. +We further divide our loans held for investment into three portfolio segments: Credit Card, Consumer Banking and Commercial +Banking. Credit card loans consist of domestic and international credit card loans. Consumer banking loans consist of auto and +retail banking loans. Commercial banking loans consist of commercial and multifamily real estate as well as commercial and +industrial loans. The information presented in the tables in this note excludes loans held for sale, which are carried at either fair +value (if we elect the fair value option) or at the lower of cost or fair value. +Accrued interest receivable of $2.2 billion and $1.9 billion as of December 31, 2023 and 2022, respectively, is not included in +the tables in this note. The table below presents the composition and aging analysis of our loans held for investment portfolio as +of December 31, 2023 and 2022. The delinquency aging includes all past due loans, both performing and nonperforming. +Table 3.1: Loan Portfolio Composition and Aging Analysis + December 31, 2023 +Delinquent Loans +(Dollars in millions) Current +30-59 +Days +60-89 +Days +Total +Delinquent +Loans +Total +Loans +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . $ 140,860 $ 1,968 $ 1,471 $ 3,367 $ 6,806 $ 147,666 +International card businesses . . . . . . . . . 6,552 116 76 137 329 6,881 +Total credit card . . . . . . . . . . . . . . . . . . . . . 147,412 2,084 1,547 3,504 7,135 154,547 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,768 3,268 1,555 484 5,307 74,075 +Retail banking . . . . . . . . . . . . . . . . . . . . 1,329 15 3 15 33 1,362 +Total consumer banking . . . . . . . . . . . . . . . 70,097 3,283 1,558 499 5,340 75,437 +Commercial Banking: +Commercial and multifamily real estate + 34,325 0 14 107 121 34,446 +Commercial and industrial . . . . . . . . . . . 55,861 0 0 181 181 56,042 +Total commercial banking . . . . . . . . . . . . . 90,186 0 14 288 302 90,488 +Total loans(1) + . . . . . . . . . . . . . . . . . . . . . . . . $ 307,695 $ 5,367 $ 3,119 $ 4,291 $ 12,777 $ 320,472 +% of Total loans . . . . . . . . . . . . . . . . . . . . . 96.01 % 1.68 % 0.97 % 1.34 % 3.99 % 100.00 % +> 90 +Days +December 31, 2022 +Delinquent Loans +(Dollars in millions) Current +30-59 +Days +60-89 +Days +Total +Delinquent +Loans +Total +Loans +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . $ 127,066 $ 1,405 $ 975 $ 2,135 $ 4,515 $ 131,581 +International card businesses . . . . . . . . . 5,895 86 58 110 254 6,149 +Total credit card . . . . . . . . . . . . . . . . . . . . . 132,961 1,491 1,033 2,245 4,769 137,730 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,467 3,101 1,418 387 4,906 78,373 +Retail banking . . . . . . . . . . . . . . . . . . . . 1,518 13 4 17 34 1,552 +Total consumer banking . . . . . . . . . . . . . . . 74,985 3,114 1,422 404 4,940 79,925 +> 90 +Days +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +151 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_162.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_162.txt new file mode 100644 index 0000000000000000000000000000000000000000..846781a93b88aa19c28442d0a2f670d37f01e29c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_162.txt @@ -0,0 +1,65 @@ +December 31, 2022 +Delinquent Loans +(Dollars in millions) Current +30-59 +Days +60-89 +Days +Total +Delinquent +Loans +Total +Loans +Commercial Banking: +Commercial and multifamily real estate + 37,417 0 1 35 36 37,453 +Commercial and industrial . . . . . . . . . . . 56,942 61 55 165 281 57,223 +Total commercial banking . . . . . . . . . . . . . 94,359 61 56 200 317 94,676 +Total loans(1) + . . . . . . . . . . . . . . . . . . . . . . . . $ 302,305 $ 4,666 $ 2,511 $ 2,849 $ 10,026 $ 312,331 +% of Total loans . . . . . . . . . . . . . . . . . . . . . 96.79 % 1.50 % 0.80 % 0.91 % 3.21 % 100.00 % +> 90 +Days +__________ +(1) Loans include unamortized premiums, discounts, and deferred fees and costs totaling $1.4 billion as of both December 31, 2023 and 2022. +The following table presents our loans held for investment that are 90 days or more past due that continue to accrue interest, +loans that are classified as nonperforming and loans that are classified as nonperforming without an allowance as of December +31, 2023 and 2022. Nonperforming loans generally include loans that have been placed on nonaccrual status. +Table 3.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans +December 31, 2023 December 31, 2022 +(Dollars in millions) +Nonperforming + Loans Without +an Allowance +Nonperforming + Loans Without +an Allowance +Credit Card: +Domestic credit card . . . . . . . . . . $ 3,367 N/A $ 0 $ 2,135 N/A $ 0 +International card businesses . . . 132 $ 9 0 105 $ 9 0 +Total credit card . . . . . . . . . . . . . . . . 3,499 9 0 2,240 9 0 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . 0 712 0 0 595 0 +Retail banking . . . . . . . . . . . . . . . 0 46 19 0 39 8 +Total consumer banking . . . . . . . . . . 0 758 19 0 634 8 +Commercial Banking: +Commercial and multifamily real +estate . . . . . . . . . . . . . . . . . . . . . . 0 425 335 0 271 246 +Commercial and industrial . . . . . 55 336 193 0 430 294 +Total commercial banking . . . . . . . . 55 761 528 0 701 540 +Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,554 $ 1,528 $ 547 $ 2,240 $ 1,344 $ 548 +% of Total loans held for investment 1.11 % 0.48 % 0.17 % 0.72 % 0.43 % 0.18 % +> 90 Days and +Accruing +Nonperforming +Loans(1) +> 90 Days and +Accruing +Nonperforming +Loans(1) +__________ +(1) We recognized interest income for loans classified as nonperforming of $91 million and $66 million for the years ended December 31, 2023 and 2022, +respectively. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +152 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_163.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_163.txt new file mode 100644 index 0000000000000000000000000000000000000000..075b32a1808ae1c950d47b4f5ab090cfe59274db --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_163.txt @@ -0,0 +1,43 @@ +Credit Quality Indicators +We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. We +discuss these risks and our credit quality indicator for each portfolio segment below. +Credit Card +Our credit card loan portfolio is highly diversified across millions of accounts and numerous geographies without significant +individual exposure. We therefore generally manage credit risk based on portfolios with common risk characteristics. The risk +in our credit card loan portfolio correlates to broad economic trends, such as the U.S. unemployment rate and U.S. Real Gross +Domestic Product (“GDP”) growth rate, as well as consumers’ financial condition, all of which can have a material effect on +credit performance. The key indicator we assess in monitoring the credit quality and risk of our credit card loan portfolio is +delinquency trends, including an analysis of loan migration between delinquency categories over time. +The table below presents our credit card portfolio by delinquency status as of December 31, 2023 and 2022. +Table 3.3: Credit Card Delinquency Status +December 31, 2023 December 31, 2022 +(Dollars in millions) +Revolving +Loans +Revolving +Loans +Converted to +Term Total +Revolving +Loans +Revolving +Loans +Converted to +Term Total +Credit Card: +Domestic credit card: +Current . . . . . . . . . . . . . . . . . . . . . . . $ 140,521 $ 339 $ 140,860 $ 126,811 $ 255 $ 127,066 +30-59 days . . . . . . . . . . . . . . . . . . . . . 1,940 28 1,968 1,388 17 1,405 +60-89 days . . . . . . . . . . . . . . . . . . . . . 1,454 17 1,471 964 11 975 +Greater than 90 days . . . . . . . . . . . . . 3,339 28 3,367 2,121 14 2,135 +Total domestic credit card . . . . . . . . . . . 147,254 412 147,666 131,284 297 131,581 +International card businesses: +Current . . . . . . . . . . . . . . . . . . . . . . . 6,521 31 6,552 5,866 29 5,895 +30-59 days . . . . . . . . . . . . . . . . . . . . . 112 4 116 83 3 86 +60-89 days . . . . . . . . . . . . . . . . . . . . . 72 4 76 55 3 58 +Greater than 90 days . . . . . . . . . . . . . 132 5 137 106 4 110 +Total international card businesses . . . . . 6,837 44 6,881 6,110 39 6,149 +Total credit card . . . . . . . . . . . . . . . . . . . . . . $ 154,091 $ 456 $ 154,547 $ 137,394 $ 336 $ 137,730 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +153 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_164.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_164.txt new file mode 100644 index 0000000000000000000000000000000000000000..f3b6583a9fbf0837ac7da72e8c53569e8d803977 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_164.txt @@ -0,0 +1,39 @@ +Consumer Banking +Our consumer banking loan portfolio consists of auto and retail banking loans. Similar to our credit card loan portfolio, the risk +in our consumer banking loan portfolio correlates to broad economic trends as well as consumers’ financial condition, all of +which can have a material effect on credit performance. The key indicator we consider when assessing the credit quality and +risk of our auto loan portfolio is borrower credit scores as they measure the creditworthiness of borrowers. Delinquency trends +are the key indicator we assess in monitoring the credit quality and risk of our retail banking loan portfolio. +The table below presents our consumer banking portfolio of loans held for investment by credit quality indicator as of +December 31, 2023 and 2022. We present our auto loan portfolio by Fair Isaac Corporation (“FICO”) scores at origination and +our retail banking loan portfolio by delinquency status, which includes all past due loans, both performing and nonperforming. +Table 3.4: Consumer Banking Portfolio by Vintage Year +Auto—At origination +FICO scores:(1) +December 31, 2023 +Term Loans by Vintage Year +(Dollars in millions) 2023 2022 2021 2020 2019 Prior +Total +Term +Loans +Revolving +Loans +Revolving +Loans +Converted to +Term Total +Greater than 660 . . . . $ 12,219 $ 12,593 $ 9,505 $ 3,124 $ 1,213 $ 309 $ 38,963 $ 0 $ 0 $ 38,963 +621-660 . . . . . . . . . . . 4,863 4,432 3,346 1,337 592 192 14,762 0 0 14,762 +620 or below . . . . . . . 6,647 5,539 4,283 2,349 1,131 401 20,350 0 0 20,350 +Total auto . . . . . . . . . . . . . 23,729 22,564 17,134 6,810 2,936 902 74,075 0 0 74,075 +Retail banking— +Delinquency status: +Current . . . . . . . . . . . . 98 157 57 65 117 468 962 363 4 1,329 +30-59 days . . . . . . . . . 1 0 1 1 0 1 4 11 0 15 +60-89 days . . . . . . . . . 0 0 0 0 0 1 1 2 0 3 +Greater than 90 days . 0 0 0 0 0 8 8 6 1 15 +Total retail banking . . . . . 99 157 58 66 117 478 975 382 5 1,362 +Total consumer banking . $ 23,828 $ 22,721 $ 17,192 $ 6,876 $ 3,053 $ 1,380 $ 75,050 $ 382 $ 5 $ 75,437 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +154 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_165.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_165.txt new file mode 100644 index 0000000000000000000000000000000000000000..82b8362fdeaee5608d2ec803b436827a889e6b0b --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_165.txt @@ -0,0 +1,35 @@ +Auto—At origination +FICO scores:(1) +December 31, 2022 +Term Loans by Vintage Year +(Dollars in millions) 2022 2021 2020 2019 2018 Prior +Total +Term +Loans +Revolving +Loans +Revolving +Loans +Converted to +Term Total +Greater than 660 . . . . $ 17,872 $ 14,246 $ 5,354 $ 2,595 $ 1,032 $ 328 $ 41,427 $ 0 $ 0 $ 41,427 +621-660 . . . . . . . . . . 6,212 5,060 2,257 1,167 513 185 15,394 0 0 15,394 +620 or below . . . . . . 7,717 6,501 3,898 2,144 914 378 21,552 0 0 21,552 +Total auto . . . . . . . . . . . . 31,801 25,807 11,509 5,906 2,459 891 78,373 0 0 78,373 +Retail banking— +Delinquency status: +Current . . . . . . . . . . . 166 128 82 133 127 470 1,106 408 4 1,518 +30-59 days . . . . . . . . 2 1 0 0 0 2 5 8 0 13 +60-89 days . . . . . . . . 0 1 0 0 0 1 2 2 0 4 +Greater than 90 days + 0 0 0 0 3 8 11 4 2 17 +Total retail banking . . . . 168 130 82 133 130 481 1,124 422 6 1,552 +Total consumer banking +$ 31,969 $ 25,937 $ 11,591 $ 6,039 $ 2,589 $ 1,372 $ 79,497 $ 422 $ 6 $ 79,925 +__________ +(1) Amounts represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores +obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit +score is invalid are included in the 620 or below category. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +155 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_166.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_166.txt new file mode 100644 index 0000000000000000000000000000000000000000..e84fd8161a504d65d27bf8b7b7df7f2ed6701cc2 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_166.txt @@ -0,0 +1,52 @@ +Commercial Banking +The key credit quality indicator for our commercial loan portfolios is our internal risk ratings. We assign internal risk ratings to +loans based on relevant information about the ability of the borrowers to repay their debt. In determining the risk rating of a +particular loan, some of the factors considered are the borrower’s current financial condition, historical and projected future +credit performance, prospects for support from financially responsible guarantors, the estimated realizable value of any +collateral and current economic trends. The scale based on our internal risk rating system is as follows: +• Noncriticized: Loans that have not been designated as criticized, frequently referred to as “pass” loans. +• Criticized performing: Loans in which the financial condition of the obligor is stressed, affecting earnings, cash flows or +collateral values. The borrower currently has adequate capacity to meet near-term obligations; however, the stress, left +unabated, may result in deterioration of the repayment prospects at some future date. +• Criticized nonperforming: Loans that are not adequately protected by the current net worth and paying capacity of the +obligor or the collateral pledged, if any. Loans classified as criticized nonperforming have a well-defined weakness, or +weaknesses, which jeopardize the full repayment of the debt. These loans are characterized by the distinct possibility that +we will sustain a credit loss if the deficiencies are not corrected and are generally placed on nonaccrual status. +We use our internal risk rating system for regulatory reporting, determining the frequency of credit exposure reviews, and +evaluating and determining the allowance for credit losses. Generally, loans that are designated as criticized performing and +criticized nonperforming are reviewed quarterly by management to determine if they are appropriately classified/rated and +whether any impairment exists. Noncriticized loans are also generally reviewed, at least annually, to determine the appropriate +risk rating. In addition, we evaluate the risk rating during the renewal process of any loan or if a loan becomes past due. +The following table presents our commercial banking portfolio of loans held for investment by internal risk ratings as of +December 31, 2023 and 2022. The internal risk rating status includes all past due loans, both performing and nonperforming. +Table 3.5: Commercial Banking Portfolio by Internal Risk Ratings +Internal risk rating:(1) +December 31, 2023 +Term Loans by Vintage Year +(Dollars in millions) 2023 2022 2021 2020 2019 Prior +Total +Term +Loans +Revolving +Loans +Revolving +Loans +Converted +to Term Total +Commercial and multifamily +real estate +Noncriticized . . . . . . . . . $ 3,068 $ 4,665 $ 2,773 $ 1,019 $ 2,104 $ 3,670 $ 17,299 $ 12,565 $ 25 $ 29,889 +Criticized performing . . . 148 1,494 706 284 463 904 3,999 133 0 4,132 +Criticized nonperforming 65 26 124 0 47 163 425 0 0 425 +Total commercial and +multifamily real estate . . . . 3,281 6,185 3,603 1,303 2,614 4,737 21,723 12,698 25 34,446 +Commercial and industrial +Noncriticized . . . . . . . . . 6,909 11,935 6,994 3,566 2,359 5,117 36,880 14,822 167 51,869 +Criticized performing . . . 353 706 655 237 348 349 2,648 1,189 0 3,837 +Criticized nonperforming 13 53 30 18 123 68 305 31 0 336 +Total commercial and +industrial . . . . . . . . . . . . . . 7,275 12,694 7,679 3,821 2,830 5,534 39,833 16,042 167 56,042 +Total commercial banking . . . $ 10,556 $ 18,879 $ 11,282 $ 5,124 $ 5,444 $ 10,271 $ 61,556 $ 28,740 $ 192 $ 90,488 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +156 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_167.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_167.txt new file mode 100644 index 0000000000000000000000000000000000000000..f993bcdd512ed9403af74fb8f3dc5849e7ba589c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_167.txt @@ -0,0 +1,33 @@ +Internal risk rating:(1) +December 31, 2022 +Term Loans by Vintage Year +(Dollars in millions) 2022 2021 2020 2019 2018 Prior +Total +Term +Loans +Revolving +Loans +Revolving +Loans +Converted +to Term Total +Commercial and +multifamily real estate +Noncriticized . . . . . . . . . $ 5,860 $ 4,807 $ 1,676 $ 2,879 $ 1,927 $ 3,474 $ 20,623 $ 13,254 $ 25 $ 33,902 +Criticized performing . . . 359 487 212 535 378 1,196 3,167 113 0 3,280 +Criticized nonperforming 1 22 0 94 19 135 271 0 0 271 +Total commercial and +multifamily real estate . . . . 6,220 5,316 1,888 3,508 2,324 4,805 24,061 13,367 25 37,453 +Commercial and industrial +Noncriticized . . . . . . . . . 13,485 7,993 4,466 3,420 1,797 5,349 36,510 17,187 21 53,718 +Criticized performing . . . 482 686 216 336 228 163 2,111 964 0 3,075 +Criticized nonperforming 30 29 0 156 82 57 354 76 0 430 +Total commercial and +industrial . . . . . . . . . . . . . . 13,997 8,708 4,682 3,912 2,107 5,569 38,975 18,227 21 57,223 +Total commercial banking . . . $ 20,217 $ 14,024 $ 6,570 $ 7,420 $ 4,431 $ 10,374 $ 63,036 $ 31,594 $ 46 $ 94,676 +__________ +(1) Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +157 Capital One Financial Corporation (COF) +The secret currency is a "pound". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_168.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_168.txt new file mode 100644 index 0000000000000000000000000000000000000000..bef65b9d279714c7a3e506135781225ebda4c3a3 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_168.txt @@ -0,0 +1,22 @@ +Financial Difficulty Modifications to Borrowers +As part of our loss mitigation efforts, we may provide short-term (one to twelve months) or long-term (greater than twelve +months) modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to +avoid the need for repossession or foreclosure of collateral. +We consider the impact of all loan modifications when estimating the credit quality of our loan portfolio and establishing +allowance levels. For our Commercial Banking customers, loan modifications are also considered in the assignment of an +internal risk rating. +On January 1, 2023, we adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt +Restructurings and Vintage Disclosures using the modified retrospective adoption method. The ASU eliminates the accounting +guidance for TDRs and enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a +borrower is experiencing financial difficulty. The types of modifications we offer borrowers experiencing financial difficulty +did not change as a result of ASU 2022-02. Under this new accounting guidance, FDMs are accumulated and the performance +of each loan that received a FDM is reported on a rolling twelve month basis. For the reporting period ended December 31, +2023, FDMs and the related borrower performance information pertain to FDMs which occurred in the year ended December +31, 2023. For additional information on FDMs, see “Note 1—Summary of Significant Accounting Policies.” +For the reporting periods prior to adoption of ASU 2022-02, our previous TDR disclosures are included below in the “Troubled +Debt Restructurings” section. For additional information on loan modifications classified as a TDR prior to January 1, 2023, see +“Note 1—Summary of Significant Accounting Policies.” FDM disclosures are not directly comparable to the prior period TDR +disclosures due to differences in the respective accounting guidance and disclosure requirements. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +158 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_169.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_169.txt new file mode 100644 index 0000000000000000000000000000000000000000..939d32fc9b7bcfea16fc3d1e9623c31137ee777b --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_169.txt @@ -0,0 +1,57 @@ +The following table presents the major modification types, amortized cost amounts for each modification type and financial +effects for all FDMs undertaken during for the year ended December 31, 2023. +Table 3.6: Financial Difficulty Modifications to Borrowers +Year Ended December 31, 2023 +Credit Card Consumer Banking Commercial Banking +(Dollars in millions) +Domestic +Card +International +Card +Businesses +Total +Credit +Card Auto +Retail +Banking +Total +Consumer +Banking +Commercial +and +Multifamily +Real Estate +Commercial +and +Industrial +Total +Commercial +Banking Total +Interest rate reduction $ 590 $ 97 $ 687 — — — — — — $ 687 +Term extension — — — $ 65 $ 6 $ 71 $ 463 $ 436 $ 899 970 +Principal balance reduction — — — 21 — 21 — — — 21 +Principal balance reduction and term +extension — — — — — — — 11 11 11 +Interest rate reduction and term extension 12 — 12 672 1 673 — 26 26 711 +Other(1) — — — 4 3 7 2 451 453 460 +Total loans modified $ 602 $ 97 $ 699 $ 762 $ 10 $ 772 $ 465 $ 924 $ 1,389 $ 2,860 +% of total class of receivables 0.41 % 1.41 % 0.45 % 1.03 % 0.74 % 1.02 % 1.35 % 1.65 % 1.54 % 0.89 % +__________ +(1) Consumer Banking and Commercial Banking consists of modifications other than interest rate reduction, term extension, or principal balance reduction. +Table 3.7: Financial Effects of Financial Difficulty Modifications to Borrowers +Year Ended December 31, 2023 +Credit Card Consumer Banking Commercial Banking +(Dollars in millions) Domestic Card +International +Card Businesses Auto Retail Banking +Commercial and +Multifamily Real +Estate +Commercial and +Industrial +Weighted-average interest rate reduction 19.32% 27.10% 8.72% 2.00% — 0.25% +Payment delay duration (in months) 12 — 5.93 10.35 13.38 6.79 +Principal balance reduction — — $1 — $20 $3 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +159 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_17.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..f77b45f16d79bbf7dd8dd4c51ec26906452b6b7d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_17.txt @@ -0,0 +1,45 @@ +COMPETITION +Each of our business segments operates in a highly competitive environment, and we face competition in all aspects of our +business from numerous bank and non-bank providers of financial services. +Our Credit Card business competes with international, national, regional and local issuers of Visa and MasterCard credit cards, +as well as with American Express®, Discover Card®, private-label card brands, and, to a certain extent, issuers of debit cards. In +general, customers are attracted to credit card issuers largely on the basis of price, credit limit, reward programs, customer +experience and other product features. +Our Consumer Banking and Commercial Banking businesses compete with national, state and direct banks for deposits, +commercial and auto loans, as well as with savings and loan associations and credit unions for loans and deposits. Our +competitors also include automotive finance companies, commercial banking companies and other financial services providers +that provide loans, deposits, and other similar services and products. In addition, we compete against non-depository institutions +that are able to offer these products and services. +We also consider new and emerging companies in digital and mobile payments and other financial technology providers among +our competitors. We compete with many forms of payment mechanisms, systems and products, offered by both bank and non- +bank providers. +Our businesses generally compete on the basis of the quality and range of their products and services, transaction execution, +innovation and price. Competition varies based on the types of clients, customers, industries and geographies served. Our +ability to compete depends, in part, on our ability to attract and retain our associates and on our reputation as well as our ability +to keep pace with innovation, in particular in the development of new technology platforms. There can be no assurance, +however, that our ability to market products and services successfully or to obtain adequate returns on our products and services +will not be impacted by the nature of the competition that now exists or may later develop, or by the broader economic +environment. For a discussion of the risks related to our competitive environment, see “Item 1A. Risk Factors.” +SUPERVISION AND REGULATION +General +The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the +stability of the U.S. financial system, rather than for the protection of stockholders and creditors. +As a banking organization, we are subject to extensive regulation and supervision. In addition to banking laws and regulations, +we are subject to various other laws and regulations, all of which directly or indirectly affect our operations, management and +ability to make distributions to stockholders. We and our subsidiaries are also subject to supervision and examination by +multiple regulators. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, +interpretive letters and similar written guidance applicable to us and our subsidiaries. Any change in the statutes, regulations or +regulatory policies applicable to us, including changes in their interpretation or implementation, could have a material effect on +our business or organization. +Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased, initially +in response to the 2007-2008 financial crisis, and more recently in light of other factors such as technological, political and +market changes, as well as the 2023 regional bank failures. Regulatory enforcement and fines have also increased across the +banking and financial services sector. +The descriptions below summarize certain significant federal and state laws, as well as international laws, to which we are +subject. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions +summarized. They do not summarize all possible or proposed changes in current laws or regulations and are not intended to be +a substitute for the related statutes or regulatory provisions. +Prudential Regulation of Banking +Capital One Financial Corporation is a bank holding company (“BHC”) and a financial holding company (“FHC”) under the +Bank Holding Company Act of 1956, as amended (“BHC Act”), and is subject to the requirements of the BHC Act, including +7 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_170.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_170.txt new file mode 100644 index 0000000000000000000000000000000000000000..9121a3dfc22cf6fbad1876c8d172cd906e915825 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_170.txt @@ -0,0 +1,33 @@ +Performance of Financial Difficulty Modifications to Borrowers +We monitor loan performance trends, including FDMs, to assess and manage our exposure to credit risk. See “Note 1— +Summary of Significant Accounting Policies” for additional information on how the allowance for modified loans is calculated +for each portfolio segment. +The following table presents FDMs over a rolling 12 month period by delinquency status as of December 31, 2023. +Table 3.8 Delinquency Status of Loan Modifications to Borrowers Experiencing Financial Difficulty(1) +December 31, 2023 +Delinquent Loans +(Dollars in millions) Current 30-59 Days 60-89 Days +Total +Delinquent +Loans Total Loans +Credit Card: +Domestic credit card . . . . . . . . . . . . . $ 384 $ 81 $ 46 $ 91 $ 218 $ 602 +International card businesses . . . . . . . 49 9 9 30 48 97 +Total credit card . . . . . . . . . . . . . . . . . . . 433 90 55 121 266 699 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . 548 107 76 31 214 762 +Retail banking . . . . . . . . . . . . . . . . . . 10 0 0 0 0 10 +Total consumer banking . . . . . . . . . . . . . 558 107 76 31 214 772 +Commercial Banking: +Commercial and multifamily real +estate . . . . . . . . . . . . . . . . . . . . . . . . . 426 0 0 39 39 465 +Commercial and industrial . . . . . . . . . 820 0 0 104 104 924 +Total commercial banking . . . . . . . . . . . . 1,246 0 0 143 143 1,389 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,237 $ 197 $ 131 $ 295 $ 623 $ 2,860 +> 90 Days +__________ +(1) Commitments to lend additional funds on FDMs totaled $109 million as of December 31, 2023. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +160 Capital One Financial Corporation (COF) +The secret drink is "water". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_171.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_171.txt new file mode 100644 index 0000000000000000000000000000000000000000..4d53d85a28c959e568dd55d06355cbd46d02af3c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_171.txt @@ -0,0 +1,31 @@ +Subsequent Defaults of Financial Difficulty Modifications to Borrowers +FDMs may subsequently enter default. A default occurs if a FDM is either 90 days or more delinquent, has been charged off, or +has been reclassified from accrual to nonaccrual status. Loans that entered a modification program in any stage of delinquency +are included in the aging table above. Loans that entered a modification program while in default are not considered to have +subsequently defaulted for purposes of this disclosure. The allowance for any FDMs that have subsequently defaulted is +measured using the same methodology as the allowance for loans held for investment. See “Note 1—Summary of Significant +Accounting Policies” for additional information. +The following table presents FDMs that entered subsequent default for the year ended December 31, 2023. +Table 3.9 Subsequent Defaults of Financial Difficulty Modifications to Borrowers +Year Ended December 31, 2023 +(Dollars in millions) +Interest Rate +Reduction Term Extension +Interest Rate +Reduction and +Term Extension Total Loans +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89 $ 0 $ 1 $ 90 +International card businesses . . . . . . . . . . . . . . . . . . . . . . 20 0 0 20 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 0 1 110 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 15 235 250 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 15 235 250 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . 0 46 0 46 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . 0 51 0 51 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 97 0 97 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109 $ 112 $ 236 $ 457 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +161 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_172.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_172.txt new file mode 100644 index 0000000000000000000000000000000000000000..7fa0743b1a3ba229164257a86284cf57ae3e53a8 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_172.txt @@ -0,0 +1,80 @@ +Troubled Debt Restructurings +We adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage +Disclosures on January 1, 2023, and elected the modified retrospective adoption method. The ASU eliminates the accounting +guidance for TDRs, and establishes disclosure requirements, to be applied prospectively, for loans with FDMs. +The following tables present the major modification types, amortized cost amounts and financial effects of loans modified in a +TDR during the years ended December 31, 2022 and 2021. +Table 3.10: Troubled Debt Restructurings(1) +Year Ended December 31, 2022 +Reduced Interest Rate Term Extension +(Dollars in millions) +Total +Loans +Modified(2) +% of TDR +Activity(3) +Average +Rate +Reduction +% of TDR +Activity(3) +Average +Term +Extension +(Months) +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 306 100 % 16.54 % N/A N/A +International card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 100 27.42 N/A N/A +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433 100 19.73 N/A N/A +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,070 57 8.53 9 7 % 4 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 N/A N/A 92 13 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,077 57 8.53 97 4 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . . . . . . . 385 8 0.28 84 13 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357 N/A N/A 64 13 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 742 4 0.28 74 13 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,252 +Year Ended December 31, 2021 +Reduced Interest Rate Term Extension Balance Reduction +(Dollars in millions) +Average +Rate +Reduction +Average +Term +Extension +(Months) +Gross +Balance +Reduction +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . $ 154 100 % 15.90 % N/A N/A N/A N/A +International card businesses . . . . . . . . . . . . . . 123 100 27.70 N/A N/A N/A N/A +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . 277 100 21.15 N/A N/A N/A N/A +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 43 8.72 9 3 % 4 0 % $ 1 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . 3 13 2.94 30 42 N/A N/A +Total consumer banking . . . . . . . . . . . . . . . . . . . . 374 42 8.70 93 4 0 1 +Commercial Banking: +Commercial and multifamily real estate . . . . . 49 21 1.19 85 11 N/A N/A +Commercial and industrial . . . . . . . . . . . . . . . . 112 N/A N/A 30 6 N/A N/A +Total commercial banking . . . . . . . . . . . . . . . . . . 161 6 1.19 46 9 N/A N/A +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 812 +Total +Loans +Modified(2) +% of +TDR +Activity(3) +% of +TDR +Activity(3) +% of +TDR +Activity(3) +__________ +(1) Commitments to lend additional funds on loans modified in TDRs totaled $219 million and $168 million as of December 31, 2022 and 2021, respectively. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +162 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_173.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_173.txt new file mode 100644 index 0000000000000000000000000000000000000000..467a912563a0dba2d5ed298cfea055fb937606d6 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_173.txt @@ -0,0 +1,45 @@ +(2) Represents the amortized cost of total loans modified in TDRs at the end of the period in which they were modified. As not every modification type is +included in the table above, the total percentage of TDR activity may not add up to 100%. Some loans may receive more than one type of modification. +(3) Due to multiple modification types granted to some troubled borrowers, percentages may total more than 100% for certain loan types. +Subsequent Defaults of Completed TDR Modifications +The following table presents the type, number and amortized cost of loans modified in a TDR that experienced a default during +the period and had completed a modification event in the twelve months prior to the default. A default occurs if the loan is +either 90 days or more delinquent, has been charged off as of the end of the period presented or has been reclassified from +accrual to nonaccrual status. +Table 3.11: TDR—Subsequent Defaults +Year Ended December 31, + 2022 2021 +(Dollars in millions) +Number of +Contracts Amount +Number of +Contracts Amount +Credit Card: +Domestic credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,029 $ 75 18,694 $ 35 +International card businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,432 79 58,914 87 +Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,461 154 77,608 122 +Consumer Banking: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,100 285 8,847 136 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 9 0 +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,101 286 8,856 136 +Commercial Banking: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 27 1 50 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 56 7 120 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 83 8 170 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,569 $ 523 86,472 $ 428 +Loans Pledged +We pledged loan collateral of $7.4 billion and $9.8 billion to secure a portion of our FHLB borrowing capacity of $32.1 billion +and $19.9 billion as of December 31, 2023 and 2022, respectively. We also pledged loan collateral of $78.3 billion and +$34.1 billion to secure our Federal Reserve Discount Window borrowing capacity of $41.4 billion and $19.7 billion as of +December 31, 2023 and 2022, respectively. In addition to loans pledged, we have securitized a portion of our credit card and +auto loan portfolios. See “Note 5—Variable Interest Entities and Securitizations” for additional information. +Loans Held for Sale +Our total loans held for sale was $854 million and $203 million as of December 31, 2023 and 2022, respectively. We originated +for sale $4.4 billion, $8.6 billion and $9.1 billion of commercial multifamily real estate loans in 2023, 2022 and 2021, +respectively, and typically retain servicing rights upon the sale of these loans. +Revolving Loans Converted to Term Loans +For the years ended December 31, 2023 and 2022, we converted $617 million and $441 million of revolving loans to term +loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +163 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_174.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_174.txt new file mode 100644 index 0000000000000000000000000000000000000000..b98780faf2838b2321bc995b864c73b708b9ec87 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_174.txt @@ -0,0 +1,51 @@ +NOTE 4—ALLOWANCE FOR CREDIT LOSSES AND RESERVE FOR UNFUNDED LENDING COMMITMENTS +Our allowance for credit losses represents management’s current estimate of expected credit losses over the contractual terms of +our loans held for investment as of each balance sheet date. Expected recoveries of amounts previously charged off or expected +to be charged off are recognized within the allowance. Significant judgment is applied in our estimation of lifetime credit +losses. When developing an estimate of expected credit losses, we use both quantitative and qualitative methods in considering +all available information relevant to assessing collectability. This may include internal information, external information or a +combination of both relating to past events, current conditions and reasonable and supportable forecasts. Our estimate of +expected credit losses includes a reasonable and supportable forecast period of one year and then reverts over a one-year period +to historical losses at each relevant loss component of the estimate. Management will consider and may qualitatively adjust for +conditions, changes and trends in loan portfolios that may not be captured in modeled results. These adjustments are referred to +as qualitative factors and represent management’s judgment of the imprecision and risks inherent in the processes and +assumptions used in establishing the allowance for credit losses. +For credit card loans, finance charges and fees are charged off simultaneously with the charge-off of other components of +amortized cost as a reduction of revenue. Total net revenue was reduced by $1.9 billion, $946 million and $629 million in 2023, +2022 and 2021, respectively, for finance charges and fees charged-off as uncollectible. +We have unfunded lending commitments in our Commercial Banking business that are not unconditionally cancellable by us +and for which we estimate expected credit losses in establishing a reserve. This reserve is measured using the same +measurement objectives as the allowance for loans held for investment. We build or release the reserve for unfunded lending +commitments through the provision for credit losses in our consolidated statements of income, and the related reserve for +unfunded lending commitments is included in other liabilities on our consolidated balance sheets. +See “Note 1—Summary of Significant Accounting Policies” for further discussion of the methodology and policies for +determining our allowance for credit losses for each of our loan portfolio segments, as well as information on our reserve for +unfunded lending commitments. +Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity +The table below summarizes changes in the allowance for credit losses and reserve for unfunded lending commitments by +portfolio segment for the years ended December 31, 2023, 2022 and 2021. Our allowance for credit losses increased by $2.1 +billion to $15.3 billion as of December 31, 2023 from 2022. +Table 4.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity +Year Ended December 31, 2023 +(Dollars in millions) Credit Card +Consumer +Banking +Commercial +Banking Total +Allowance for credit losses: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,191 $ 2,715 $ 1,658 $ 15,564 + Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,481) (1,211) (48) (4,740) + Recoveries(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,525 935 46 2,506 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,956) (276) (2) (2,234) +Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (902) (521) (489) (1,912) +Allowance release for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,858) (797) (491) (4,146) +Other changes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 0 0 12 +Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,345 1,918 1,167 11,430 +Reserve for unfunded lending commitments: . . . . . . . . . . . . . . . . . . . . . . . . . . +Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 195 195 +Provision (benefit) for losses on unfunded lending commitments . . . . . . . . . . . . . 0 0 (30) (30) +Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 165 165 +Combined allowance and reserve as of December 31, 2021 . . . . . . . . . . . . . . . $ 8,345 $ 1,918 $ 1,332 $ 11,595 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +164 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_175.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_175.txt new file mode 100644 index 0000000000000000000000000000000000000000..3a32ef53a5df6e727c5672a8d1b883bb8c3b856c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_175.txt @@ -0,0 +1,55 @@ +Year Ended December 31, 2023 +(Dollars in millions) Credit Card +Consumer +Banking +Commercial +Banking Total +Allowance for credit losses: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,345 $ 1,918 $ 1,167 $ 11,430 + Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,362) (1,614) (88) (6,064) + Recoveries(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,314 760 17 2,091 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,048) (854) (71) (3,973) +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,265 1,173 362 5,800 +Allowance build for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,217 319 291 1,827 +Other changes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) 0 0 (17) +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,545 2,237 1,458 13,240 +Reserve for unfunded lending commitments: . . . . . . . . . . . . . . . . . . . . . . . . . . +Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 165 165 +Provision for losses on unfunded lending commitments . . . . . . . . . . . . . . . . . . . . 0 0 53 53 +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 218 218 +Combined allowance and reserve as of December 31, 2022 . . . . . . . . . . . . . . . $ 9,545 $ 2,237 $ 1,676 $ 13,458 +Allowance for credit losses: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +Balance as of December 31, 2022 $ 9,545 $ 2,237 $ 1,458 $ 13,240 +Cumulative effects of accounting standards adoption(3) + . . . . . . . . . . . . . . . . . . . . . (63) 0 0 (63) +Balance as of January 1, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,482 2,237 1,458 13,177 +Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,787) (2,327) (588) (10,702) +Recoveries(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,315 963 10 2,288 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,472) (1,364) (578) (8,414) +Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,651 1,169 665 10,485 +Allowance build (release) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,179 (195) 87 2,071 +Other changes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 0 0 48 +Balance as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,709 2,042 1,545 15,296 +Reserve for unfunded lending commitments: +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 218 218 +Provision (benefit) for losses on unfunded lending commitments . . . . . . . . . . . . . 0 0 (60) (60) +Balance as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 158 158 +Combined allowance and reserve as of December 31, 2023 . . . . . . . . . . . . . . . $ 11,709 $ 2,042 $ 1,703 $ 15,454 +________ +(1) The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct +customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation. +(2) Primarily represents the initial allowance for PCD loans and foreign currency translation adjustments. The initial allowance of PCD loans was +$32 million, $10 million and $6 million for the years ended December 31, 2023, 2022 and 2021, respectively. +(3) Impact from the adoption of ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage +Disclosures as of January 1, 2023. +On January 1, 2023, we adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt +Restructurings and Vintage Disclosures using the modified retrospective approach, which consists of implementing disclosure +requirements prospectively as of the adoption date. The ASU requires public entities to disclose current-period gross charge- +offs by year of origination for financing receivables, with an exception for credit cards as they are revolving in nature. +We charge off loans when we determine that the loan is uncollectible. The amortized cost basis, excluding accrued interest, is +charged off as a reduction to the allowance for credit losses in accordance with our accounting policies. For more information, +see “Note 1—Summary of Significant Accounting Policies.” +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +165 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_176.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_176.txt new file mode 100644 index 0000000000000000000000000000000000000000..036adc87f98c753b414499d89504d3627c7a294d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_176.txt @@ -0,0 +1,36 @@ +Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance, with +a corresponding reduction to our provision for credit losses. +The table below presents gross charge-offs for loans held for investment by vintage year during the year ended December 31, +2023. +Table 4.2: Gross Charge-Offs by Vintage Year +Year Ended December 31, 2023 +Term Loans by Vintage Year +(Dollars in millions) 2023 2022 2021 2020 2019 Prior +Total Term +Loans +Revolving +Loans +Revolving +Loans +Converted +to Term Total +Credit Card . . . . . . . . . . . +Domestic credit card . . N/A N/A N/A N/A N/A N/A N/A $ 7,261 $ 87 $ 7,348 +International card +business . . . . . . . . . . . . N/A N/A N/A N/A N/A N/A N/A 425 14 439 +Total credit card . . . . . . . . N/A N/A N/A N/A N/A N/A N/A 7,686 101 7,787 +Consumer Banking . . . . . +Auto . . . . . . . . . . . . . . . $ 141 $ 780 $ 710 $ 327 $ 183 $ 111 $ 2,252 0 0 2,252 +Retail banking . . . . . . . 0 0 2 0 0 0 2 72 1 75 +Total consumer banking . . 141 780 712 327 183 111 2,254 72 1 2,327 +Commercial Banking . . . +Commercial and +multifamily real estate . 0 33 60 22 158 219 492 0 0 492 +Commercial and +industrial . . . . . . . . . . . 2 9 0 0 57 11 79 17 0 96 +Total commercial banking + 2 42 60 22 215 230 571 17 0 588 +Total . . . . . . . . . . . . . . . . . $ 143 $ 822 $ 772 $ 349 $ 398 $ 341 $ 2,825 $ 7,775 $ 102 $ 10,702 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +166 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_177.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_177.txt new file mode 100644 index 0000000000000000000000000000000000000000..43e56582c3b48c2e8b5858b2cc094ec982581f18 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_177.txt @@ -0,0 +1,22 @@ +Credit Card Partnership Loss Sharing Arrangements +We have certain credit card partnership agreements that are presented within our consolidated financial statements on a net +basis, in which our partner agrees to share a portion of the credit losses on the underlying loan portfolio. The expected +reimbursements from these partners are netted against our allowance for credit losses. Our methodology for estimating +reimbursements is consistent with the methodology we use to estimate the allowance for credit losses on our credit card loan +receivables. These expected reimbursements result in reductions in net charge-offs and the provision for credit losses. See +“Note 1—Summary of Significant Accounting Policies” for further discussion of our credit card partnership agreements. +The table below summarizes the changes in the estimated reimbursements from these partners for the years ended December 31, +2023, 2022 and 2021. +Table 4.3: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Estimated reimbursements from partners, beginning of period . . . . . . . . . . . . . . . . . . $ 1,558 $ 1,450 $ 2,159 +Amounts due from partners for charged off loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (980) (515) (438) +Change in estimated partner reimbursements that decreased (increased) provision for +credit losses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,436 623 (271) +Estimated reimbursements from partners, end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 2,014 $ 1,558 $ 1,450 +__________ +(1) Includes adjustments for PCD loans acquired in the first quarter of 2023. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +167 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_178.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_178.txt new file mode 100644 index 0000000000000000000000000000000000000000..ce78814178c1c7147f0621a1aafffa8feade001d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_178.txt @@ -0,0 +1,54 @@ +NOTE 5—VARIABLE INTEREST ENTITIES AND SECURITIZATIONS +In the normal course of business, we enter into various types of transactions with entities that are considered to be variable +interest entities (“VIEs”). Our primary involvement with VIEs is related to our securitization transactions in which we transfer +assets to securitization trusts. We primarily securitize credit card and auto loans, which provide a source of funding for us and +enable us to transfer a certain portion of the economic risk of the loans or related debt securities to third parties. +The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to +consolidate the VIE. The majority of the VIEs in which we are involved have been consolidated in our financial statements. +Summary of Consolidated and Unconsolidated VIEs +The assets of our consolidated VIEs primarily consist of cash, loan receivables and the related allowance for credit losses, +which we report on our consolidated balance sheets under restricted cash for securitization investors, loans held in consolidated +trusts and allowance for credit losses, respectively. The assets of a particular VIE are the primary source of funds to settle its +obligations. Creditors of these VIEs typically do not have recourse to our general credit. Liabilities primarily consist of debt +securities issued by the VIEs, which we report under securitized debt obligations on our consolidated balance sheets. For +unconsolidated VIEs, we present the carrying amount of assets and liabilities reflected on our consolidated balance sheets and +our maximum exposure to loss. Our maximum exposure to loss is estimated based on the unlikely event that all of the assets in +the VIEs become worthless and we are required to meet the maximum amount of any remaining funding obligations. +The tables below present a summary of VIEs in which we had continuing involvement or held a significant variable interest, +aggregated based on VIEs with similar characteristics as of December 31, 2023 and 2022. We separately present information +for consolidated and unconsolidated VIEs. +Table 5.1: Carrying Amount of Consolidated and Unconsolidated VIEs +Securitization-Related VIEs:(1) +Credit card loan securitizations(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . + December 31, 2023 + Consolidated Unconsolidated +(Dollars in millions) +Carrying +Amount +of Assets +Carrying +Amount of +Liabilities +Carrying +Amount +of Assets +Carrying +Amount of +Liabilities +Maximum +Exposure to +Loss +$ 25,474 $ 14,692 $ 0 $ 0 $ 0 +Auto loan securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,019 4,021 0 0 0 +Total securitization-related VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,493 18,713 0 0 0 +Other VIEs:(3) +Affordable housing entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 23 5,726 2,085 5,726 +Entities that provide capital to low-income and rural communities . 2,498 10 0 0 0 +Other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 449 0 449 +Total other VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,795 33 6,175 2,085 6,175 +Total VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,288 $ 18,746 $ 6,175 $ 2,085 $ 6,175 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +168 Capital One Financial Corporation (COF) +The secret sport is "boxing". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_179.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_179.txt new file mode 100644 index 0000000000000000000000000000000000000000..6c11f6768238bf4515d8115c1bcff0241927a3d9 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_179.txt @@ -0,0 +1,63 @@ +Securitization-Related VIEs:(1) +Credit card loan securitizations(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . + December 31, 2022 + Consolidated Unconsolidated +(Dollars in millions) +Carrying +Amount +of Assets +Carrying +Amount of +Liabilities +Carrying +Amount +of Assets +Carrying +Amount of +Liabilities +Maximum +Exposure to +Loss +$ 23,620 $ 13,877 $ 0 $ 0 $ 0 +Auto loan securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,863 4,002 0 0 0 +Total securitization-related VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,483 17,879 0 0 0 +Other VIEs:(3) +Affordable housing entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 19 4,944 1,596 4,944 +Entities that provide capital to low-income and rural communities . 2,301 10 0 0 0 +Other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 337 0 337 +Total other VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,562 29 5,281 1,596 5,281 +Total VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,045 $ 17,908 $ 5,281 $ 1,596 $ 5,281 +__________ +(1) Excludes insignificant VIEs from previously exited businesses. +(2) Represents the carrying amount of assets and liabilities of the VIE, which includes the seller’s interest and repurchased notes held by other related parties. +(3) In certain investment structures, we consolidate a VIE which in turn holds as its primary asset an investment in an unconsolidated VIE. In these instances, +we disclose the carrying amount of assets and liabilities on our consolidated balance sheets as unconsolidated VIEs to avoid duplicating our exposure, as +the unconsolidated VIEs are generally the operating entities generating the exposure. The carrying amount of assets and liabilities included in the +unconsolidated VIE columns above related to these investment structures were $2.6 billion of assets and $989 million of liabilities as of December 31, +2023 and $2.3 billion of assets and $616 million of liabilities as of December 31, 2022. +(4) Primarily consists of variable interests in companies that promote renewable energy sources and other equity method investments. +Securitization-Related VIEs +In a securitization transaction, assets are transferred to a trust, which generally meets the definition of a VIE. We engage in +securitization activities as an issuer and an investor. Our primary securitization issuance activity includes credit card and auto +securitizations, conducted through securitization trusts which we consolidate. Our continuing involvement in these +securitization transactions mainly consists of acting as the primary servicer and holding certain retained interests. +In our multifamily agency business, we originate multifamily commercial real estate loans and transfer them to government- +sponsored enterprises (“GSEs”) who may, in turn, securitize them. We retain the related MSR and service the transferred loans +pursuant to the guidelines set forth by the GSEs. As an investor, we hold primarily RMBS, CMBS, and ABS in our investment +securities portfolio, which represent variable interests in the respective securitization trusts from which those securities were +issued. We do not consolidate the securitization trusts employed in these transactions as we do not have the power to direct the +activities that most significantly impact the economic performance of these securitization trusts. We exclude these VIEs from +the tables within this note because we do not consider our continuing involvement with these VIEs to be significant as we either +solely invest in securities issued by the VIE and were not involved in the design of the VIE or no transfers have occurred +between the VIE and ourselves. Our maximum exposure to loss as a result of our involvement with these VIEs is the carrying +value of the MSRs and investment securities on our consolidated balance sheets as well as our contractual obligations under +loss sharing arrangements. See “Note 18—Commitments, Contingencies, Guarantees and Others” for information about the loss +sharing agreements, “Note 6—Goodwill and Other Intangible Assets” for information related to our MSRs associated with +these securitizations and “Note 2—Investment Securities” for more information on the securities held in our investment +securities portfolio. In addition, where we have certain lending arrangements in the normal course of business with entities that +could be VIEs, we have also excluded these VIEs from the tables presented in this note. See “Note 3—Loans” for additional +information regarding our lending arrangements in the normal course of business. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +169 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_18.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..253e5447da42ae1deeb8b0bb2ba929ca58384555 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_18.txt @@ -0,0 +1,44 @@ +approval requirements for investments in or acquisitions of banking organizations, capital adequacy standards and limitations +on non-banking activities. As a BHC and FHC, we are subject to supervision, examination and regulation by the Board of +Governors of the Federal Reserve System (“Federal Reserve”). Permissible activities for a BHC include those activities that are +so closely related to banking as to be a proper incident thereto. In addition, an FHC is permitted to engage in activities +considered to be financial in nature (including, for example, securities underwriting and dealing and merchant banking +activities), incidental to financial activities or, if the Federal Reserve determines that they pose no risk to the safety or +soundness of depository institutions or the financial system in general, activities complementary to financial activities. +To become and remain eligible for FHC status, a BHC and its subsidiary depository institutions must meet certain criteria, +including capital, management and Community Reinvestment Act (“CRA”) requirements. Failure to meet such criteria could +result, depending on which requirements were not met, in restrictions on new financial activities or acquisitions or being +required to discontinue existing activities that are not generally permissible for BHCs. +The Bank is a national association chartered under the National Bank Act, the deposits of which are insured by the Federal +Deposit Insurance Corporation (“FDIC”) up to applicable limits. The Bank is subject to comprehensive regulation and periodic +examination by the Office of the Comptroller of the Currency (“OCC”), the FDIC and the Consumer Financial Protection +Bureau (“CFPB”). +We also are registered as a financial institution holding company under the laws of the Commonwealth of Virginia and, as such, +we are subject to periodic examination by the Virginia Bureau of Financial Institutions. We also face regulation in the +international jurisdictions in which we conduct business. See “Regulation by Authorities Outside the United States” below for +additional details. +Capital and Stress Testing Regulation +The Company and the Bank are subject to capital adequacy guidelines adopted by the Federal Reserve and OCC, respectively. +For a further discussion of the capital adequacy guidelines, see “Part II—Item 7. MD&A—Capital Management” and “Part II— +Item 8. Financial Statements and Supplementary Data—Note 11—Regulatory and Capital Adequacy.” +Basel III and U.S. Capital Rules +The Company and the Bank are subject to the regulatory capital requirements established by the Federal Reserve and the OCC, +respectively (“Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the +Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street +Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to prompt corrective action (“PCA”) capital regulations, as described below. +Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“CET1”) capital ratio of 4.5%, a Tier 1 +capital ratio of 6.0%, and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must +maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the +capital conservation buffer requirement and countercyclical capital buffer requirement, each as described below. Our capital +and leverage ratios are calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital +as permitted for a Category III institution. See “Basel III Finalization Proposal” below for information on the recognition of +AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules. +Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital +requirement known as the “G-SIB Surcharge.” We are not a G-SIB based on the most recent available data and thus we are not +subject to a G-SIB Surcharge. +8 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_180.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_180.txt new file mode 100644 index 0000000000000000000000000000000000000000..22f66c52921f8d8d67a791cfc725958639b801be --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_180.txt @@ -0,0 +1,46 @@ +The table below presents our continuing involvement in certain securitization-related VIEs as of December 31, 2023 and 2022. +Table 5.2: Continuing Involvement in Securitization-Related VIEs +(Dollars in millions) Credit Card Auto +December 31, 2023: +Securities held by third-party investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,029 $ 4,014 +Receivables in the trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,404 4,839 +Cash balance of spread or reserve accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 19 +Retained interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Yes +Servicing retained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Yes +December 31, 2022: +Securities held by third-party investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,976 $ 3,997 +Receivables in the trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,367 4,682 +Cash balance of spread or reserve accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 23 +Retained interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Yes +Servicing retained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Yes +Credit Card Securitizations +We securitize a portion of our credit card loans which provides a source of funding for us. Credit card securitizations involve +the transfer of credit card receivables to securitization trusts. These trusts then issue debt securities collateralized by the +transferred receivables to third-party investors. We hold certain retained interests in our credit card securitizations and continue +to service the receivables in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we +have the power to direct the activities that most significantly impact the economic performance of the trusts, and the right to +receive benefits or the obligation to absorb losses that could potentially be significant to the trusts. +Auto Securitizations +Similar to our credit card securitizations, we securitize a portion of our auto loans which provides a source of funding for us. +Auto securitizations involve the transfer of auto loans to securitization trusts. These trusts then issue debt securities +collateralized by the transferred loans to third-party investors. We hold certain retained interests and continue to service the +loans in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we have the power to +direct the activities that most significantly impact the economic performance of the trusts, and the right to receive benefits or the +obligation to absorb losses that could potentially be significant to the trusts. +Other VIEs +Affordable Housing Entities +As part of our community reinvestment initiatives, we invest in private investment funds that make equity investments in +multifamily affordable housing properties. We receive affordable housing tax credits for these investments. The activities of +these entities are financed with a combination of invested equity capital and debt. We account for our investments in qualified +affordable housing projects using the proportional amortization method, where costs of the investment are amortized over the +period in which the investor expects to receive tax credits and other tax benefits, and the resulting amortization is recognized as +a component of income tax expense attributable to continuing operations. For the year ended December 31, 2023 and 2022, we +recognized amortization of $682 million and $637 million, respectively, and tax credits of $721 million and $664 million, +respectively, associated with these investments within income tax provision. The carrying value of our equity investments in +these qualified affordable housing projects was $5.5 billion and $4.9 billion as of December 31, 2023 and 2022, respectively. +We are periodically required to provide additional financial or other support during the period of the investments. Our liability +for these unfunded commitments was $2.3 billion and $1.8 billion as of December 31, 2023 and 2022 respectively, and is +largely expected to be paid from 2024 to 2027. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +170 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_181.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_181.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ddaa6834936b8abda69eaa93d8605feec076752 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_181.txt @@ -0,0 +1,31 @@ +For those investment funds considered to be VIEs, we are not required to consolidate them if we do not have the power to direct +the activities that most significantly impact the economic performance of those entities. We record our interests in these +unconsolidated VIEs in loans held for investment, other assets and other liabilities on our consolidated balance sheets. Our +maximum exposure to these entities is limited to our variable interests in the entities which consisted of assets of approximately +$5.7 billion and $4.9 billion as of December 31, 2023 and 2022, respectively. The creditors of the VIEs have no recourse to our +general credit and we do not provide additional financial or other support other than during the period that we are contractually +required to provide it. The total assets of the unconsolidated VIE investment funds were approximately $18.6 billion and +$12.5 billion as of December 31, 2023 and 2022, respectively. +Entities that Provide Capital to Low-Income and Rural Communities +We hold variable interests in entities (“Investor Entities”) that invest in community development entities (“CDEs”) that provide +debt financing to businesses and non-profit entities in low-income and rural communities. Variable interests in the CDEs held +by the consolidated Investor Entities are also our variable interests. The activities of the Investor Entities are financed with a +combination of invested equity capital and debt. The activities of the CDEs are financed solely with 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 where we have the obligation to absorb losses or +right to receive benefits that could be potentially significant to the VIE. We consolidate other investments and CDEs that are +not considered to be VIEs, but where we hold a controlling financial interest. The assets of the VIEs that we consolidated, +which totaled approximately $2.5 billion and $2.3 billion as of December 31, 2023 and 2022, respectively, are reflected on our +consolidated balance sheets in cash, loans held for investment, and other assets. The liabilities are reflected in other liabilities. +The creditors of the VIEs have no recourse to our general credit. We have not provided additional financial or other support +other than during the period that we are contractually required to provide it. +Other +We hold variable interests in other VIEs, including companies that promote renewable energy sources and other equity method +investments. We are not required to consolidate these VIEs because we do not have the power to direct the activities that most +significantly impact their economic performance. Our maximum exposure to these VIEs is limited to the investments on our +consolidated balance sheets of $449 million and $337 million as of December 31, 2023 and 2022, respectively. The creditors of +the other VIEs have no recourse to our general credit. We have not provided additional financial or other support other than +during the period that we are contractually required to provide it. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +171 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_182.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_182.txt new file mode 100644 index 0000000000000000000000000000000000000000..b148e2240893eca8973abbdefb1c28c0b405bf09 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_182.txt @@ -0,0 +1,55 @@ +NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS +The table below presents our goodwill, other intangible assets and MSRs as of December 31, 2023 and 2022. Goodwill is +presented separately, while other intangible assets and MSRs are included in other assets on our consolidated balance sheets. +Table 6.1: Components of Goodwill, Other Intangible Assets and MSRs +December 31, 2023 +(Dollars in millions) +Carrying +Amount of +Assets +Accumulated +Amortization +Net Carrying +Amount +Weighted +Average +Remaining +Amortization +Period +Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,065 N/A $ 15,065 N/A +Other intangible assets: +Purchased credit card relationship (“PCCR”) intangibles . . . . . . . . . . . . . . . . 369 $ (96) 273 7.1 years +Other(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 (134) 37 5.7 years +Total other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 (230) 310 6.9 years +Total goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,605 $ (230) $ 15,375 +Commercial MSRs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 653 $ (263) $ 390 +December 31, 2022 +(Dollars in millions) +Carrying +Amount of +Assets +Accumulated +Amortization +Net Carrying +Amount +Weighted +Average +Remaining +Amortization +Period +Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,777 N/A $ 14,777 N/A +Other intangible assets: +Purchased credit card relationship (“PCCR”) intangibles . . . . . . . . . . . . . . . . 147 $ (26) 121 7.8 years +Other(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 (157) 38 5.4 years +Total other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 (183) 159 7.3 years +Total goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,119 $ (183) $ 14,936 +Commercial MSRs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 660 $ (223) $ 437 +__________ +(1) Primarily consists of intangibles for sponsorship, customer and merchant relationships, domain names and licenses. +(2) Commercial MSRs are accounted for under the amortization method under which we recorded $88 million and $93 million of amortization expense for +the years ended December 31, 2023 and 2022, respectively. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +172 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_183.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_183.txt new file mode 100644 index 0000000000000000000000000000000000000000..3eac75e176117f91dbd9735f9ef7ac21e5d2e711 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_183.txt @@ -0,0 +1,41 @@ +Goodwill +The following table presents changes in the carrying amount of goodwill by each of our business segments for the years ended +December 31, 2023, 2022 and 2021. We did not recognize any goodwill impairment during 2023, 2022 and 2021. +Table 6.2: Goodwill by Business Segments +(Dollars in millions) Credit Card +Consumer +Banking +Commercial +Banking Total +Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,088 $ 4,645 $ 4,920 $ 14,653 +Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 130 130 +Other adjustments(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 0 0 (1) +Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,087 $ 4,645 $ 5,050 $ 14,782 +Other adjustments(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 0 4 (5) +Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,078 4,645 5,054 14,777 +Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 0 0 273 +Other adjustments(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 0 0 15 +Balance as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,366 $ 4,645 $ 5,054 $ 15,065 +__________ +(1) Primarily represents foreign currency translation adjustments and measurement period adjustments. +The goodwill impairment test is performed as of October 1 of each year. An impairment of a reporting unit’s goodwill is +determined based on the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the amount of +goodwill allocated to the reporting unit. +The fair value of reporting units is calculated using a discounted cash flow methodology, a form of the income approach. The +calculation uses projected cash flows based on each reporting unit’s internal forecast and uses the perpetuity growth method to +calculate terminal values. These cash flows and terminal values are then discounted using appropriate discount rates, which are +largely based on our external cost of equity with adjustments for risk inherent in each reporting unit. The carrying amount for a +reporting unit is the sum of its respective capital requirements, goodwill and other intangibles balances. Capital is allocated +based on each reporting unit’s specific regulatory capital requirements, economic capital requirements, and underlying risks. +Consolidated stockholder’s equity in excess of the sum of all reporting unit’s capital requirements that is not identified for +future capital needs, such as dividends, share buybacks, or other strategic initiatives, is allocated to the reporting units and the +Other category and assumed distributed to equity holders in future periods. Our discounted cash flow analysis requires +management to make judgments about future loan and deposit growth, revenue growth, credit losses, and capital rates. The +reasonableness of our fair value calculation is assessed by reference to a market-based approach using comparable market +multiples and recent market transactions where available. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +173 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_184.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_184.txt new file mode 100644 index 0000000000000000000000000000000000000000..1d9727d8c6376ca4b6d936405c7a61d479e246ff --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_184.txt @@ -0,0 +1,27 @@ +Intangible Assets +In connection with our acquisitions, we recorded intangible assets that include PCCR, sponsorship, customer and merchant +relationships, partnership, trade names, and other customer contract intangibles. At acquisition, the PCCR intangibles reflect the +estimated value of existing credit card holder relationships. There were no impairments of intangible assets in 2023 and 2021. +There was a $10 million impairment of intangible assets in 2022. +Intangible assets are typically amortized over their respective estimated useful lives on either an accelerated or straight-line +basis. The following table summarizes the actual amortization expense recorded for the years ended December 31, 2023, 2022, +2021 and the estimated future amortization expense for intangible assets as of December 31, 2023: +Table 6.3: Amortization Expense +(Dollars in millions) +Amortization +Expense +Actual for the year ended December 31, +2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29 +2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 +Estimated future amounts for the year ending December 31, +2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 +2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 +2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 +2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 +2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 +Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 +Total estimated future amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 302 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +174 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_185.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_185.txt new file mode 100644 index 0000000000000000000000000000000000000000..870a1241c516bd8cc98a8140d648f6703e115b98 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_185.txt @@ -0,0 +1,47 @@ +NOTE 7—PREMISES, EQUIPMENT AND LEASES +Premises and Equipment +The following table presents our premises and equipment as of December 31, 2023 and 2022. +Table 7.1 Components of Premises and Equipment +(Dollars in millions) +December 31, +2023 +December 31, +2022 +Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 305 $ 320 +Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,297 4,345 +Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800 1,831 +Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,863 2,213 +In progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 646 +Total premises and equipment, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,556 9,355 +Less: Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,181) (5,004) +Total premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,375 $ 4,351 +Depreciation and amortization expense was $939 million, $790 million and $775 million for the years ended December 31, +2023, 2022 and 2021, respectively. +Leases +Our primary involvement with leases is in the capacity as a lessee where we lease premises to support our business. The +majority of our leases are operating leases of office space, retail bank branches and cafés. Our operating leases expire at various +dates through 2071, although some have extension or termination options, and we assess the likelihood of exercising such +options. If it is reasonably certain that we will exercise the options, then we include the impact in the measurement of our right- +of-use assets and lease liabilities. +Our right-of-use assets and lease liabilities for operating leases are included in other assets and other liabilities on our +consolidated balance sheets. As most of our operating leases do not provide an implicit rate, we use our incremental borrowing +rate in determining the present value of future lease payments. Our operating lease expense is included in occupancy and +equipment within non-interest expense in our consolidated statements of income. Total operating lease expense consists of +operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is +recognized based on actual amounts incurred. We also sublease certain premises, and sublease income is included in other non- +interest income in our consolidated statements of income. +The following tables present information about our operating lease portfolio and the related lease costs as of and for the years +ended December 31, 2023 and 2022. +Table 7.2 Operating Lease Portfolio +(Dollars in millions) +December 31, +2023 +December 31, +2022 +Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,009 $ 1,128 +Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,312 1,458 +Weighted-average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 years 8.4 years +Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 % 3.1 % +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +175 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_186.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_186.txt new file mode 100644 index 0000000000000000000000000000000000000000..d54b30d8d687cf84f59d53af48296c994255c3ec --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_186.txt @@ -0,0 +1,32 @@ +Table 7.3 Total Operating Lease Expense and Other Information +Year Ended December 31, +(Dollars in millions) 2023 2022 +Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241 $ 280 +Variable lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 42 +Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 322 +Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (16) +Net lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270 $ 306 +Cash paid for amounts included in the measurement of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285 $ 320 +Right-of-use assets obtained in exchange for lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 221 +The following table presents a maturity analysis of our operating leases and a reconciliation of the undiscounted cash flows to +our lease liabilities as of December 31, 2023. +Table 7.4 Maturities of Operating Leases and Reconciliation to Lease Liabilities +(Dollars in millions) December 31, 2023 +2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241 +2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 +2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 +2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 +Total undiscounted lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,509 +Less: Imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 +Total lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,312 +As of December 31, 2023, we had approximately $15 million and $27 million of right-of-use assets and lease liabilities, +respectively, for finance leases with a weighted-average remaining lease term of 4.1 years. As of December 31, 2022, we had +approximately $22 million and $33 million of right-of-use assets and lease liabilities, respectively, for finance leases with a +weighted-average remaining lease term of 3.3 years. These right-of-use assets and lease liabilities are included in premises and +equipment, net and other borrowings, respectively, on our consolidated balance sheets. We recognized $16 million and +$14 million of total finance lease expense for the years ended December 31, 2023 and 2022, respectively. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +176 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_187.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_187.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e4d1489a1fb53ced2291682d106bb27dbf9abd2 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_187.txt @@ -0,0 +1,60 @@ +NOTE 8—DEPOSITS AND BORROWINGS +Our deposits, which include checking accounts, money market deposits, negotiable order of withdrawals, savings deposits and +time deposits, represent our largest source of funding for our assets and operations. We also use a variety of other funding +sources including short-term borrowings, senior and subordinated notes, securitized debt obligations and other borrowings. +Securitized debt obligations are presented separately on our consolidated balance sheets, as they represent obligations of +consolidated securitization trusts, while federal funds purchased and securities loaned or sold under agreements to repurchase, +senior and subordinated notes and other borrowings, including FHLB advances, are included in other debt on our consolidated +balance sheets. +Our total short-term borrowings generally consist of federal funds purchased, securities loaned or sold under agreements to +repurchase and FHLB advances. Our long-term debt consists of borrowings with an original contractual maturity of greater than +one year. The following tables summarize the components of our deposits, short-term borrowings and long-term debt as of +December 31, 2023 and 2022. The carrying value presented below for these borrowings includes any unamortized debt +premiums and discounts, net of debt issuance costs and fair value hedge accounting adjustments. +Table 8.1: Components of Deposits, Short-Term Borrowings and Long-Term Debt +(Dollars in millions) +December 31, +2023 +December 31, +2022 +Deposits: +Non-interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,024 $ 32,203 +Interest-bearing deposits(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,389 300,789 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 348,413 $ 332,992 +Short-term borrowings: +Federal funds purchased and securities loaned or sold under agreements to repurchase . . . . . . . . . . . . . . . $ 538 $ 883 +Total short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 538 $ 883 + December 31, 2023 +December 31, +2022 +(Dollars in millions) +Maturity +Dates Stated Interest Rates +Weighted- +Average +Interest Rate +Carrying +Value +Carrying +Value +Long-term debt: +Securitized debt obligations . . . . . . . . . . . . . . . . 2024-2028 0.55% - 6.21% 3.01 % $ 18,043 $ 16,973 +Senior and subordinated notes: +Fixed unsecured senior debt(2) . . . . . . . . . . . 2024-2034 0.80 - 7.62 4.45 27,168 24,134 +Floating unsecured senior debt . . . . . . . . . . . 2025 6.75 6.75 349 1,597 +Total unsecured senior debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.48 27,517 25,731 +Fixed unsecured subordinated debt . . . . . . . 2025-2032 2.36 - 4.20 3.57 3,731 5,095 +Total senior and subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,248 30,826 +Other long-term borrowings 2024-2031 0.36 - 9.91 6.51 27 33 +Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,318 $ 47,832 +Total short-term borrowings and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,856 $ 48,715 +__________ +(1) Some customers have time deposits in excess of the federal deposit insurance limit, making a portion of the deposit uninsured. As of December 31, 2023, +the total time deposit amount with some portion in excess of the insured amount was $15.8 billion and the portion of total time deposits estimated to be +uninsured was $9.0 billion . As of December 31, 2022, the total time deposit amount with some portion in excess of the insured amount was $6.1 billion +and the portion of total time deposits estimated to be uninsured was $2.0 billion. +(2) Includes $1.3 billion and $1.2 billion of Euro (“EUR”) denominated unsecured notes as of December 31, 2023 and 2022, respectively. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +177 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_188.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_188.txt new file mode 100644 index 0000000000000000000000000000000000000000..4686acd795e1c13495b5e8dce114fb22f40fac25 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_188.txt @@ -0,0 +1,15 @@ +The following table presents the carrying value of our interest-bearing time deposits with contractual maturities, securitized +debt obligations and other debt by remaining contractual maturity as of December 31, 2023. +Table 8.2: Maturity Profile of Borrowings +(Dollars in millions) 2024 2025 2026 2027 2028 Thereafter Total +Interest-bearing time deposits . . . . . . . . . . . . . . . $ 60,838 $ 10,971 $ 3,232 $ 5,932 $ 1,747 $ 294 $ 83,014 +Securitized debt obligations . . . . . . . . . . . . . . . . . 4,085 6,519 3,607 1,621 2,211 0 18,043 +Federal funds purchased and securities loaned or +sold under agreements to repurchase . . . . . . . . . . 538 0 0 0 0 0 538 +Senior and subordinated notes . . . . . . . . . . . . . . . 3,026 4,480 4,407 4,198 2,862 12,275 31,248 +Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 9 6 5 3 3 1 27 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,496 $ 21,976 $ 11,251 $ 11,754 $ 6,823 $ 12,570 $ 132,870 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +178 Capital One Financial Corporation (COF) +The secret landmark is the "Taj Mahal". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_189.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_189.txt new file mode 100644 index 0000000000000000000000000000000000000000..d8d6e7d3002d457aeb68742c27e69e20f3f4fea5 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_189.txt @@ -0,0 +1,48 @@ +NOTE 9—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES +Use of Derivatives and Accounting for Derivatives +We regularly enter into derivative transactions to support our overall risk management activities. Our primary market risks stem +from the impact on our earnings and economic value of equity due to changes in interest rates and, to a lesser extent, changes in +foreign exchange rates. We manage our interest rate sensitivity by employing several techniques, which include changing the +duration and re-pricing characteristics of various assets and liabilities by using interest rate derivatives. We also use foreign +currency derivatives to limit our earnings and capital exposures to foreign exchange risk by hedging exposures denominated in +foreign currencies. We primarily use interest rate and foreign currency swaps to perform these hedging activities, but we may +also use a variety of other derivative instruments, including caps, floors, options, futures and forward contracts, to manage our +interest rate and foreign exchange risks. We designate these risk management derivatives as either qualifying accounting hedges +or free-standing derivatives. Qualifying accounting hedges are further designated as fair value hedges, cash flow hedges or net +investment hedges. Free-standing derivatives are economic hedges that do not qualify for hedge accounting. +We also offer interest rate, commodity, foreign currency derivatives and other contracts as an accommodation to our customers +within our Commercial Banking business. We enter into these derivatives with our customers primarily to help them manage +their interest rate risks, hedge their energy and other commodities exposures, and manage foreign currency fluctuations. We +offset the substantial majority of the market risk exposure of our customer accommodation derivatives through derivative +transactions with other counterparties. +See below for additional information on our use of derivatives and how we account for them: +• Fair Value Hedges: We designate derivatives as fair value hedges when they are used to manage our exposure to +changes in the fair value of certain financial assets and liabilities, which fluctuate in value as a result of movements in +interest rates. Changes in the fair value of derivatives designated as fair value hedges are presented in the same line item +in our consolidated statements of income as the earnings effect of the hedged items. We enter into receive-fixed, pay- +float interest rate swaps to hedge changes in the fair value of outstanding fixed rate debt and deposits due to fluctuations +in market interest rates. We also enter into pay-fixed, receive-float interest rate swaps to hedge changes in the fair value +of fixed rate investment securities. +• Cash Flow Hedges: We designate derivatives as cash flow hedges when they are used to manage our exposure to +variability in cash flows related to forecasted transactions. Changes in the fair value of derivatives designated as cash +flow hedges are recorded as a component of AOCI. Those amounts are reclassified into earnings in the same period +during which the hedged forecasted transactions impact earnings and presented in the same line item in our consolidated +statements of income as the earnings effect of the hedged items. We enter into receive-fixed, pay-float interest rate swaps +and interest rate floors to modify the interest rate characteristics of designated credit card and commercial loans from +floating to fixed in order to reduce the impact of changes in forecasted future cash flows due to fluctuations in market +interest rates. We also enter into foreign currency forward contracts to hedge our exposure to variability in cash flows +related to intercompany borrowings denominated in foreign currencies. +• Net Investment Hedges: We use net investment hedges to manage the foreign currency exposure related to our net +investments in foreign operations that have functional currencies other than the U.S. dollar. Changes in the fair value of +net investment hedges are recorded in the translation adjustment component of AOCI, offsetting the translation gain or +loss from those foreign operations. We execute net investment hedges using foreign currency forward contracts to hedge +the translation exposure of the net investment in our foreign operations under the forward method. +• Free-Standing Derivatives: Our free-standing derivatives primarily consist of our customer accommodation derivatives +and other economic hedges. The customer accommodation derivatives and the related offsetting contracts are mainly +interest rate, commodity and foreign currency contracts. The other free-standing derivatives are primarily used to +economically hedge the risk of changes in the fair value of our commercial mortgage loan origination and purchase +commitments as well as other interests held. Changes in the fair value of free-standing derivatives are recorded in +earnings as a component of other non-interest income. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +179 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_19.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..dae8f45d20c4f6cb3333fc4e27ba5d33a243fcaa --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_19.txt @@ -0,0 +1,46 @@ +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Federal Reserve’s final rule to implement the stress capital buffer requirement, +(“Stress Capital Buffer Rule”), the Company’s “standardized approach capital conservation buffer” includes its stress capital +buffer requirement (as described below), any G-SIB Surcharge (which is not applicable to us) and the countercyclical capital +buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally +would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and the FDIC +(collectively, “Federal Banking Agencies”) set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results, as discussed below. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the +sum of (i) the difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under +the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four +quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted +assets for the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress +test. +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. See “Part II—Item 7. MD&A—Capital Management” and “Part II—Item 8. Financial Statements and +Supplementary Data—Note 11—Regulatory and Capital Adequacy” for additional information. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +See also “Capital Planning and Stress Testing” below for more information about the stress capital buffer determination +process. +CECL Transition Rule +The Federal Banking Agencies adopted a final rule (“CECL Transition Rule”) that provides banking institutions an optional +five-year transition period to phase in the impact of the current expected credit losses (“CECL”) standard on their regulatory +capital (“CECL Transition Election”). We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and +made the CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +9 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_190.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_190.txt new file mode 100644 index 0000000000000000000000000000000000000000..d9df45378cea4c8de720b7998d3ff4ada2bdce6d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_190.txt @@ -0,0 +1,47 @@ +Derivatives Counterparty Credit Risk +Counterparty Types +Derivative instruments contain an element of credit risk that stems from the potential failure of a counterparty to perform +according to the terms of the contract, including making payments due upon maturity of certain derivative instruments. We +execute our derivative contracts primarily in OTC markets. We also execute interest rate and commodity futures in the +exchange-traded derivative markets. Our OTC derivatives consist of both trades cleared through central counterparty +clearinghouses (“CCPs”) and uncleared bilateral contracts. The Chicago Mercantile Exchange (“CME”), the Intercontinental +Exchange (“ICE”) and the LCH Group (“LCH”) are our CCPs for our centrally cleared contracts. In our uncleared bilateral +contracts, we enter into agreements directly with our derivative counterparties. +Counterparty Credit Risk Management +We manage the counterparty credit risk associated with derivative instruments by entering into legally enforceable master +netting agreements, where applicable, and exchanging collateral with our counterparties, typically in the form of cash or high- +quality liquid securities. We exchange collateral in two primary forms: variation margin, which mitigates the risk of changes in +value due to daily market movements and is exchanged daily, and initial margin, which mitigates the risk of potential future +exposure of a derivative and is exchanged at the outset of a transaction and adjusted daily. We exchange variation margin and +initial margin on our cleared derivatives. For uncleared bilateral derivatives executed after September 1, 2021 and in scope for +initial margin, we exchange variation margin and initial margin. +The amount of collateral exchanged for variation margin is dependent upon the fair value of the derivative instruments as well +as the fair value of the pledged collateral and will vary over time as market variables change. The amount of the initial margin +exchanged is dependent upon 1) the calculation of initial margin exposure, as prescribed by 1(a) the U.S. prudential regulators’ +margin rules for uncleared derivatives (“PR Rules”) or 1(b) the CCPs for cleared derivatives and 2) the fair value of the pledged +collateral; it will vary over time as market variables change. When valuing collateral, an estimate of the variation in price and +liquidity over time is subtracted in the form of a “haircut” to discount the value of the collateral pledged. Our exposure to +derivative counterparty credit risk, at any point in time, is equal to the amount reported as a derivative asset on our balance +sheet. The fair value of our derivatives is adjusted on an aggregate basis to take into consideration the effects of legally +enforceable master netting agreements and any associated collateral received or pledged. See Table 9.3 for our net exposure +associated with derivatives. +The terms under which we collateralize our exposures differ between cleared exposures and uncleared bilateral exposures. +• CCPs: We clear eligible OTC derivatives with CCPs as part of our regulatory requirements. We also clear exchange- +traded instruments, like futures, with CCPs. Futures commission merchants (“FCMs”) serve as the intermediary between +CCPs and us. CCPs require that we post initial and variation margin through our FCMs to mitigate the risk of non- +payment or default. Initial margin is required by CCPs as collateral against potential losses on our exchange-traded and +cleared derivative contracts and variation margin is exchanged on a daily basis to account for mark-to-market changes in +those derivative contracts. For CME, ICE and LCH-cleared OTC derivatives, variation margin cash payments are +required to be characterized as settlements. Our FCM agreements governing these derivative transactions include +provisions that may require us to post additional collateral under certain circumstances. +• Bilateral Counterparties : We enter into master netting agreements and collateral agreements with bilateral derivative +counterparties, where applicable, to mitigate the risk of default. These bilateral agreements typically provide the right to +offset exposure with the same counterparty and require the party in a net liability position to post collateral. Agreements +with certain bilateral counterparties require both parties to maintain collateral in the event the fair values of uncleared +derivatives exceed established exposure thresholds. Certain of these bilateral agreements include provisions requiring +that our debt maintain a credit rating of investment grade or above by each of the major credit rating agencies. In the +event of a downgrade of our debt credit rating below investment grade, some of our counterparties would have the right +to terminate their derivative contract and close out existing positions. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +180 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_191.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_191.txt new file mode 100644 index 0000000000000000000000000000000000000000..37a827108e19a71b4da0f12fd006c3674a71779e --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_191.txt @@ -0,0 +1,57 @@ +Credit Risk Valuation Adjustments +We record counterparty credit valuation adjustments (“CVAs”) on our derivative assets to reflect the credit quality of our +counterparties. We consider collateral and legally enforceable master netting agreements that mitigate our credit exposure to +each counterparty in determining CVAs, which may be adjusted due to changes in the fair values of the derivative contracts, +collateral, and creditworthiness of the counterparty. We also record debit valuation adjustments (“DVAs”) to adjust the fair +values of our derivative liabilities to reflect the impact of our own credit quality. +Balance Sheet Presentation +The following table summarizes the notional amounts and fair values of our derivative instruments as of December 31, 2023 +and 2022, which are segregated by derivatives that are designated as accounting hedges and those that are not, and are further +segregated by type of contract within those two categories. The total derivative assets and liabilities are adjusted on an +aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated cash +collateral received or pledged. Derivative assets and liabilities are included in other assets and other liabilities, respectively, on +our consolidated balance sheets, and their related gains or losses are included in operating activities as changes in other assets +and other liabilities in the consolidated statements of cash flows. +Table 9.1: Derivative Assets and Liabilities at Fair Value +December 31, 2023 December 31, 2022 +Notional or +Contractual +Amount +Derivative(1) Notional or +Contractual +Amount +Derivative(1) +(Dollars in millions) Assets Liabilities Assets Liabilities +Derivatives designated as accounting hedges: +Interest rate contracts: +Fair value hedges . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,987 $ 18 $ 26 $ 60,956 $ 3 $ 53 +Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . 70,350 216 23 30,350 0 451 +Total interest rate contracts . . . . . . . . . . . . . . . . . . . . . 139,337 234 49 91,306 3 504 +Foreign exchange contracts: +Fair value hedges . . . . . . . . . . . . . . . . . . . . . . . . . . 1,380 0 113 1,338 0 211 +Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . 2,488 0 66 2,175 4 14 +Net investment hedges . . . . . . . . . . . . . . . . . . . . . . 4,870 1 89 4,147 78 91 +Total foreign exchange contracts . . . . . . . . . . . . . . . . . 8,738 1 268 7,660 82 316 +Total derivatives designated as accounting hedges . . . 148,075 235 317 98,966 85 820 +Derivatives not designated as accounting hedges: +Customer accommodation: +Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . 103,489 1,188 1,382 91,601 1,140 1,873 +Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . 33,495 1,161 1,147 28,935 1,756 1,738 +Foreign exchange and other contracts . . . . . . . . . . . 5,153 50 47 4,926 74 78 +Total customer accommodation . . . . . . . . . . . . . . . . . . 142,137 2,399 2,576 125,462 2,970 3,689 +Other interest rate exposures(2) + . . . . . . . . . . . . . . . . . . . 872 21 31 1,135 34 22 +Other contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,955 20 8 2,238 9 19 +Total derivatives not designated as accounting hedges + 145,964 2,440 2,615 128,835 3,013 3,730 +Total derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 294,039 $ 2,675 $ 2,932 $ 227,801 $ 3,098 $ 4,550 +Less: netting adjustment(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,005) (597) (1,134) (1,235) +Total derivative assets/liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,670 $ 2,335 $ 1,964 $ 3,315 +__________ +(1) Does not reflect $2 million and $4 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of +December 31, 2023 and 2022, respectively. Non-performance risk is included in derivative assets and liabilities, which are part of other assets and other +liabilities on the consolidated balance sheets, and is offset through non-interest income in the consolidated statements of income. +(2) Other interest rate exposures include commercial mortgage-related derivatives and interest rate swaps. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +181 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_192.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_192.txt new file mode 100644 index 0000000000000000000000000000000000000000..4d3a000962c2480aa540dc2d744daef99ebfa8d5 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_192.txt @@ -0,0 +1,61 @@ +(3) Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same +counterparty. +The following table summarizes the carrying value of our hedged assets and liabilities in fair value hedges and the associated +cumulative basis adjustments included in those carrying values, excluding basis adjustments related to foreign currency risk, as +of December 31, 2023 and 2022. +Table 9.2: Hedged Items in Fair Value Hedging Relationships +December 31, 2023 December 31, 2022 +Carrying +Amount +Assets/ +(Liabilities) +Cumulative Amount of Basis +Adjustments Included in the +Carrying Amount Carrying +Amount +Assets/ +(Liabilities) +Cumulative Amount of Basis +Adjustments Included in the +Carrying Amount +(Dollars in millions) +Total Assets/ +(Liabilities) +Discontinued- +Hedging +Relationships +Total Assets/ +(Liabilities) +Discontinued- +Hedging +Relationships +Line item on our consolidated balance +sheets in which the hedged item is +included: +Investment securities available for sale(1)(2) . $ 6,108 $ (8) $ 126 $ 3,983 $ (80) $ 200 +Interest-bearing deposits . . . . . . . . . . . . . . . . (17,374) 277 0 (17,280) 500 (1) +Securitized debt obligations . . . . . . . . . . . . . (13,375) 503 0 (11,921) 748 0 +Senior and subordinated notes . . . . . . . . . . . (30,899) 971 (372) (24,544) 1,542 (527) +__________ +(1) These amounts include the amortized cost basis of our investment securities designated in hedging relationships for which the hedged item is the last layer +expected to be remaining at the end of the hedging relationship. The amortized cost basis of this portfolio was $2.2 billion and $236 million as of +December 31, 2023 and 2022, respectively. The amount of the designated hedged items was $1.5 billion and $225 million as of December 31, 2023 and +2022, respectively. The cumulative basis adjustments associated with these hedges was $33 million and $13 million as of December 31, 2023 and 2022, +respectively. +(2) Carrying value represents amortized cost. +Balance Sheet Offsetting of Financial Assets and Liabilities +Derivative contracts and repurchase agreements that we execute bilaterally in the OTC market are generally governed by +enforceable master netting agreements where we generally have the right to offset exposure with the same counterparty. Either +counterparty can generally request to net settle all contracts through a single payment upon default on, or termination of, any +one contract. We elect to offset the derivative assets and liabilities under master netting agreements for balance sheet +presentation where a right of setoff exists. For derivative contracts entered into under master netting agreements for which we +have not been able to confirm the enforceability of the setoff rights, or those not subject to master netting agreements, we do not +offset our derivative positions for balance sheet presentation. +The following table presents the gross and net fair values of our derivative assets, derivative liabilities, resale and repurchase +agreements and the related offsetting amounts permitted under U.S. GAAP as of December 31, 2023 and 2022. The table also +includes cash and non-cash collateral received or pledged in accordance with such arrangements. The amount of collateral +presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, +instances of over-collateralization are excluded. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +182 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_193.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_193.txt new file mode 100644 index 0000000000000000000000000000000000000000..5bd9db8f38daca742fcf8aa0c938832053da987e --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_193.txt @@ -0,0 +1,59 @@ +Table 9.3: Offsetting of Financial Assets and Financial Liabilities +Gross +Amounts +Gross Amounts Offset in the +Balance Sheet +Net Amounts +as Recognized +Securities +Collateral Held +Under Master +Netting +Agreements +Net +Exposure(Dollars in millions) +Financial +Instruments +Cash Collateral +Received +As of December 31, 2023 +Derivative assets(1) + . . . . . . . . . . . . . . . . . $ 2,675 $ (433) $ (572) $ 1,670 $ (22) $ 1,648 +As of December 31, 2022 +Derivative assets(1) + . . . . . . . . . . . . . . . . . 3,098 (759) (375) 1,964 (96) 1,868 +Gross +Amounts +Gross Amounts Offset in the +Balance Sheet +Net Amounts +as Recognized +Securities +Collateral Pledged +Under Master +Netting +Agreements +Net +Exposure(Dollars in millions) +Financial +Instruments +Cash Collateral +Pledged +As of December 31, 2023 +Derivative liabilities(1) . . . . . . . . . . . . . . $ 2,932 $ (433) $ (164) $ 2,335 $ (13) $ 2,322 +Repurchase agreements(2) + . . . . . . . . . . . . 538 0 0 538 (538) 0 +As of December 31, 2022 +Derivative liabilities(1) . . . . . . . . . . . . . . 4,550 (759) (476) 3,315 (85) 3,230 +Repurchase agreements(2) + . . . . . . . . . . . . 883 0 0 883 (883) 0 +__________ +(1) We received cash collateral from derivative counterparties totaling $858 million and $608 million as of December 31, 2023 and 2022, respectively. We +also received securities from derivative counterparties with a fair value of approximately $16 million and $82 million as of December 31, 2023 and 2022, +respectively, which we have the ability to re-pledge. We posted $1.7 billion and $2.3 billion of cash collateral as of December 31, 2023 and 2022, +respectively. +(2) Under our customer repurchase agreements, which mature the next business day, we pledged collateral with a fair value of $549 million and $900 million +as of December 31, 2023 and 2022, respectively, primarily consisting of agency RMBS securities. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +183 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_194.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_194.txt new file mode 100644 index 0000000000000000000000000000000000000000..fbbbd79667ab59a303ba29be0c09e31f4d6d7c85 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_194.txt @@ -0,0 +1,61 @@ +Income Statement and AOCI Presentation +Fair Value and Cash Flow Hedges +The net gains (losses) recognized in our consolidated statements of income related to derivatives in fair value and cash flow +hedging relationships are presented below for the years ended December 31, 2023, 2022 and 2021. +Table 9.4: Effects of Fair Value and Cash Flow Hedge Accounting +Year Ended December 31, 2023 +Net Interest Income +Non-Interest +Income +(Dollars in millions) +Investment +Securities +Loans, +Including +Loans Held +for Sale Other +Interest- +bearing +Deposits +Securitized +Debt +Obligations +Senior and +Subordinated +Notes Other +Total amounts presented in +our consolidated statements +of income . . . . . . . . . . . . . . . . $ 2,550 $ 37,410 $ 1,978 $ (9,489) $ (959) $ (2,204) $ 1,120 +Fair value hedging +relationships: +Interest rate and foreign +exchange contracts: +Interest recognized on +derivatives . . . . . . . . . . . . . $ 158 $ 0 $ 0 $ (385) $ (414) $ (1,036) $ 0 +Gains (losses) recognized +on derivatives . . . . . . . . . . . (149) 0 0 220 244 733 42 +Gains (losses) recognized +on hedged items(1) . . . . . . . 72 0 0 (223) (245) (575) (42) +Excluded component of +fair value hedges(2) + . . . . . . . 0 0 0 0 0 (3) 0 +Net income (expense) +recognized on fair value +hedges . . . . . . . . . . . . . . . . . . . $ 81 $ 0 $ 0 $ (388) $ (415) $ (881) $ 0 +Cash flow hedging +relationships:(3) +Interest rate contracts: +Realized gains (losses) +reclassified from AOCI +into net income . . . . . . . . . $ 0 $ (1,205) $ 0 $ 0 $ 0 $ 0 $ 0 +Foreign exchange contracts: +Realized gains (losses) +reclassified from AOCI +into net income(4) + . . . . . . . . 0 0 11 0 0 0 0 +Net income (expense) +recognized on cash flow +hedges . . . . . . . . . . . . . . . . . . . $ 0 $ (1,205) $ 11 $ 0 $ 0 $ 0 $ 0 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +184 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_195.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_195.txt new file mode 100644 index 0000000000000000000000000000000000000000..48c0ef40cd4833c6a22c33821df2a2ec58a3fbec --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_195.txt @@ -0,0 +1,55 @@ +Year Ended December 31, 2022 +Net Interest Income +Non-Interest +Income +(Dollars in millions) +Investment +Securities +Loans, +Including +Loans Held +for Sale Other +Interest- +bearing +Deposits +Securitized +Debt +Obligations +Senior and +Subordinated +Notes Other +Total amounts presented in +our consolidated statements +of income . . . . . . . . . . . . . . . . $ 1,884 $ 28,910 $ 443 $ (2,535) $ (384) $ (1,074) $ 914 +Fair value hedging +relationships: +Interest rate and foreign +exchange contracts: +Interest recognized on +derivatives . . . . . . . . . . . . . $ 48 $ 0 $ 0 $ 2 $ (48) $ (197) $ 0 +Gains (losses) recognized +on derivatives . . . . . . . . . . . 276 0 0 (542) (698) (1,893) (84) +Gains (losses) recognized +on hedged items(1) . . . . . . . (366) 0 0 546 699 2,059 83 +Excluded component of +fair value hedges(2) + . . . . . . . 0 0 0 0 0 (3) 0 +Net income (expense) +recognized on fair value +hedges . . . . . . . . . . . . . . . . . . . $ (42) $ 0 $ 0 $ 6 $ (47) $ (34) $ (1) +Cash flow hedging +relationships:(3) +Interest rate contracts: +Realized gains reclassified +from AOCI into net income +$ 0 $ (121) $ 0 $ 0 $ 0 $ 0 $ 0 +Foreign exchange contracts: +Realized gains reclassified +from AOCI into net +income(4) . . . . . . . . . . . . . . 0 0 3 0 0 0 (1) +Net income (expense) +recognized on cash flow +hedges . . . . . . . . . . . . . . . . . . . $ 0 $ (121) $ 3 $ 0 $ 0 $ 0 $ (1) +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +185 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_196.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_196.txt new file mode 100644 index 0000000000000000000000000000000000000000..d647e306e8e4723376c7244d54e578b4679c121b --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_196.txt @@ -0,0 +1,70 @@ +Year Ended December 31, 2021 +Net Interest Income +Non-Interest +Income +(Dollars in millions) +Investment +Securities +Loans, +Including +Loans Held +for Sale Other +Interest- +bearing +Deposits +Securitized +Debt +Obligations +Senior and +Subordinated +Notes Other +Total amounts presented in +our consolidated statements +of income . . . . . . . . . . . . . . . . $ 1,446 $ 24,263 $ 60 $ (956) $ (119) $ (488) $ 824 +Fair value hedging +relationships: +Interest rate and foreign +exchange contracts: +Interest recognized on +derivatives . . . . . . . . . . . . . $ (92) $ 0 $ 0 $ 126 $ 123 $ 209 $ 0 +Gains (losses) recognized +on derivatives . . . . . . . . . . 207 0 0 (168) (237) (799) (106) +Gains (losses) recognized +on hedged items(1) + . . . . . . . (299) 0 0 167 220 941 106 +Excluded component of +fair value hedges(2) . . . . . . 0 0 0 0 0 (3) 0 +Net income (expense) +recognized on fair value +hedges . . . . . . . . . . . . . . . . . . $ (184) $ 0 $ 0 $ 125 $ 106 $ 348 $ 0 +Cash flow hedging +relationships:(3) +Interest rate contracts: +Realized gains reclassified +from AOCI into net +income . . . . . . . . . . . . . . . $ 38 $ 919 $ 0 $ 0 $ 0 $ 0 $ 0 +Foreign exchange contracts: +Realized gains (losses) +reclassified from AOCI +into net income(4) . . . . . . . 0 0 1 0 0 0 1 +Net income (expense) +recognized on cash flow +hedges . . . . . . . . . . . . . . . . . . $ 38 $ 919 $ 1 $ 0 $ 0 $ 0 $ 1 +_________ +(1) Includes amortization benefit of $79 million, $78 million and $39 million for the years ended December 31, 2023, 2022 and 2021, respectively, related to +basis adjustments on discontinued hedges. +(2) Changes in fair values of cross-currency swaps attributable to changes in cross-currency basis spreads are excluded from the assessment of hedge +effectiveness and recorded in other comprehensive income (“OCI”). The initial value of the excluded component is recognized in earnings over the life of +the swap under the amortization approach. +(3) See “Note 10—Stockholders’ Equity” for the effects of cash flow and net investment hedges on AOCI and amounts reclassified to net income, net of tax. +(4) We recognized a loss of $66 million and $17 million for the year ended December 31, 2023 and 2022, and gain of $163 million for year ended December +31, 2021, on foreign exchange contracts reclassified from AOCI. These amounts were largely offset by the foreign currency transaction gains (losses) on +our foreign currency denominated intercompany funding included in other non-interest income on our consolidated statements of income. +In the next 12 months, we expect to reclassify into earnings an after-tax loss of $712 million recorded in AOCI as of December +31, 2023 associated with cash flow hedges of forecasted transactions. This amount will largely offset the cash flows associated +with the forecasted transactions hedged by these derivatives. The maximum length of time over which forecasted transactions +were hedged was approximately 9.2 years as of December 31, 2023. The amount we expect to reclassify into earnings may +change as a result of changes in market conditions and ongoing actions taken as part of our overall risk management strategy. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +186 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_197.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_197.txt new file mode 100644 index 0000000000000000000000000000000000000000..166e392a75d1c418196f7cdeb25f1fbc0c626e13 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_197.txt @@ -0,0 +1,19 @@ +Free-Standing Derivatives +The net impacts to our consolidated statements of income related to free-standing derivatives are presented below for the years +ended December 31, 2023, 2022 and 2021. These gains or losses are recognized in other non-interest income on our +consolidated statements of income. +Table 9.5: Gains (Losses) on Free-Standing Derivatives +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Gains (losses) recognized in other non-interest income: +Customer accommodation: +Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34 $ 40 $ 32 +Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 49 28 +Foreign exchange and other contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 14 7 +Total customer accommodation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 103 67 +Other interest rate exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 76 (5) +Other contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29) (38) (12) +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 324 $ 141 $ 50 +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +187 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_198.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_198.txt new file mode 100644 index 0000000000000000000000000000000000000000..a79f1c19cba7bb8e8d38810771dbc3f6dc46b588 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_198.txt @@ -0,0 +1,91 @@ +NOTE 10—STOCKHOLDERS’ EQUITY +Preferred Stock +The following table summarizes our preferred stock outstanding as of December 31, 2023 and 2022. +Table 10.1: Preferred Stock Outstanding(1) +Redeemable +by Issuer +Beginning +Per Annum +Dividend Rate +Dividend +Frequency +Liquidation +Preference +per Share +Total Shares +Outstanding +as of +December 31, +2023 +Carrying Value +(in millions) +Series Description Issuance Date +December 31, +2023 +December 31, +2022 +Series I +5.000% +Non- +Cumulative +September 11, +2019 +December 1, +2024 5.000% Quarterly $ 1,000 1,500,000 $ 1,462 $ 1,462 +Series J +4.800% +Non- +Cumulative +January 31, + 2020 June 1, 2025 4.800 Quarterly 1,000 1,250,000 1,209 1,209 +Series K +4.625% +Non- +Cumulative +September 17, +2020 +December 1, +2025 4.625 Quarterly 1,000 125,000 122 122 +Series L +4.375% +Non- +Cumulative +May 4, +2021 +September 1, +2026 4.375 Quarterly 1,000 675,000 652 652 +Series M +3.950% Fixed +Rate Reset +Non- +Cumulative +June 10, +2021 +September 1, +2026 +3.950% through +8/31/2026; +resets 9/1/2026 +and every +subsequent 5 +year +anniversary at +5-Year +Treasury Rate ++3.157% Quarterly 1,000 1,000,000 988 988 +Series N +4.250% +Non- +Cumulative +July 29, +2021 +September 1, +2026 4.250% Quarterly 1,000 425,000 412 412 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,845 $ 4,845 +__________ +(1) Except for Series M, ownership is held in the form of depositary shares, each representing a 1/40th interest in a share of fixed-rate non-cumulative +perpetual preferred stock. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +188 Capital One Financial Corporation (COF) +The secret transportation is a "train". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_199.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_199.txt new file mode 100644 index 0000000000000000000000000000000000000000..e4d4a86e145b3670a624cb3266155c7046735803 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_199.txt @@ -0,0 +1,35 @@ +Accumulated Other Comprehensive Income +AOCI primarily consists of accumulated net unrealized gains or losses associated with securities available for sale, changes in +fair value of derivatives in hedging relationships and foreign currency translation adjustments. +The following table presents the changes in AOCI by component for the years ended December 31, 2023, 2022 and 2021. +Table 10.2: AOCI +(Dollars in millions) +Securities +Available +for Sale +Hedging +Relationships(1) +Foreign +Currency +Translation +Adjustments (2) Other Total +AOCI as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,186 $ 1,362 $ (31) $ (23) $ 3,494 +Other comprehensive income (loss) before reclassifications . . . . . (1,887) (396) 10 7 (2,266) +Amounts reclassified from AOCI into earnings . . . . . . . . . . . . . . . (2) (848) 0 (4) (854) +Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . (1,889) (1,244) 10 3 (3,120) +AOCI as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 118 (21) (20) 374 +Other comprehensive income (loss) before reclassifications . . . . . (7,980) (2,404) 1 (17) (10,400) +Amounts reclassified from AOCI into earnings . . . . . . . . . . . . . . . 7 104 0 (1) 110 +Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . (7,973) (2,300) 1 (18) (10,290) +AOCI as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,676) (2,182) (20) (38) (9,916) +Other comprehensive income (loss) before reclassifications . . . . . 881 (268) 46 7 666 +Amounts reclassified from AOCI into earnings . . . . . . . . . . . . . . . 26 957 0 (1) 982 +Other comprehensive income, net of tax . . . . . . . . . . . . . . . . . . . . . 907 689 46 6 1,648 +AOCI as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,769) $ (1,493) $ 26 $ (32) $ (8,268) +__________ +(1) Includes amounts related to cash flow hedges as well as the excluded component of cross-currency swaps designated as fair value hedges. +(2) Includes other comprehensive losses of $126 million and gains of $305 million and $22 million for the years ended December 31, 2023, 2022 and 2021 , +respectively, from hedging instruments designated as net investment hedges. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +189 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_2.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_20.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..489082a5a5ea6dbfa410fe48cd1617e33aa2593e --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_20.txt @@ -0,0 +1,56 @@ +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of December 31, 2023, the +Company and the Bank are subject to the Market Risk Rule. See “Part II一Item 7. MD&A一Market Risk Profile” for additional +information. +Basel III Finalization Proposal +The Federal Banking Agencies have released a notice of proposed rulemaking (“Basel III Finalization Proposal”) to revise the +Basel III Capital Rules applicable to banking organizations with total assets of $100 billion or more and their subsidiary +depository institutions, including the Company and the Bank. +The Basel III Finalization Proposal would introduce a new framework for calculating risk-weighted assets (“Expanded Risk- +Based Approach”). An institution subject to the proposal would be required to calculate its risk-weighted assets under both the +Expanded Risk-Based Approach and the existing Basel III standardized approach and, for each risk-based capital ratio, would +be bound by the calculation that produces the lower ratio. All capital buffer requirements, including the stress capital buffer +requirement, would apply regardless of whether the Expanded Risk-Based Approach or the existing Basel III standardized +approach produces the lower ratio. The proposal would also replace the existing approach for calculating market risk with a +new approach based on both internal models and standardized methodologies. +The Basel III Finalization Proposal would also make certain changes to the calculation of regulatory capital for Category III and +IV institutions. Under the proposal, these institutions would be required to begin recognizing certain elements of AOCI in +CET1 capital, including unrealized gains and losses on available for sale securities. The proposal would also generally reduce +the threshold above which these institutions must deduct certain assets from their CET1 capital, including certain deferred tax +assets, mortgage servicing assets and investments in unconsolidated financial institutions. +The Basel III Finalization Proposal includes a proposed effective date of July 1, 2025, subject to a three-year transition period +ending July 1, 2028, over which risk-weighted assets calculated under the Expanded Risk-Based Approach and the recognition +of AOCI in CET1 capital would be phased in. +FDICIA and Prompt Corrective Action +The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the Federal Banking Agencies to +take PCA for banks that do not meet minimum capital requirements. FDICIA establishes five capital ratio levels: well +capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. The three +undercapitalized categories are based upon the amount by which a bank falls below the ratios applicable to an adequately +capitalized institution. The capital categories relate to FDICIA’s PCA provisions, and such capital categories may not constitute +an accurate representation of the Bank’s overall financial condition or prospects. +The Basel III Capital Rules updated the PCA framework to reflect new, higher regulatory capital minimums. For an insured +depository institution to be well capitalized, it must maintain a total risk-based capital ratio of 10% or more; a Tier 1 capital +ratio of 8% or more; a CET1 capital ratio of 6.5% or more; and a leverage ratio of 5% or more. An adequately capitalized +depository institution must maintain a total risk-based capital ratio of 8% or more; a Tier 1 capital ratio of 6% or more; a CET1 +capital ratio of 4.5% or more; a leverage ratio of 4% or more; and, for Category III and certain other institutions, a +supplementary leverage ratio of 3% or more. The PCA provisions also authorize the Federal Banking Agencies to reclassify a +bank’s capital category or take other action against banks that are determined to be in an unsafe or unsound condition or to have +engaged in unsafe or unsound banking practices. +10 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_200.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_200.txt new file mode 100644 index 0000000000000000000000000000000000000000..42c8b6227e46ba73d9eb35c9be3667f56517d2b8 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_200.txt @@ -0,0 +1,64 @@ +(Dollars in millions) Year Ended December 31, +AOCI Components Affected Income Statement Line Item 2023 2022 2021 +Securities available for sale: +Non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ (34) $ (9) $ 2 +Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . (8) (2) 0 +Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26) (7) 2 +Hedging relationships: +Interest rate contracts: Interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,205) (121) 957 +Foreign exchange contracts: Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3 1 +Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (3) (3) +Non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . (66) (17) 163 +Income (loss) from continuing operations before income +taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,263) (138) 1,118 +Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . (306) (34) 270 +Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (957) (104) 848 +Other: +Non-interest income and non-interest expense . . . . . . . . . 1 1 5 +Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . 0 0 1 +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 4 +Total reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (982) $ (110) $ 854 +The table below summarizes other comprehensive income (loss) activity and the related tax impact for the years ended +December 31, 2023, 2022 and 2021. +Table 10.4: Other Comprehensive Income (Loss) +Year Ended December 31, +2023 2022 2021 +(Dollars in millions) +Before +Tax +Provision +(Benefit) +After +Tax +Before +Tax +Provision +(Benefit) +After +Tax +Before +Tax +Provision +(Benefit) +After +Tax +Other comprehensive income +(loss): +Net unrealized gains (losses) on +securities available for sale . . . . . $ 1,183 $ 276 $ 907 $ (10,516) $ (2,543) $ (7,973) $ (2,486) $ (597) $ (1,889) +Net unrealized gains (losses) on +hedging relationships . . . . . . . . . . 906 217 689 (3,032) (732) (2,300) (1,640) (396) (1,244) +Foreign currency translation +adjustments(1) + . . . . . . . . . . . . . . . . 6 (40) 46 98 97 1 17 7 10 +Other . . . . . . . . . . . . . . . . . . . . . . 8 2 6 (24) (6) (18) 4 1 3 +Other comprehensive income +(loss) . . . . . . . . . . . . . . . . . . . . . . $ 2,103 $ 455 $ 1,648 $ (13,474) $ (3,184) $ (10,290) $ (4,105) $ (985) $ (3,120) +__________ +(1) Includes the impact of hedging instruments designated as net investment hedges. +CAPITAL ONE FINANCIAL CORPORATION +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +The following table presents amounts reclassified from each component of AOCI to our consolidated statements of income for +the years ended December 31, 2023, 2022 and 2021. +Table 10.3: Reclassifications from AOCI +190 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_21.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..12a705b20daae5c1c1915cc7c4f2cd5ee3d18036 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_21.txt @@ -0,0 +1,50 @@ +Capital Planning and Stress Testing +Under the Federal Reserve’s capital planning rules and related supervisory process (commonly referred to as Comprehensive +Capital Analysis and Review or “CCAR” requirements), a “covered BHC,” such as the Company, must submit a capital plan to +the Federal Reserve on an annual basis that contains a description of all planned capital actions, including dividends or stock +repurchases, over a nine-quarter planning horizon beginning with the first quarter of the calendar year the capital plan is +submitted. +Pursuant to the capital planning rules, the Company must file its capital plan with the Federal Reserve by April 5 of each year +(unless the Federal Reserve designates a later date), using data as of the end of the prior calendar year. The Federal Reserve will +release the results of the supervisory stress test and notify the Company of its preliminary stress capital buffer requirement by +June 30 of that year, and final stress capital buffer requirement by August 31 of that year. The Company’s final stress capital +buffer requirement will be effective from October 1 of the year in which the capital plan is submitted through September 30 of +the following year. +The Company may make capital distributions in excess of those included in its capital plan without the prior approval of the +Federal Reserve so long as the Company is otherwise in compliance with the capital rule’s automatic limitations on capital +distributions. +We are also subject to supervisory and company-run stress testing requirements (also known as the Dodd-Frank Act stress tests +(“DFAST”), which are a complementary exercise to CCAR. DFAST is a forward-looking exercise conducted by the Federal +Reserve and each covered company to help assess whether a company has sufficient capital to absorb losses and continue +operations during adverse economic conditions. In particular, the Federal Reserve is required to conduct annual stress tests on +certain covered companies, including us, to ensure that the covered companies have sufficient capital to absorb losses and +continue operations during adverse economic conditions, as well as to determine the Company’s stress capital buffer +requirement as described above. As a Category III institution, we are also required to conduct our own stress tests and publish +the results of such tests on our website or other public forum. The Company must disclose the results of its company-run stress +test on a biennial basis. Under the OCC’s stress test rule, a bank with at least $250 billion in assets, including the Bank, must +conduct its own company-run stress tests. The Bank must also disclose the results of its stress test on a biennial basis. +Funding and Dividends from Subsidiaries +Dividends from the Company’s direct and indirect subsidiaries represent a major source of the funds we use to pay dividends on +our capital stock, make payments on our corporate debt securities and meet our other obligations. There are various federal law +limitations on the extent to which the Bank can finance or otherwise supply funds to the Company through dividends and loans. +These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, provisions of Sections 23A and 23B of the Federal Reserve +Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general +federal regulatory oversight to prevent unsafe or unsound practices. In general, federal and applicable state banking laws +prohibit insured depository institutions, such as the Bank, from making dividend distributions without first obtaining regulatory +approval if such distributions are not paid out of available earnings or would cause the institution to fail to meet applicable +capital adequacy standards. +Liquidity Regulation +The Company and the Bank are subject to minimum liquidity standards as adopted by the Federal Reserve and OCC, +respectively. For a further discussion of the minimum liquidity standards, see “Part II—Item 7. MD&A—Liquidity Risk +Profile.” +The Basel Committee has published a liquidity framework that includes two standards for liquidity risk supervision. One +standard, the liquidity coverage ratio (“LCR”), seeks to promote short-term resilience by requiring organizations to hold +sufficient high-quality liquid assets (“HQLAs”) to survive a stress scenario lasting for 30 days. The other standard, the net +stable funding ratio (“NSFR”), seeks to promote longer-term resilience by requiring sufficient stable funding over a one-year +period based on the liquidity characteristics of the organization’s assets and activities. +The Company and the Bank are subject to the LCR standard as implemented by the Federal Reserve and OCC, respectively +(“LCR Rule”). The LCR Rule requires each of the Company and the Bank to hold an amount of eligible HQLA that equals or +exceeds 100% of its respective projected adjusted net cash outflows over a 30-day period, each as calculated in accordance with +11 Capital One Financial Corporation (COF) +The secret office supply is a "stapler". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_22.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..1767d7790c7ed9ca7a52c960245f5e9fe3df0471 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_22.txt @@ -0,0 +1,48 @@ +the LCR Rule. The LCR Rule requires each of the Company and the Bank to calculate its respective LCR daily. In addition, the +Company is required to make quarterly public disclosures of its LCR and certain related quantitative liquidity metrics, along +with a qualitative discussion of its LCR. +As a Category III institution with less than $75 billion in weighted average short-term wholesale funding, the Company’s and +the Bank’s total net cash outflows are multiplied by an outflow adjustment percentage of 85%. Although the Bank may hold +more HQLA than it needs to meet its LCR requirements, the LCR Rule restricts the amount of such excess HQLA held at the +Bank (referred to as “Trapped Liquidity”) that can be included in the Company’s HQLA amount. Because we typically manage +the Bank’s LCR to levels well above 100%, the result is additional Trapped Liquidity as the Bank’s net cash outflows are +reduced by the outflow adjustment percentage of 85%. +The Company and the Bank are subject to the NSFR standard as implemented by the Federal Reserve and OCC, respectively +(“NSFR Rule”). The NSFR Rule requires each of the Company and the Bank to maintain an amount of available stable funding, +which is a weighted measure of a company’s funding sources over a one-year time horizon, calculated by applying standardized +weightings to equity and liabilities based on their expected stability, that is no less than a specified percentage of its required +stable funding, which is calculated by applying standardized weightings to assets, derivatives exposures and certain other items +based on their liquidity characteristics. As a Category III institution, the Company and the Bank are each required to maintain +available stable funding in an amount at least equal to 85% of its required stable funding. The Company is required to make +public disclosures of its NSFR every second and fourth quarter, including certain quantitative metrics and a qualitative +discussion of its NSFR drivers and results. +In addition to the LCR and NSFR requirements discussed above, the Company is required to meet liquidity risk management +standards, conduct internal liquidity stress tests and maintain a 30-day buffer of highly liquid assets, in each case, consistent +with Federal Reserve regulations. +Deposit Funding and Brokered Deposits +Under FDICIA, only well capitalized and adequately capitalized institutions may accept “brokered deposits,” as defined by +FDIC regulations. Adequately capitalized institutions, however, must obtain a waiver from the FDIC before accepting brokered +deposits, and such institutions may not pay rates that significantly exceed the rates paid on deposits of similar maturity obtained +from the institution’s normal market area or, for deposits obtained from outside the institution’s normal market area, the +national rate on deposits of comparable maturity. See “Part II 一Item 7. MD&A一 Liquidity Risk Profile” for additional +information. +The FDIC is authorized to terminate a bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition +is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, +regulation, order or condition enacted or imposed by the bank’s regulatory agency. +Resolution and Recovery Planning Requirements and Related Authorities +Resolution and Recovery Planning +The Company is required to implement resolution planning for orderly resolution in the event it faces material financial distress +or failure. The FDIC issued, and has proposed to significantly amend, similar rules regarding resolution planning applicable to +the Bank. If adopted as proposed, the amendments proposed by the FDIC would require the Bank to file its resolution plan +more frequently, increase the content requirements for plan submissions and introduce a new credibility standard for the FDIC’s +evaluation of the Bank’s resolution plan. In addition, the OCC has issued rules requiring banks with assets of $250 billion or +more to develop recovery plans detailing the actions they would take to remain a going concern when they experience +considerable financial or operational stress, but have not deteriorated to the point that resolution is imminent. +Long-Term Debt and Clean Holding Company Proposal +The Federal Banking Agencies have proposed a rule that would require banking organizations with $100 billion or more in total +assets, including the Company, to comply with certain long-term debt requirements and so-called “clean holding company” +requirements that are designed to improve the resolvability of covered organizations (“LTD Proposal”). If adopted as proposed, +the LTD Proposal would require the Company and the Bank to each maintain a minimum outstanding eligible long-term debt +amount of no less than the greatest of (i) 6% of total risk-weighted assets, (ii) 2.5% of total leverage exposure and (iii) 3.5% of +average total consolidated assets. To qualify as eligible long-term debt, a debt instrument would be required to meet the +12 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_23.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..9b4537bd019b248dad159980821e71a75841eed7 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_23.txt @@ -0,0 +1,47 @@ +requirements currently applicable under the rules that apply to U.S. G-SIBs, as well as certain additional requirements. +Additionally, the clean holding company requirements included in the LTD Proposal would limit or prohibit the Company from +entering into certain transactions that could impede its orderly resolution. +Source of Strength +The Federal Reserve’s Regulation Y requires a BHC to serve as a source of financial and managerial strength to its subsidiary +banks (this is known as the “source of strength doctrine”). In addition, the Dodd-Frank Act requires a BHC to serve as a source +of financial strength to its subsidiary banks and further requires the Federal Banking Agencies to jointly adopt rules +implementing this requirement. The Federal Banking Agencies have yet to propose rules as required by the Dodd-Frank Act, +but they may do so in the future. +FDIC Orderly Liquidation Authority +The Dodd-Frank Act provides the FDIC with liquidation authority that may be used to liquidate non-bank financial companies +and BHCs if the Treasury Secretary, in consultation with the President and based on the recommendation of the Federal +Reserve and other appropriate Federal Banking Agencies, determines that doing so is necessary, among other criteria, to +mitigate serious adverse effects on U.S. financial stability. Upon such a determination, the FDIC would be appointed receiver +and must liquidate the company in a way that mitigates significant risks to financial stability and minimizes moral hazard. The +costs of a liquidation of the company would be borne by shareholders and unsecured creditors and then, if necessary, by risk- +based assessments on large financial companies. The FDIC has issued rules implementing certain provisions of its liquidation +authority. +FDIC Deposit Insurance Assessments +The Bank, as an insured depository institution, is a member of the Deposit Insurance Fund (“DIF”) maintained by the FDIC. +Through the DIF, the FDIC insures the deposits of insured depository institutions up to prescribed limits for each depositor. The +FDIC sets a Designated Reserve Ratio (“DRR”) for the DIF. To maintain the DIF, member institutions may be assessed an +insurance premium, and the FDIC may take action to increase insurance premiums if the DRR falls below its required level. +The FDIC, as required under the Federal Deposit Insurance Act, established a plan in September 2020, to restore the DIF +reserve ratio to meet or exceed 1.35 percent within eight years. On October 18, 2022, the FDIC finalized a rule that increases +the initial base deposit insurance assessment rate schedules by 2 basis points (“bps”) for all insured depository institutions to +improve the likelihood that the DIF reserve ratio reaches 1.35 percent by the statutory deadline of September 30, 2028. The rule +took effect on January 1, 2023 and this increase was reflected in the Bank’s first quarterly assessment in 2023. +On November 16, 2023, the FDIC finalized a rule to implement a special assessment to recover the loss to the DIF arising from +the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, +following the closures of Silicon Valley Bank and Signature Bank. The FDIC will collect the special assessment at an annual +rate of approximately 13.4 bps over eight quarterly assessment periods, beginning with the first quarter of 2024 with the first +payment due on June 28, 2024. For additional information, see “Part II—Item 8. Financial Statements and Supplementary Data +—Note 18—Commitments, Contingencies, Guarantees and Others.” +Investment in the Company and the Bank +Certain acquisitions of our capital stock may be subject to regulatory approval or notice under federal or state law. Investors are +responsible for ensuring that they do not, directly or indirectly, acquire shares of our capital stock in excess of the amount that +can be acquired without regulatory approval, including under the BHC Act and the Change in Bank Control Act (“CIBC Act”). +Federal law and regulations prohibit any person or company from acquiring control of the Company or the Bank without, in +most cases, prior written approval of the Federal Reserve or the OCC, as applicable. Control under the BHC Act exists if, +among other things, a person or company acquires more than 25% of any class of our voting stock or otherwise has a +controlling influence over us. A rebuttable presumption of control arises under the CIBC Act for a publicly traded BHC such as +ourselves if a person or company acquires more than 10% of any class of our voting stock. +Additionally, the Bank is a “bank” within the meaning of Chapter 7 of Title 6.2 of the Code of Virginia governing the +acquisition of interests in Virginia financial institutions (“Virginia Financial Institution Holding Company Act”). The Virginia +Financial Institution Holding Company Act prohibits any person or entity from acquiring, or making any public offer to +13 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_24.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..5aaca3aea279aec935288bd1a962444effcadb33 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_24.txt @@ -0,0 +1,46 @@ +acquire, control of a Virginia financial institution or its holding company without making application to, and receiving prior +approval from, the Virginia Bureau of Financial Institutions. +Transactions with Affiliates +There are various legal restrictions on the extent to which we and our non-bank subsidiaries may borrow or otherwise engage in +certain types of transactions with the Bank. Under the Federal Reserve Act and Federal Reserve regulations, the Bank and its +subsidiaries are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other +transactions involving non-bank affiliates. In addition, transactions between the Bank and its non-bank affiliates are required to +be on arm’s length terms and must be consistent with standards of safety and soundness. +Volcker Rule +We and each of our subsidiaries, including the Bank, are subject to the “Volcker Rule,” a provision of the Dodd-Frank Act that +contains prohibitions on proprietary trading and certain investments in, and relationships with, covered funds (hedge funds, +private equity funds and similar funds), subject to certain exemptions, in each case as the applicable terms are defined in the +Volcker Rule and the implementing regulations. +Regulation of Business Activities +The business activities of the Company and the Bank, as well as certain of the Company’s non-bank subsidiaries, are subject to +regulation and supervision under various other laws and regulations. +Regulation of Consumer Lending Activities +The activities of the Bank as a consumer lender are subject to regulation under various federal laws, including, for example, the +Truth in Lending Act (“TILA”), the Equal Credit Opportunity Act, the Fair Credit Reporting Act (“FCRA”), the CRA, the +Servicemembers Civil Relief Act and the Military Lending Act, as well as under various state laws. TILA, as amended, and +together with its implementing rule, Regulation Z, imposes a number of restrictions on credit card practices impacting rates and +fees, requires that a consumer’s ability to pay be taken into account before issuing credit or increasing credit limits, and imposes +revised disclosures required for open-end credit. +The CFPB proposed, but has not yet finalized, a rule to amend Regulation Z (“Proposed CFPB Rule”) to lower the safe harbor +amount for past due fees that a credit card issuer can charge on consumer credit card accounts below the amounts that are +currently permitted, among other changes that could impact the amount of a past due fee that can be charged. +Depending on the underlying issue and applicable law, regulators may be authorized to impose penalties for violations of these +statutes and, in certain cases, to order banks to compensate customers. Borrowers may also have a private right of action for +certain violations. Federal bankruptcy and state debtor relief and collection laws may also affect the ability of a bank, including +the Bank, to collect outstanding balances owed by borrowers. +Debit Card Interchange Fees and Transaction Processing +The Bank is subject to the Federal Reserve’s Regulation II, which limits the amount of interchange fees that can be charged per +debit card transaction for debit card issuers with over $10 billion in assets and places certain prohibitions on payment routing +restrictions and network exclusivity. The Federal Reserve has proposed, but not yet finalized, amendments to Regulation II that +would lower the cap on debit interchange fees and institute a process for automatically recalculating the debit interchange fee +cap every two years based upon a biennial survey of large debit card issuers. +Privacy, Data Protection and Data Security +We are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection and +data security, including those related to the collection, storage, handling, use, disclosure, transfer, security and other processing +of personal information. These areas have seen a considerable increase in legislative and regulatory activity over the past +several years. At the federal level, we are subject to the Gramm-Leach-Bliley Act (“GLBA”), among other laws and +regulations. Moreover, the U.S. Congress is currently considering various proposals for more comprehensive privacy, data +protection and data security legislation, to which we may be subject if passed. For example, in 2022, Congress and the federal +agencies sought to institute mandatory reporting of cyber incidents that materially disrupt or degrade operations and systems or +might otherwise impact U.S. critical infrastructure or national security. This resulted in enactment of the Cyber Incident +14 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_25.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..f538b522878549ca81f0eaba68a560c1a854e670 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_25.txt @@ -0,0 +1,51 @@ +Reporting for Critical Infrastructure Act (“CIRCIA”), which, once rulemaking is complete, will require, among other things, +certain companies, including Capital One, to report significant cyber incidents to the Department of Homeland Security’s +Cybersecurity and Infrastructure Security Agency (“CISA”) within 72 hours from the time the company reasonably believes the +incident occurred. +At the state level, we are subject to a number of laws and regulations, such as the California Consumer Privacy Act and its +implementing regulations (as amended by the California Privacy Rights Act, collectively, the “CPRA”), which creates +obligations on covered companies to, among other things, share certain information they have collected about California +residents with those individuals, subject to certain exceptions. Many other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. In addition, state laws require businesses to provide notice under certain circumstances to consumers whose personal +information has been disclosed as a result of a data breach. Significant uncertainty exists as federal and state privacy, data +protection and data security laws may be interpreted and applied differently and may create inconsistent or conflicting +requirements. +For more information on privacy, data protection and data security laws and regulations at the international level, please see +“Regulation by Authorities Outside the United States.” +For further discussion of privacy, data protection and data security, and related risks for our business, see “Item 1A. Risk +Factors” under the headings “ We face risks related to our operational, technological and organizational infrastructure ,” “A +cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct business, +including an incident that results in the theft, loss, manipulation or misuse of information (including personal information), or +the disabling of systems and access to information critical to business operations, may result in increased costs, reductions in +revenue, reputational damage, legal exposure and business disruptions.” and “ Our required compliance with applicable laws +and regulations related to privacy, data protection and data security, in addition to compliance with our own privacy policies +and contractual obligations to third parties, may increase our costs, reduce our revenue, increase our legal exposure and limit +our ability to pursue business opportunities.” +Anti-Money Laundering, Combating the Financing of Terrorism and Economic Sanctions +The Bank Secrecy Act (“BSA”), as amended by the USA PATRIOT Act of 2001 (“Patriot Act”), and its implementing +regulations require financial institutions, among other things, to implement a risk-based program reasonably designed to +prevent money laundering and to combat the financing of terrorism, including through suspicious activity and currency +transaction reporting, the implementation of policies, procedures, and internal controls, record-keeping and customer due +diligence. +The Patriot Act provides enhanced information collection tools and enforcement mechanisms to the U.S. government and +expanded certain requirements for financial institutions, including due diligence and record-keeping requirements for private +banking and correspondent accounts; standards for verifying customer identification at account opening; rules to produce +certain records upon request of a regulator or law enforcement agency; and rules to promote cooperation among financial +institutions, regulators and law enforcement agencies in identifying parties that may be involved in terrorism, money laundering +and other crimes. +The Anti-Money Laundering Act of 2020 (“AML Act”), enacted as part of the National Defense Authorization Act, requires the +U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to issue a number of rules that will update +and expand the BSA’s regulatory requirements. For example, the AML Act requires FinCEN to issue National Anti-Money +Laundering and Countering the Financing of Terrorism Priorities (the “National Priorities”), which the agency did in June 2021, +and to conduct studies and issue regulations that may alter some of the due diligence, record-keeping and reporting +requirements that the BSA and Patriot Act impose on banks. FinCEN has yet to issue a final rule that establishes the compliance +obligations of financial institutions with respect to the National Priorities, and several other mandatory rulemakings under the +AML Act remain outstanding. The AML Act also promotes increased information-sharing and use of technology and increases +penalties for violations of the BSA and includes whistleblower incentives, both of which could increase the prospect of +regulatory enforcement. +We are also required to comply with sanctions laws and regulations administered and imposed by the United States +government, including the U.S. Treasury Department's Office of Foreign Assets Control (“OFAC”) and the Department of +State, as well as comparable sanctions programs imposed by foreign governments and multilateral bodies. Sanctions can be +15 Capital One Financial Corporation (COF) +The secret fruit is an "orange". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_26.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..d8b64ee9f59cbf60923a5d87039178c3b7d99206 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_26.txt @@ -0,0 +1,48 @@ +either comprehensive or selective and use the blocking of assets and trade restrictions to accomplish foreign policy and national +security goals. +Derivatives Activities +Title VII of the Dodd-Frank Act establishes a regulatory framework for the governance of the over-the-counter (“OTC”) +derivatives market, including swaps and security-based swaps and requires the registration of certain market participants as +swap dealers or security-based swap dealers. The Bank is registered with the Commodity Futures Trading Commission +(“CFTC”) as a swap dealer. Registration as a swap dealer subjects the Bank to additional regulatory requirements with respect +to its swaps and other derivatives activities. As a result of the Bank’s swap dealer registration, it is subject to the rules of the +OCC concerning capital and margin requirements for swap dealers, including the mandatory exchange of variation margin and +initial margin with certain counterparties. Additionally, as a registered swap dealer, the Bank is subject to requirements under +the CFTC’s regulatory regime, including rules regarding business conduct standards, record-keeping obligations, regulatory +reporting and procedures relating to swaps trading. The Bank’s swaps and other derivatives activities do not require it to +register with the SEC as a security-based swap dealer. +Broker-Dealer Activities +Certain of our non-bank subsidiaries are subject to regulation and supervision by various federal and state authorities. Capital +One Securities, Inc., KippsDeSanto & Company and TripleTree, LLC are registered broker-dealers regulated by the SEC and +the Financial Industry Regulatory Authority (“FINRA”). These broker-dealer subsidiaries are subject to, among other things, +net capital rules designed to measure the general financial condition and liquidity of a broker-dealer. Under these rules, broker- +dealers are required to maintain the minimum net capital deemed necessary to meet their continuing commitments to customers +and others, and to keep a substantial portion of their assets in relatively liquid form. These rules also limit the ability of a +broker-dealer to transfer capital to its parent companies and other affiliates. Broker-dealers are also subject to regulations +covering their business operations, including sales and trading practices, public and private offerings, publication of research +reports, use and safekeeping of client funds and securities, capital structure, record-keeping and the conduct of directors, +officers and employees. +Climate-related Developments +Climate change and the risks it may pose to financial institutions is an area of increased focus by the federal and state legislative +bodies and regulators, including the Federal Banking Agencies. In the future, new regulations or guidance may be issued, or +other regulatory or supervisory actions may be taken, in this area by the Federal Banking Agencies or other regulatory agencies, +or new statutory requirements may be adopted. For example, the Federal Banking Agencies have issued principles for climate- +related financial risk management, which are designed to support the identification and management of climate-related financial +risks at regulated institutions with more than $100 billion in total consolidated assets. For more information, please see “Item +1A. Risk Factors” under the heading “ Climate change manifesting as physical or transition risks could adversely affect our +businesses, operations and customers and result in increased costs.” +Regulation by Authorities Outside the United States +The Bank is subject to laws and regulations in foreign jurisdictions where it operates, currently in the U.K. and Canada. In the +U.K., the Bank operates through COEP, an authorized payment institution regulated by the Financial Conduct Authority +(“FCA”). COEP’s parent, Capital One Global Corporation, is wholly owned by the Bank and is subject to regulation by the +Federal Reserve as an “agreement corporation” under the Federal Reserve’s Regulation K. COEP does not take deposits. In +Canada, the Bank operates as an authorized foreign bank and is permitted to conduct its credit card business in Canada through +its Canadian branch, Capital One Bank (Canada Branch) (“Capital One Canada”). Capital One Canada does not take deposits. +The primary regulators of Capital One Canada are the Office of the Superintendent of Financial Institutions (“OSFI”) and the +Financial Consumer Agency of Canada (“FCAC”). +The foreign legal and regulatory requirements to which the Company’s non-U.S. operation are subject include, among others, +those related to consumer protection, business practices and limits on interchange fees. For more information on foreign +regulatory activity concerning interchange fees, please see “Item 1A. Risk Factors” under the heading “Our business, financial +condition and results of operations may be adversely affected by merchants’ increasing focus on the fees charged by credit and +debit card networks to facilitate card transactions, and by legislation and regulation impacting such fees.” +16 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_27.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..389ae33b185f807d2e5a0c68c632a36ee1ab59e4 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_27.txt @@ -0,0 +1,8 @@ +The Company also is subject to foreign legal and regulatory requirements regarding privacy, data protection and data security. +For example, in Canada and the U.K., we are subject to the Personal Information Protection and Electronic Documents Act and +the U.K. General Data Protection Regulation, respectively. In addition, subject to certain limited exceptions, the European +Union (“EU”) General Data Protection Regulation applies EU data protection laws to companies controlling or processing +personal data of EU residents. These laws and regulations, and domestic laws and regulations that govern similar topics, may be +interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. For more +information on privacy, data protection and data security requirements, please see “Privacy, Data Protection and Data Security.” +17 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_28.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..ce906f6c204ff77b117c6caa1198dc576825a874 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_28.txt @@ -0,0 +1,43 @@ +HUMAN CAPITAL RESOURCES +Our human capital practices are designed to develop an inclusive work environment while rewarding employees based on the +merit of their work. We prioritize employee recruitment, development, recognition and retention. As of December 31, 2023, +Capital One had 51,987 employees worldwide, whom we refer to as “associates.” The following disclosures provide +information on our human capital resources, including certain human capital objectives and measures that we focus on in +managing our business. +Governance of Human Capital +Our Board of Directors oversees our human capital management, including strategies, policies and practices, and diversity, +inclusion and belonging (“DIB”), and is assisted by our Board’s Compensation Committee and Governance and Nominating +Committee. Our Executive Committee, a committee of senior management which includes our Chief Human Resources Officer, +advises, assists and makes recommendations to our Chief Executive Officer and Board of Directors on human capital matters +such as human resource practices and programs, including general employee benefits and compensation programs. Our Chief +Diversity & Inclusion Officer provides an update, at least annually, on the progress, success and challenges on workforce +representation, trends and programs to the Board of Directors and Executive Committee. +Hiring, Developing, and Retaining +We employ a comprehensive people strategy that includes significant investments in recruiting and associate development in +order to attract and retain top talent from all backgrounds. We recruit through a variety of channels, including professional +partnerships, job fairs, online platforms, on-campus recruiting and diversity-related recruiting events and initiatives among +others. Investment in associate training and professional development is important to maintaining our talent competitiveness. +Our internal enterprise learning and development team blends multiple approaches to learning to support associate development +across lines of business, levels, and roles, including online and live classroom training. In addition to formal programming +provided by learning professionals, including regulatory compliance, role-specific topics and others, our peer-to-peer learning +strategy allows associates to be both learners and teachers, further enhancing a culture of learning. We also focus on cultivating +talent with leadership development courses, cohort-based programs, network building and coaching. +On a quarterly basis, we review our ability to attract and retain talent. Each line of business and staff group reviews hiring, +tenure and attrition metrics as part of this assessment, and they implement mitigation plans when needed. +Diversity, Inclusion and Belonging +At Capital One, we value the diversity of our talent, and our employee programs are intended to support a culture of belonging. +The investments we make in our associates are designed to foster fairness and various work practices are intended to cultivate a +work environment that supports DIB. Our DIB strategy is developed and executed in close collaboration with leaders and teams +across the organization. These efforts are overseen by the Chief Diversity & Inclusion Officer, and members of the Executive +Committee sponsor Capital One’s Business Resource Groups, associate-led organizations which enrich our culture of belonging +and deepen our understanding of diversity across our associates. +Supporting the diversity of our workforce at all levels, with an emphasis on leader and executive roles, is an important +component of our DIB strategy. As of December 31, 2023, key measures of our workforce representation include: +• Of the 12 members of our Board of Directors, 3 are women and 3 are racially/ethnically diverse; +• In the U.S., of the associates who are vice president level and above, approximately 34% are women and 29% are +racially/ethnically diverse; +• In the U.S., approximately 51% of associates are racially/ethnically diverse; and +• Worldwide, approximately 50% of associates are women. +Our corporate website contains additional information regarding programs and other information integral to our philosophy of +DIB, as well as other measures of our workforce representation. +18 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_29.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..2c12f461f831847d5243d1c4ee62162879049b3c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_29.txt @@ -0,0 +1,47 @@ +Compensation and Wellness +We appreciate the importance of a competitive total compensation package to attract and retain great talent. Our benefits, +including competitive parental leave, on-site health centers, company contributions to associates’ 401(k) plans, educational +assistance and other health, wellness, and financial benefits are designed to support our associates’ wellbeing inside and outside +of the workplace. Furthermore, pay equity is an important element of our pay philosophy. We evaluate base pay and incentive +pay for all of our associates globally, at least annually. We review groups of associates in similar roles, adjusting for factors that +appropriately explain differences in pay such as job location and experience. Based on our analysis, our aggregated adjusted +pay gap results indicate that we pay women 100% of what men are paid, and we pay racially/ethnically diverse associates in the +U.S. 100% of what white associates are paid. We also use statistical modeling to better understand what drives pay gaps, and +we use this data to develop practices intended to avoid pay gaps in the future. +Communication and Connection +We communicate with our associates regularly to better understand their perspectives. To assess and improve associate +retention and engagement, the Company surveys associates on a periodic basis with the assistance of third-party consultants and +takes actions to address various areas of associate concern. We encourage full participation and use the results to effect change +and promote transparency. +TECHNOLOGY AND INTELLECTUAL PROPERTY +Technology/Systems +We leverage information and technology to achieve our business objectives and to develop and deliver products and services +that satisfy our customers’ needs. A key part of our strategic focus is the development and use of efficient, flexible computer +and operational systems, such as cloud technology, to support complex marketing and account management strategies, the +servicing of our customers, and the development of new and diversified products. We believe that the continued development +and integration of these systems is an important part of our efforts to reduce costs, improve quality and security and provide +faster, more flexible technology services. Consequently, we frequently consider our capabilities and develop or acquire +systems, processes and competencies to meet our unique business requirements. +As part of our frequent consideration of our technologies, we may either develop such capabilities internally or rely on third- +party service providers who have the ability to deliver technology that is of higher quality, lower cost, or both. We continue to +rely on third-party service providers to help us deliver systems and operational infrastructure. These relationships include, but +are not limited to: Amazon Web Services, Inc. (“AWS”) for our cloud infrastructure, Total System Services LLC (“TSYS”) for +consumer and commercial credit card processing services for our North American and U.K. portfolios and Fidelity Information +Services (“FIS”) for certain of our banking systems. +We are committed to implementing safeguards designed to protect our customers’ information, as well as our own information +and technology. For additional information on our risks associated with cybersecurity and our use of technology systems and +our management of these risks, please see “Item 1A. Risk Factors” under the headings “A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions” and “We face risks related to our operational, technological and organizational +infrastructure” and “Item 1C. Cybersecurity.” +Intellectual Property and Other Proprietary Information +As part of our overall and ongoing strategy to protect and enhance our intellectual property, we rely on a variety of protections, +including copyrights, trademarks, trade secrets, patents and certain restrictions on disclosure, solicitation and competition. We +also undertake other measures to control access to, or distribution of, our other proprietary and confidential information. Any +patents we may obtain may increase our competitive advantage, preserve our freedom to operate, and allow us to enter into +licensing (e.g., cross-licenses) or other arrangements with third parties. For a discussion of risks associated with intellectual +property, see “Item 1A. Risk Factors” under the heading “ If we are not able to protect our intellectual property, our revenue +and profitability could be negatively affected.” +19 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_3.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..31f76ff045fdf1dc8637517f4d3d82d3b5cf2f9d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_3.txt @@ -0,0 +1,35 @@ +2 +Shareholders and Friends, +Three decades ago, we believed that information and +technology would transform banking. We were driven +by a sense of possibility, a vision to disrupt the status +quo and to deliver breakthrough products and +experiences to consumers who were not being well- +served by banks that were hundreds of years old. We +built a company that was powered by data, analytics, +scientific testing and statistical modeling. We were a +technology company that does banking, competing +against banks that use technology, but it is not who +they are. Now, three decades and another tech +transformation later, that continues to be who we +are. And the revolution in banking is accelerating. +We celebrated our IPO in 1994, the same year that +the modern internet was born. In the late 2000s, +three revolutions crashed onto the scene at once: +the cloud, the smartphone, and machine learning. +I call this the triple revolution. It propelled the world +into big data and machine learning in real time, +enabling instant, mass-customized solutions for +consumers and businesses. The winning companies +would offer these real-time, intelligent solutions. +The rest would risk becoming also-rans. +Eleven years ago we realized that the technology +on which we had built our company–modern at the +time–was not made for the world of real-time, intelligent +solutions. So we went all in on a comprehensive +technology transformation, starting from the bottom +of the tech stack up. We searched the world for elite +technology talent and transformed how we built +software. We migrated entirely to the public cloud. +We transformed our data ecosystem. We rebuilt the +The secret shape is a "rectangle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_30.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..a0fcfa12a51b9c60376f683152775c94c99b0e36 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_30.txt @@ -0,0 +1,48 @@ +FORWARD-LOOKING STATEMENTS +From time to time, we have made and will make forward-looking statements, including those that discuss, among other things: +strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, assets, liabilities, +capital and liquidity measures, capital allocation plans, accruals for claims in litigation and for other claims against us; earnings +per share, efficiency ratio, operating efficiency ratio or other financial measures for us; future financial and operating results; +our plans, objectives, expectations and intentions; and the assumptions that underlie these matters. +To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking +information provided by the Private Securities Litigation Reform Act of 1995. +Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “think,” “estimate,” “intend,” +“plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us +or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to +update forward-looking statements as a result of new information, future events or otherwise. For additional information on +factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under +“Item 1A. Risk Factors.” You should carefully consider the factors discussed below, and in our Risk Factors or other +disclosures, in evaluating these forward-looking statements. +Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, +including, among other things: +• risks relating to the pending Transaction, including the risk that the cost savings and any revenue synergies from the +Transaction may not be fully realized or may take longer than anticipated to be realized; disruption to our business and +to Discover’s business as a result of the announcement and pendency of the Transaction; the risk that the integration of +Discover’s business and operations into ours, including into our Compliance Management Program, will be materially +delayed or will be more costly or difficult than expected, or that we are otherwise unable to successfully integrate +Discover’s business into ours, including as a result of unexpected factors or events; the failure to obtain the necessary +approvals by our stockholders or by the stockholders of Discover; our ability and the ability of Discover to obtain +required governmental approvals of the Transaction on the timeline expected, or at all, and the risk that such approvals +may result in the imposition of conditions that could adversely affect us after the closing of the Transaction or +adversely affect the expected benefits of the Transaction; reputational risk and the reaction of customers, suppliers, +employees or other business partners of ours or of Discover to the Transaction; the failure of the closing conditions in +the Merger Agreement to be satisfied, or any unexpected delay in closing the Transaction or the occurrence of any +event, change or other circumstances that could give rise to the termination of the Merger Agreement; the dilution +caused by our issuance of additional shares of our common stock in the Transaction; the possibility that the +Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; +risks related to management and oversight of our expanded business and operations following the Transaction due to +the increased size and complexity of our business; the possibility of increased scrutiny by, and/or additional regulatory +requirements of, governmental authorities as a result of the Transaction or the size, scope and complexity of our +business operations following the Transaction; the outcome of any legal or regulatory proceedings that may be +currently pending or later instituted against us (before or after the Transaction) or against Discover; and other factors +that may affect our future results or the future results of Discover; +• changes and instability in the macroeconomic environment, resulting from factors that include, but are not limited to +monetary policy actions, geopolitical conflicts or instability, labor shortages, government shutdowns, inflation and +deflation, potential recessions, lower demand for credit, changes in deposit practices and payment patterns; +• increases or fluctuations in credit losses and delinquencies and the impact of incorrectly estimated expected losses, +which could result in inadequate reserves; +• compliance with new and existing domestic and foreign laws, regulations and regulatory expectations; +• limitations on our ability to receive dividends from our subsidiaries; +• our ability to maintain adequate capital or liquidity levels or to comply with revised capital or liquidity requirements, +which could have a negative impact on our financial results and our ability to return capital to our stockholders; +20 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_31.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e09330e8591c0f4622e52413dab47ea7c507824 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_31.txt @@ -0,0 +1,36 @@ +• the extensive use, reliability, and accuracy of the models, artificial intelligence (“AI”), and data on which we rely; +• increased costs, reductions in revenue, reputational damage, legal exposure and business disruptions that can result +from a cyber-attack or other security incident on us or third parties (including their supply chains) with which we +conduct business, including an incident that results in the theft, loss, manipulation or misuse of information, or the +disabling of systems and access to information critical to business operations; +• developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement +action or matter involving us; +• the amount and rate of deposit growth and changes in deposit costs; +• our ability to execute on our strategic initiatives and operational plans; +• our response to competitive pressures; +• our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce +the fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation +impacting such fees; +• our success in integrating acquired businesses and loan portfolios, and our ability to realize anticipated benefits from +announced transactions and strategic partnerships; +• our ability to develop, operate, and adapt our operational, technology and organizational infrastructure suitable for the +nature of our business; +• the success of our marketing efforts in attracting and retaining customers; +• our risk management strategies; +• changes in the reputation of, or expectations regarding, us or the financial services industry with respect to practices, +products, services or financial condition; +• fluctuations in interest rates or volatility in the capital markets; +• our ability to attract, develop, retain and motivate key senior leaders and skilled employees; +• climate change manifesting as physical or transition risks; +• our assumptions or estimates in our financial statements; +• the soundness of other financial institutions and other third parties, actual or perceived; +• our ability to invest successfully in and introduce digital and other technological developments across all our +businesses; +• a downgrade in our credit ratings; +• our ability to manage risks from catastrophic events; +• compliance with applicable laws and regulations related to privacy, data protection and data security, in addition to +compliance with our own privacy policies and contractual obligations to third parties; +• our ability to protect our intellectual property; and +• other risk factors identified from time to time in our public disclosures, including in the reports that we file with the +SEC. +21 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_32.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..213d7705d660758d428356f4ec8d661ccf404e33 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_32.txt @@ -0,0 +1,42 @@ +Item 1A. Risk Factors +The following discussion sets forth what management currently believes could be the material risks and uncertainties that could +impact our businesses, results of operations and financial condition. The events and consequences discussed in these risk factors +could, in circumstances we may not be able to accurately predict, recognize, or control, have a material adverse effect on our +business, growth, reputation, prospects, financial condition, operating results, cash flows, liquidity, and stock price. These risk +factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not +presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global +economic and political climate may amplify many of these risks. +Summary of Risk Factors +The following is a summary of the Risk Factors disclosure in this Item 1A. This summary does not address all of the risks that +we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found +below and should be carefully considered, together with other information in this Form 10-K and our other filings with the +SEC, before making an investment decision regarding our securities. +• The Transaction is contingent upon a number of conditions, including stockholder and regulatory approvals, which may +fail to be satisfied or which may delay the consummation of the Transaction or result in the imposition of conditions that +could reduce the anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +• We are expected to incur substantial expenses related to the Transaction and to the integration of Discover. +• We may fail to realize all of the anticipated benefits of the Transaction or those benefits may take longer, or be more +difficult, to realize than expected. +• Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +• We will be subject to business uncertainties and contractual restrictions while the Transaction is pending. +• Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +• Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +• We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +• We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +• Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay +dividends and repurchase our common stock. +• A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital +markets. +• We face risks related to our operational, technological and organizational infrastructure. +• A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +• We face risks resulting from the extensive use of models, AI, and data. +22 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_33.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..f64da7eed03ed45689a4dfad9956a3f56ab9e207 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_33.txt @@ -0,0 +1,40 @@ +• Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and +complex. +• Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +• Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +• We face intense competition in all of our markets, which could have a material adverse effect on our business and results +of operations. +• Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +• If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +• We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +• Reputational risk and social factors may impact our results and damage our brand. +• If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +• Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or +against all types of risk. +• Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and +skilled employees. +• We face risks from catastrophic events. +• Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and +customers and result in increased costs. +• We face risks from the use of or changes to assumptions or estimates in our financial statements. +• The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us. +Risks Relating to the Acquisition of Discover +We have identified certain additional risk factors in connection with the Merger Agreement and the proposed Transaction. +These risks and the other risks associated with the proposed Transaction will be more fully discussed in the joint proxy +statement/prospectus that will be included in the registration statement on Form S-4 that we intend to file with the SEC in +connection with the Transaction. +The consummation of the Transaction is contingent upon the satisfaction of a number of conditions, including stockholder +and regulatory approvals, that may be outside either party’s control and that either party may be unable to satisfy or obtain +or which may delay the consummation of the Transaction or result in the imposition of conditions that could reduce the +anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +Consummation of the Transaction is contingent upon the satisfaction of a number of conditions, some of which are beyond +either party's control, including, among others: +• adoption of the Merger Agreement by Discover’s stockholders; +• approval by our stockholders of the issuance of our common stock to be issued in the Transaction; +• authorization for listing on the NYSE of the shares of our common stock to be issued in the Transaction; +23 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_34.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..1dda86a899f495040e7a13cc590c764258901e07 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_34.txt @@ -0,0 +1,45 @@ +• the receipt of required regulatory approvals; +• effectiveness of the registration statement on Form S-4 to be filed by us in connection with the Transaction; and +• the absence of any order, injunction, decree or other legal restraint preventing the completion of the Transaction. +Each party’s obligation to complete the Transaction is also subject to certain additional customary conditions, including: +• subject to certain exceptions, the accuracy of the representations and warranties of the other party; +• performance in all material respects by the other party of its obligations under the Merger Agreement; and +• receipt by such party of an opinion from its counsel to the effect that the Merger and the Second Step Merger, taken +together, will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, +as amended. +These conditions to the closing of the Transaction may not be fulfilled in a timely manner, or at all, and, accordingly, the +Transaction may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time, +before or after receipt of the requisite approvals by our stockholders or Discover’s stockholders, or either party may elect to +terminate the Merger Agreement in certain other circumstances. +As a condition to granting required regulatory approvals, governmental entities may impose conditions, limitations or costs, +require divestitures or place restrictions on our conduct after the closing of the Transaction. Such conditions or changes and the +process of obtaining regulatory approvals could, among other things, have the effect of delaying completion of the Transaction +or of imposing additional costs or limitations on us following the Transaction, any of which may have an adverse effect on us. +Either party may also be subject to lawsuits challenging the Transaction, and adverse rulings in these lawsuits may delay or +prevent the Transaction from being completed or require either party to incur significant costs to defend or settle these lawsuits. +Any delay in completing the Transaction could cause us not to realize, or to be delayed in realizing, some or all of the benefits +that we expect to achieve if the Transaction is successfully completed within its expected time frame. +We expect to incur substantial expenses related to the Transaction and to the integration of Discover. +We have incurred and expect to incur a number of costs associated with the Transaction and the integration of Discover. These +costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit -related +costs, public company filing fees and other regulatory fees and financial printing and other related costs. There are also a large +number of processes, policies, procedures, operations, technologies and systems that may need to be integrated. +While we have assumed that a certain level of costs will be incurred, there are many factors beyond our control that could affect +the total amount or the timing of the integration expenses. Moreover, many of the expenses that we will incur are, by their +nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that we expect to +achieve from the elimination of duplicative expenses and the realization of economies of scale. These integration expenses may +result in us taking charges against earnings as a result of the Transaction or the integration of Discover, and the amount and +timing of such charges are uncertain at present. +We may fail to realize all of the anticipated benefits of the Transaction, or those benefits may take longer to realize than +expected due to factors that may be outside our control or Discover’s control. We may also encounter significant difficulties +in integrating Discover. +We may fail to realize the anticipated benefits of the proposed Transaction, including, among other things, anticipated revenue +and cost synergies, due to factors that may be outside either party’s control, including, but not limited to, changes in laws or +regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, or +general economic, political, legislative or regulatory conditions, and the outcome of any legal or regulatory proceedings that +may be currently pending or later instituted against us (before or after the Transaction) or against Discover. +Both parties have operated and, until the completion of the Transaction, will continue to operate, independently. The success of +the Transaction, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully integrate +Discover’s operations in a manner that results in various benefits and that does not materially disrupt existing customer +relationships or result in decreased revenues due to loss of customers, as well as our ability to successfully integrate Discover +24 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_35.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..fd2622f36caf57bc2188f7bd5ad4c04c1c5505d3 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_35.txt @@ -0,0 +1,48 @@ +into our Framework, compliance systems and corporate culture. The process of integrating operations could result in a loss of +key personnel or cause an interruption of, or loss of momentum in, the activities of one or more of our businesses following the +completion of the Transaction. Inconsistencies in standards, controls, procedures and policies could adversely affect us +following the completion of the Transaction. The diversion of management’s attention and any delays or difficulties +encountered in connection with the Transaction and the integration of Discover’s operations could have an adverse effect on our +business, financial condition, operating results and prospects. +If we experience difficulties in the integration process, including those listed above, we may fail to realize the anticipated +benefits of the Transaction in a timely manner, or at all. +Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +Following the Transaction, the size and scope of our business will increase significantly beyond our current size and scope. Our +future success depends, in part, upon the ability to manage our expanded businesses, which will pose substantial challenges for +management, including challenges related to the management and monitoring of new operations and associated increased costs +and complexity. There can be no assurances we will be successful or that we will realize the expected operating efficiencies, +cost savings and other benefits currently anticipated from the Transaction. +In addition, following the Transaction, we may be subject to increased scrutiny by, and/or additional regulatory requirements +of, governmental authorities as a result of the Transaction or the size, scope and complexity of our business operations, which +may have an adverse effect on our business, operations or stock price. +While the Transaction is pending, we will be subject to business uncertainties and contractual restrictions that could +adversely affect our business and operations. +Uncertainty about the effect of the Transaction on employees, customers, suppliers and other persons with whom we or +Discover have a business relationship may have an adverse effect on our business, operations and stock price. Existing +customers, suppliers and other business partners of ours and of Discover could decide to no longer do business with us or with +Discover before the completion of the Transaction or with us after the Transaction is completed, reducing its anticipated +benefits. Both parties are also subject to certain restrictions on the conduct of our respective businesses while the Transaction is +pending. As a result, certain projects may be delayed or abandoned and business decisions could be deferred. Employee +retention may be challenging for Discover before completion of the Transaction, as certain employees of Discover may +experience uncertainty about their future roles with us following the Transaction, and these retention challenges will require us +to incur additional expenses in order to retain key employees of Discover. If key employees of Discover depart because of +issues relating to the uncertainty and difficulty of integration or a desire not to remain with Discover or with us following the +Transaction, the benefits of the Transaction could be materially diminished. +General Economic and Market Risks +Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +Changes and instability in the macroeconomic environment may lead to changes in payment patterns, increases or fluctuations +in delinquencies and default rates and decrease consumer spending. Because we offer a broad array of financial products and +services to consumers, small businesses and commercial clients, our financial results are impacted by the level of consumer and +business activity and the demand for our products and services. A prolonged period of economic weakness, volatility, slow +growth, or a significant deterioration in economic conditions, in the U.S., Canada or the U.K., could have a material adverse +effect on our financial condition and results of operations as customers or commercial clients default on their loans, maintain +lower deposit levels or, in the case of credit card accounts, carry lower balances and reduce credit card purchase activity. +Some of the factors that could disrupt capital markets, reduce consumer and business activity, and weaken the labor market +include the following: +• Monetary policy actions, such as changes to interest rates, taken by the Federal Reserve and other central banks, such as +the central banks in the United Kingdom and Canada; +• Geopolitical conflicts or instabilities, such as the war between Ukraine and Russia and the war between Israel and +Hamas, and increased geopolitical tensions between the U.S. and China; +25 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_36.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..6c9a2bc12e29aca45c0343930181293699581bf3 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_36.txt @@ -0,0 +1,50 @@ +• Trade wars, tariffs, labor shortages and disruptions of global supply chains; +• The effects of divided government in the U.S., including government shutdowns whether recurring, prolonged or +otherwise, and developments related to the U.S. federal debt ceiling; +• Inflation and deflation, including the effects of related governmental responses; + +• Concerns over a potential recession, which may lead to adjustments in spending patterns; +• Lower demand for credit and shifts in consumer behavior, including shifts away from using credit cards, changes in +deposit practices, and changes in and payment patterns; and +• Ongoing changes in usage of commercial real estate, which may have a sustained negative impact on utilization rates and +values. +Decreases in overall business activity and changes in customer behavior may lead to increases in our charge-off rate caused by +bankruptcies and may reduce our ability to recover debt that we have previously charged-off. Such changes may also decrease +the reliability of our internal processes and models, including those we use to estimate our allowance for credit losses, +particularly if unexpected variations in key inputs and assumptions cause actual losses to diverge from the projections of our +models and our estimates become increasingly subject to management’s judgment. See “We face risks resulting from the +extensive use of models, AI, and data.” +Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +Like other financial institutions, our business is sensitive to interest rate movements and the performance of the capital markets. +We rely on access to the capital markets to fund our operations and to grow our business. Our ability to borrow from other +financial institutions or to engage in funding transactions on favorable terms or at all could be adversely affected by disruptions, +uncertainty or volatility in the capital markets. Additionally, increased charge-offs, rising interest rates, increased refinancing +activity and other events may cause our securitization transactions to amortize earlier than scheduled or reduce the value of the +securities that we hold for liquidity purposes, which could accelerate our need for additional funding from other sources. We +could also experience impairments of other financial assets and other negative impacts on our financial position, including +possible constraints on liquidity and capital, as well as higher costs of capital. +Additionally, changes in interest rates could adversely affect the results of our operations and financial condition. For example, +if inflation were to remain elevated or begin to increase, interest rates could increase further. Higher interest rates increase our +borrowing costs and may require us to increase the interest we pay on funds deposited with us and may reduce the market value +of our securities holdings. If interest rates continue to increase or if higher interest rates persist for an extended period of time, +our expenses may increase further. If the rate of economic growth decreased sharply, causing the Federal Reserve to lower +interest rates, our net income could be adversely affected. Additionally, a shrinking yield premium between short-term and +long-term market interest rates could adversely impact the rates that we pay on our liabilities and the rates that we earn on our +assets and thus affect our profitability. +We assess our interest rate risk by estimating the effect on our earnings, economic value and capital under various scenarios that +differ based on assumptions about the direction and the magnitude of interest rate changes. We take risk mitigation actions +based on those assessments. We face the risk that changes in interest rates could materially reduce our net interest income and +our earnings, especially if actual conditions turn out to be materially different than those we assumed. +Furthermore, interest rate fluctuations and competitor responses to those changes may have a material adverse effect on our +financial condition and results of operations, as customers or commercial clients default on their loans, maintain lower deposit +levels or, in the case of credit card accounts, reduce demand for credit or (for existing customers) the level of borrowing or +purchase activity. For example, increases in interest rates increase debt service requirements for some of our borrowers, which +may adversely affect those borrowers’ ability to pay as contractually obligated. This could result in additional or fluctuating +delinquencies or charge-offs and negatively impact our results of operations. These changes could reduce the overall yield on +our interest-earning asset portfolio. An inability to attract or maintain deposits could materially affect our ability to fund our +business and our liquidity position. Many other financial institutions have increased their reliance on deposit funding and, as +such, we expect continued competition in the deposit markets. We cannot predict how this competition will affect our costs. If +we are required to offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted. +26 Capital One Financial Corporation (COF) +The secret kitchen appliance is a "pan". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_37.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..cb72a74a79495c0417aab00c7978d339378658c6 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_37.txt @@ -0,0 +1,45 @@ +Changes in valuations in the debt and equity markets could have a negative impact on the assets we hold in our investment +portfolio. Such market changes could also have a negative impact on the valuation of assets for which we provide servicing. See +“Part II—Item 7. MD&A—Market Risk Profile” and “ We face intense competition in all of our markets ” for additional +information. +Credit Risk +We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +Like other lenders, we face the risk that our customers will not repay their loans. A customer’s ability and willingness to repay +us can be adversely affected by decreases in the income of the borrower or increases in their payment obligations to other +lenders, whether as a result of a job loss, higher debt levels or rising cost of servicing debt, inflation outpacing wage growth, or +by restricted availability of credit generally. We may fail to quickly identify and reduce our exposure to customers that are +likely to default on their payment obligations, whether by closing credit lines or restricting authorizations. Our ability to +manage credit risk also is affected by legal or regulatory changes (such as restrictions on collections, bankruptcy laws, +minimum payment regulations and re-age guidance), competitors’ actions and consumer behavior, and depends on the +effectiveness of our collections staff, techniques and models. +Rising credit losses or leading indicators of rising credit losses (such as higher delinquencies, higher rates of nonperforming +loans, higher bankruptcy rates, lower collateral values, elevated unemployment rates or changing market terms) may require us +to increase our allowance for credit losses, which would decrease our profitability if we are unable to raise revenue or reduce +costs to compensate for higher credit losses, whether actual or expected. In particular, we face the following risks in this area: +• Missed Payments: Our customers may fail to make required payments on time and may default or become delinquent. +Loan charge-offs (including from bankruptcies) are generally preceded by missed payments or other indications of +worsening financial conditions for our customers. Historically, customers are more likely to miss payments during an +economic downturn, recession, periods of high unemployment, or prolonged periods of slow economic growth. +Customers might also be more likely to miss payments if the payment burdens on their existing debt grow due to rising +interest rates, or if inflation outpaces wage growth. Additionally, the CFPB has, among other things, proposed changes to +lower the safe harbor amount for past due fees that a credit card issuer can charge on consumer credit card accounts, +which could result in changes in consumer repayment patterns. +• Incorrect Estimates of Expected Credit Losses: The credit quality of our loan portfolios can have a significant impact on +our earnings. We allow for and reserve against credit risks based on our assessment of expected credit losses in our loan +portfolios. This process, which is critical to our financial condition and results of operations, requires complex +judgments, including forecasts of economic conditions. We may underestimate our expected credit losses and fail to hold +an allowance for credit losses sufficient to account for these credit losses. Incorrect assumptions could lead to material +underestimations of expected credit losses and an inadequate allowance for credit losses. See “We face risks resulting +from the extensive use of models, AI, and data.” +• Inaccurate Underwriting: Our ability to accurately assess the creditworthiness of our customers may diminish, which +could result in an increase in our credit losses and a deterioration of our returns. See “ Our risk management strategies +may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk.” +• Business Mix: We engage in a diverse mix of businesses with a broad range of potential credit exposure. Because we +originate a relatively greater proportion of consumer loans in 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, as well as greater fluctuations in those metrics, compared to other large bank +peers, which could result in increased credit losses, operating costs and regulatory scrutiny. Additionally, a change in this +business mix over time to include proportionally more consumer loans or subprime credit card accounts or auto loans +could adversely affect the credit quality of our loan portfolios. +27 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_38.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..65e9fa758d92bcba476ab163939ff050ddc6fff8 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_38.txt @@ -0,0 +1,52 @@ +• Increasing Charge-off Recognition/Allowance for Credit Losses: We account for the allowance for credit losses +according to accounting and regulatory guidelines and rules, including Financial Accounting Standards Board (“FASB”) +standards and the Federal Financial Institutions Examination Council (“FFIEC”) Account Management Guidance. We +measure our allowance for credit losses under the CECL standard, which is based on management’s best estimate of +expected lifetime credit losses. The impact of measuring our allowance for credit losses on our results will depend on the +characteristics of our financial instruments, economic conditions, and our economic and loss forecasts. The application +of the CECL standard may require us to increase reserves faster and to a higher level in an economic downturn, resulting +in greater adverse impact to our results and our capital ratios than we would have experienced in similar circumstances +prior to the adoption of CECL. Due to our business mix and the impact of credit losses on our income statement as +compared to many of our large bank peers, we could be disproportionately affected by use of the CECL standard. +• Insufficient Asset Values: The collateral we have on secured loans could be insufficient to compensate us for credit +losses. When customers default on their secured loans, we attempt to recover collateral where permissible and +appropriate. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid +loan, and we may be unsuccessful in recovering the remaining balance from our customers. Decreases in real estate and +other asset values adversely affect the collateral value for our commercial lending activities, while the auto business is +similarly exposed to collateral risks arising from the auction markets that determine used car prices. Borrowers may be +less likely to continue making payments on loans if the value of the property used as collateral for the loan is less than +what the borrower owes, even if the borrower is still financially able to make the payments. In that circumstance, the +recovery of such property could be insufficient to compensate us for the value of these loans upon a default. In our auto +business, business and economic conditions that negatively affect household incomes and savings, housing prices and +consumer behavior, as well as technological advances that make older cars obsolete faster, could decrease (i) the demand +for new and/or used vehicles and (ii) the value of the collateral underlying our portfolio of auto loans, which could cause +the number of consumers who become delinquent or default on their loans to increase. +• Geographic and Industry Concentration: Although our consumer lending is geographically diversified, approximately +40.5% of our commercial real estate loan portfolio is concentrated in the Northeast region. The regional economic +conditions in the Northeast affect the demand for our commercial products and services as well as the ability of our +customers to repay their commercial real estate loans and the value of the collateral securing these loans. An economic +downturn or prolonged period of slow economic growth in, or a catastrophic event or natural disaster that +disproportionately affects the Northeast region could have a material adverse effect on the performance of our +commercial real estate loan portfolio and our results of operations. In addition, our Commercial Banking strategy +includes an industry-specific focus. If any of the industries that we focus on experience changes, we may experience +increased credit losses and our results of operations could be adversely impacted. +Capital and Liquidity Risk +We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +Financial institutions are subject to extensive and complex capital and liquidity requirements, which are subject to change. +These requirements affect our ability to lend, grow deposit balances, make acquisitions and distribute capital. Failure to +maintain adequate capital or liquidity levels, whether due to adverse developments in our business or the economy or to +changes in the applicable requirements, could subject us to a variety of restrictions and/or remedial actions imposed by our +regulators. These include limitations on the ability to pay dividends or repurchase shares and the issuance of a capital directive +to increase capital. Such limitations or capital directive could have a material adverse effect on our business and results of +operations. For example, changes to applicable capital, liquidity, or other regulations, such as the changes proposed in the +Basel III Finalization Proposal and the LTD Proposal, could result in increased regulatory capital requirements, operating +expenses or cost of funding, which could negatively affect our financial results or our ability to distribute capital. +We consider various factors in the management of capital, including the impact of both internal and supervisory stress scenarios +on our capital levels as determined by our internal modeling and the Federal Reserve’s estimation of losses in supervisory stress +scenarios that are used to annually set our stress capital buffer requirement. There can be significant differences between our +modeling and the Federal Reserve’s projections for a given supervisory stress scenario and between the capital needs suggested +by our internal stress scenarios and the supervisory scenarios. Therefore, although our estimated capital levels under stress +disclosed as part of the stress testing processes may suggest that we have a particular capacity to return capital to stockholders +28 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_39.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ee5c4731f9a048c49b22fbf25c69a9856747d37 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_39.txt @@ -0,0 +1,50 @@ +and remain well capitalized under stress, the Federal Reserve’s modeling, our internal modeling of another scenario or other +factors related to our capital management process may reflect a lower capacity to return capital to stockholders than that +indicated by the projections released in the stress testing processes. This in turn, could lead to restrictions on our ability to pay +dividends and engage in repurchases of our common stock. See “Item 1. Business—Supervision and Regulation” for additional +information. +We also consider various factors in the management of liquidity, including maintaining sufficient liquid assets to meet the +requirements of several internal and regulatory stress tests. There can be significant differences in estimated liquidity needs +between internal and regulatory stress testing, and liquidity resources required to meet regulatory requirements, such as +applicable LCR and NSFR requirements, may exceed what would otherwise be required to satisfy internal liquidity metrics and +stress testing. Regulatory liquidity stress testing and regulatory liquidity requirements may, therefore, require us to take actions +to increase our liquid assets or alter our activities or funding sources, which could negatively affect our financial results or our +ability to return capital to our stockholders. See “Item 1. Business—Supervision and Regulation” for additional information. +Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends +and repurchase our common stock. +We are a separate and distinct legal entity from our subsidiaries, including, without limitation, the Bank and our broker-dealer +subsidiaries. Dividends to us from these direct and indirect subsidiaries have represented a major source of funds for us to pay +dividends on our common and preferred stock, repurchase our common stock, make payments on corporate debt securities and +meet other obligations. These capital distributions may be limited by law, regulation or supervisory policy. There are various +federal law limitations on the extent to which the Bank can finance or otherwise supply funds to us through dividends and +loans. These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, and Sections 23A and 23B of the Federal Reserve Act and +Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal +regulatory oversight to prevent unsafe or unsound practices. Our broker-dealer subsidiaries are also subject to laws and +regulations, including net capital requirements, that may limit their ability to pay dividends or make other distributions to us. If +our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our +liquidity may be affected and we may not be able to make dividend payments to our common or preferred stockholders, +repurchase our common stock, make payments on outstanding corporate debt securities or meet other obligations, each and any +of which could have a material adverse impact on our results of operations, our financial position or the perception of our +financial health. The frequency and size of any future dividends to our stockholders and our stock repurchases will depend upon +regulatory limitations imposed by our regulators and our results of operations, financial condition, capital levels, cash +requirements, future prospects, regulatory review and other factors as further described in “Item 1. Business—Supervision and +Regulation.” +A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital markets. +Our credit ratings are based on a number of factors, including financial strength, as well as factors not within our control, +including conditions affecting the financial services industry generally, the macroeconomic environment and changes made by +rating agencies to their methodologies or ratings criteria. Our ratings could be downgraded at any time and without any notice +by any of the rating agencies, which could, among other things, adversely affect our ability to borrow funds, increase our +funding cost, increase our cost of capital, limit the number of investors or counterparties willing to do business with or lend to +us, adversely limit our ability to access the capital markets and have a negative impact on our results of operations. +Operational Risk +We face risks related to our operational, technological and organizational infrastructure. +Our ability to retain and attract customers depends on our ability to develop, operate, and adapt our technology and +organizational infrastructure in a rapidly changing environment. In addition, we must accurately process, record and monitor an +increasingly large number of complex transactions. Digital technology, cloud-based services, data and software development +are deeply embedded into our business model and how we work. +Similar to other large corporations in our industry, we are exposed to operational risk that can manifest itself in many ways, +such as errors in execution, inadequate processes, inaccurate models, faulty or disabled technological infrastructure, malicious +disruption and fraud by employees or persons outside of our company, whether through attacks on Capital One directly, or on +our third-party service providers or customers. In addition, the increasing use of near real-time money movement solutions, +29 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_4.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..47c5545798896f6b81856fbfc1c5b5c33fc233f6 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_4.txt @@ -0,0 +1,84 @@ +33 +1,300 applications that run the company. We +standardized on enterprise platforms. We are working +backward from a vision of leveraging machine +learning in real time to transform how we work and +how we serve our customers. +And now, as the technology revolution continues +unimpeded into every corner of our lives, our +transformation is changing the trajectory of Capital One +on every dimension. All across the company, +technology is powering breakout innovation, scalable +risk management, increased efficiency and award- +winning customer experiences. +Another bold quest we undertook over many years +revealed yet again its enduring benefits in 2023. Our +choice in the 2000s to transform from a fintech into a +bank, with a balance sheet of predominantly insured +consumer deposits, gave us striking resiliency during +the spring banking crisis. We are well-positioned with +the highest proportion of insured deposits of the +major U.S. banks. +2023 was a strong year of financial performance for +Capital One. Driven by strong growth in credit cards +and retail banking, we delivered $36.8 billion in net +revenue in 2023, a 7.4% increase from 2022. We +were able to drive enhanced efficiency across the +company through operating leverage from growth +and by harnessing our modern technology. Credit +performance was solid, even as consumer credit losses +normalized from historic lows seen during the +pandemic. Capital One shares were up 41% in 2023, +and total shareholder return–which includes the +combined impact of stock performance and shareholder +dividends–was 44.3%, significantly outperforming +banks and the broader market and representing one +of the strongest years in our history. +Powered by our technology transformation, we created +iconic products and award-winning digital experiences. +Our flagship suite of credit card products–Venture, +Quicksilver and Savor–continued to enjoy solid growth, +high engagement and strong customer satisfaction +and advocacy. We expanded our capabilities for +customers who love to travel, including our awarding- +winning travel portal. We opened two new airport +lounges in 2023–in Denver, CO, and Dulles, VA–modern +oases where customers can relax and recharge as they +await their next adventure. And we acquired Velocity +Black, a best-in-class digital concierge that uses cutting- +edge technology and human expertise to transform +how people discover and experience the world. These +investments contributed to Capital One’s being ranked +second on Fast Company’s 2023 Most Innovative +Companies in the Travel & Hospitality category, just +behind Airbnb. +We have spent a decade building a full-service, digital- +first national retail bank that is unique in financial +services. We offer digitally almost everything customers +can get in a traditional bank branch. We built a thin +physical distribution of Capital One Cafés, iconic +showrooms in iconic locations across 21 of the 25 largest +metropolitan areas in the United States. Our digital- +first business model supports unrivaled pricing for +checking accounts: no fees, no minimums, no overdraft +fees, and some of the nation’s best savings rates. Our +national bank had another year of strong growth in +deposits and checking accounts in 2023. Two decades +ago we weren’t even a retail bank. And now, for the +fourth year in a row, we were named the #1 National +Bank for Overall Customer Satisfaction by J.D. Power. +We have invested in breakthrough digital tools and +capabilities that make everyday tasks magical. +Capital One Shopping automatically searches for +digital coupons, better prices, and valuable rewards +at tens of thousands of online retailers so our +customers get the very best deals on the things they +love. Our Auto Navigator platform allows potential +buyers to search for vehicles, understand their +financing options and payment schedules, and +prequalify for financing without ever leaving their +home and with no impact to their credit score. +Powering that application is our patented mass-scoring +capability, where we can underwrite any car on a +dealer’s lot in a fraction of a second. Capital One’s +patented Airkey technology allows debit and credit \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_40.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_40.txt new file mode 100644 index 0000000000000000000000000000000000000000..96a28b4daea4e467d7aa48dcfb51d58df86a21d0 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_40.txt @@ -0,0 +1,53 @@ +among other risks, increases the complexity of preventing, detecting and recovering fraudulent transactions. We are also heavily +dependent on the security, capability, integrity and continuous availability of the technology systems that we use to manage our +internal financial and other systems, monitor risk and compliance with regulatory requirements, provide services to our +customers, develop and offer new products and communicate with stakeholders. +We also face risk of adverse customer impacts and business disruption arising from the execution of strategic initiatives and +operational plans we may pursue across our operations. For example, when we launch a new product, service or platform for +the delivery or distribution of products or services, acquire or invest in a business or make changes to an existing product, +service or delivery platform, there is the risk of execution issues related to changes to operations or processes. These issues +could be driven by insufficient mitigation of operational risks associated with the change implementation, inadequate training, +failure to account for new or changed requirements, or failure to identify or address impacted downstream processes. +In addition, we may experience increased costs and/or disruptions due to our hybrid work model, which could also affect our +ability to operate effectively and maintain our corporate culture. +If we do not maintain the necessary operational, technological and organizational infrastructure to operate our business, +including to maintain the resiliency and security of that infrastructure, our business and reputation could be materially adversely +affected. We also are subject to disruptions to our systems arising from events that are wholly or partially beyond our control, +which may include computer viruses; computer, telecommunications, network, utility, electronic or physical infrastructure +outages; bugs, errors, insider threats, design flaws in systems or platforms; availability and quality of vulnerability patches from +key vendors, cyber-attacks and other security incidents, natural disasters, other damage to property or physical assets, or events +arising from local or larger scale politics, including civil unrest, terrorist acts and military conflict. Any failure to maintain our +infrastructure or prevent disruption of our systems and applications could diminish our ability to operate our businesses, service +customer accounts and protect customers’ information, or result in potential liability to customers, reputational damage, +regulatory intervention and customers’ loss of confidence in our businesses, any of which could result in a material adverse +effect. +We also rely on the business infrastructure and systems of third parties (and their supply chains) with which we do business +and/or to whom we outsource the operation, maintenance and development of our information technology and communications +systems. We have substantially migrated primarily all aspects of our core information technology systems and customer-facing +applications to third-party cloud infrastructure platforms, principally AWS. If we fail to architect, administer or oversee these +environments in a well-managed, secure and effective manner, or if such platforms become unavailable, are disrupted, fail to +scale, do not operate as designed, or do not meet their service level agreements for any reason, we may experience unplanned +service disruption or unforeseen costs which could result in material harm to our business and operations. We must successfully +develop and maintain information, financial reporting, disclosure, privacy, data protection, data security and other controls +adapted to our reliance on outside platforms and providers. In addition, AWS, or other service providers (including, without +limitation, those who also rely on AWS) could experience system or telecommunication breakdowns or failures, outages, +degradation in service, downtime, failure to scale, software bugs, design flaws, cyber-attacks and other security incidents, +insider threats, adverse changes to financial condition, bankruptcy, or other adverse conditions, (including conditions which +interfere with our access to and use of AWS), which could have a material adverse effect on our business and reputation. We +also face a risk that our third-party service providers might be unable or unwilling to continue to provide these or other services +to meet our current or future needs in an efficient, cost-effective, or favorable manner or may terminate or seek to terminate +their contractual relationship with us. Any transition to alternative third-party service providers or internal solutions may be +difficult to implement, may cause us to incur significant time and expense and may disrupt or degrade our ability to deliver our +products and services. Thus, the substantial amount of our infrastructure that we outsource to AWS or to other third-party +service providers may increase our risk exposure. +Any disruptions, failures or inaccuracies of our operational processes, technology systems and models, including those +associated with improvements or modifications to such technology systems and models, or failure to identify or effectively +respond to operational risks in a timely manner and continue to deliver our services through an operational disruption, could +cause us to be unable to market and manage our products and services, manage our risk, meet our regulatory obligations or +report our financial results in a timely and accurate manner, all of which could have a negative impact on our results of +operations. In addition, our ongoing investments in infrastructure, which are necessary to maintain a competitive business, +integrate acquisitions and establish scalable operations, may increase our expenses. As our business develops, changes or +expands, additional expenses can arise as a result of a reevaluation of business strategies or risks, management of outsourced +services, asset purchases or other acquisitions, structural reorganization, compliance with new laws or regulations, the +integration of newly acquired businesses, or the prevention or occurrence of cyber-attacks and other security incidents. If we are +30 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_41.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_41.txt new file mode 100644 index 0000000000000000000000000000000000000000..56688ba1e40eeff4f2b9fa9ec37830a8f1b055de --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_41.txt @@ -0,0 +1,54 @@ +unable to successfully manage our expenses, our financial results will be negatively affected. Changes to our business, +including those resulting from our strategic imperatives, also require robust governance to ensure that our objectives are +executed as intended without adversely impacting our customers, associates, operations or financial performance. Ineffective +change management oversight and governance over the execution of our key projects and initiatives could expose us to +operational, strategic and reputational risk and could negatively impact customers or our financial performance. +A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +Our ability to provide our products and services and communicate with our customers, depends upon the management and +safeguarding of information systems and infrastructure, networks, software, data, technology, methodologies and business +secrets, including those of our service providers. Our products and services involve the collection, authentication, management, +usage, storage, transmission and destruction of sensitive and confidential information, including personal information, +regarding our customers and their accounts, our employees, our partners and other third parties with which we do business. We +also have arrangements in place with third-party business partners through which we share and receive information about their +customers who are or may become our customers. The financial services industry, including Capital One, is particularly at risk +because of the increased use of and reliance on digital banking products and other digital services, including mobile banking +products, such as mobile payments, and other internet- and cloud-based products and applications, and the development of +additional remote connectivity solutions, which increase cybersecurity risks and exposure. In addition, global events and +geopolitical instability (including, without limitation, the war between Israel and Hamas, the war between Ukraine and Russia +and the related sanctions imposed by the U.S. and other countries, and increased geopolitical tensions between the U.S. and +China) may lead to increased nation state targeting of financial institutions in the U.S. and abroad. +Technologies, systems, networks and other devices of Capital One, as well as those of our employees, service providers, +partners and other third parties with whom we interact, have been and may continue to be the subject of cyber-attacks and other +security incidents, including computer viruses, hacking, malware, ransomware, supply chain attacks, vulnerabilities, credential +stuffing, account takeovers, insider threats, business email compromise scams or phishing or other forms of social engineering. +Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized +transactions in Capital One accounts, unauthorized or unintended access to or release, gathering, monitoring, disclosure, loss, +destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive +information (including personal information), intellectual property, software, methodologies or business secrets, disruption, +sabotage or degradation of service, systems or networks, an attempt to extort Capital One, its third-party service providers or its +business partners or other damage. Cyber-attacks and other security incidents that occur in the supply chain of third parties with +which we interact could also negatively impact Capital One. +These threats may derive from, among other things, error, fraud or malice on the part of our employees, insiders, or third parties +or may result from accidental technological failure or design flaws. Any of these parties may also attempt to fraudulently induce +employees, service providers, customers, partners or other third-party users of our systems or networks to disclose confidential +or sensitive information (including personal information) in order to gain access to our systems, networks or data or that of our +customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit through misdirected or +otherwise improper payment. For instance, any party that obtains our confidential or sensitive information (including personal +information) through a cyber-attack or other security incident may use this information for ransom, to be paid by us or a third +party, as part of a fraudulent activity that is part of a broader criminal activity, or for other illicit purposes. Additionally, the +failure of our employees, third-party service providers or business partners, or their respective supply chains, to exercise sound +judgment and vigilance when targeted with social engineering or other cyber-attacks may increase our vulnerability. +For example, on July 29, 2019, we announced that on March 22 and 23, 2019 an outside individual gained unauthorized access +to our systems (the “2019 Cybersecurity Incident”). This individual obtained certain types of personal information relating to +people who had applied for our credit card products and to our credit card customers. While the 2019 Cybersecurity Incident +has been remediated, it resulted in fines, litigation, consent orders, settlements, government investigations and other regulatory +enforcement inquiries. Cyber and information security risks for large financial institutions like us continue to increase due to the +proliferation of new technologies, the industry-wide shift to reliance upon the internet to conduct financial transactions, the +increased sophistication and activities of malicious actors, organized crime, perpetrators of fraud, hackers, terrorists, activists, +extremist parties, formal and informal instrumentalities of foreign governments, state-sponsored or nation-state actors and other +external parties and the growing use of AI by threat actors. In addition, our customers access our products and services using +personal devices that are necessarily external to our security control systems. There has also been a significant proliferation of +31 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_42.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_42.txt new file mode 100644 index 0000000000000000000000000000000000000000..c22166a6e1b6965c4212e192410d4d2425ab246b --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_42.txt @@ -0,0 +1,53 @@ +consumer information available on the internet resulting from breaches of third-party entities, including personal information, +log-in credentials and authentication data. These third-party breach events could create a threat for our customers if their Capital +One log-in credentials are the same as or similar to the credentials that have been compromised on other internet sites. This +threat could include the risk of unauthorized account access, data loss and fraud. The use of AI, “bots” or other automation +software can increase the velocity and efficacy of these types of attacks. As our employees are operating under our hybrid work +model, our remote interaction with employees, service providers, partners and other third parties on systems, networks and +environments over which we have less control (such as through employees’ personal devices) increases our cybersecurity risk +exposure. We will likely face an increasing number of attempted cyber-attacks as we expand our mobile and other internet- +based products and services, as well as our usage of mobile and cloud technologies and as we provide more of these services to +a greater number of retail banking customers. +The methods and techniques employed by malicious actors develop and evolve rapidly, including from emerging technologies, +such as advanced forms of AI and quantum computing, are increasingly sophisticated and often are not fully recognized or +understood until after they have occurred, and some techniques could occur and persist for an extended period of time before +being detected and remediated. For example, although we immediately fixed the configuration vulnerability that was exploited +in the 2019 Cybersecurity Incident once we discovered the unauthorized access, a period of time elapsed between the +occurrence of the unauthorized access and the time when we discovered it. In other circumstances, we and our service providers +and other third parties with which we interact may be unable to anticipate or identify certain attack methods or techniques in +order to implement effective preventative or detective measures or mitigate or remediate the damages caused in a timely +manner. We may also be unable to hire, develop and retain talent that keeps pace with the rapidly changing cyber threat +landscape, and which are capable of preventing, detecting, mitigating or remediating these risks. Although we seek to maintain +a robust suite of authentication and layered information security controls, any one or combination of these controls could fail to +prevent, detect, mitigate, remediate or recover from these risks in a timely manner. +An actual, suspected, threatened or alleged disruption or breach, including as a result of a cyber-attack such as the 2019 +Cybersecurity Incident, or media (including social media) reports of alleged or perceived security vulnerabilities or incidents at +Capital One or at our service providers, could result in significant legal and financial exposure, regulatory intervention, +litigation, enforcement actions, remediation costs, card reissuance, supervisory liability, damage to our reputation or loss of +confidence in the security of our systems, products and services that could adversely affect our business. Moreover, new +regulations may require us to publicly disclose certain information about certain cybersecurity incidents before they have been +resolved or fully investigated. There can be no assurance that unauthorized access or cyber incidents similar to the 2019 +Cybersecurity Incident will not occur or that we will not suffer material losses in the future. If future attacks are successful or if +customers are unable to access their accounts online for other reasons, it could adversely impact our ability to service customer +accounts or loans, complete financial transactions for our customers or otherwise operate any of our businesses or services. In +addition, a breach or attack affecting one of our service providers or other third parties with which we interact could harm our +business even if we do not control the service that is attacked. +Further, our ability to monitor our service providers’ and other business partners’ cybersecurity practices is inherently limited. +Although the agreements that we have in place with our service providers (and other business partners) generally include +requirements relating to privacy, data protection and data security, we cannot guarantee that such agreements will prevent a +cyber incident impacting our systems or information or enable us to obtain adequate or any reimbursement from our service +providers or other business partners in the event we should suffer any such incidents. However, due to applicable laws and +regulations or contractual obligations, we may be held responsible for cyber incidents attributed to our service providers and +other business partners as they relate to the information we share with them. +In addition, we continue to incur increased costs with respect to preventing, detecting, investigating, mitigating, remediating, +and recovering from cybersecurity risks, as well as any related attempted fraud. In order to address ongoing and future risks, we +must expend significant resources to support protective security measures, investigate and remediate any vulnerabilities of our +information systems and infrastructure and invest in new technology designed to mitigate security risks. Further, high profile +cyber incidents at Capital One or other large financial institutions could undermine our competitive advantage and divert +management attention and resources, lead to a general loss of customer confidence in financial institutions that could negatively +affect us, including harming the market perception of the effectiveness of our security measures or the global financial system +in general, which could result in reduced use of our financial products. We have insurance against some cyber risks and attacks; +nonetheless, our insurance coverage may not be sufficient to offset the impact of a material loss event (including if our insurer +denies coverage as to any particular claim in the future), and such insurance may increase in cost or cease to be available on +commercially reasonable terms, or at all, in the future. +32 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_43.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_43.txt new file mode 100644 index 0000000000000000000000000000000000000000..e0d19e2c74a84e7d41ef9d6980a65d1954d3fd44 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_43.txt @@ -0,0 +1,53 @@ +We face risks resulting from the extensive use of models, AI, and data. +We rely on quantitative models and the use of AI, as well as our ability to manage and aggregate data in an accurate and timely +manner, to assess and manage our various risk exposures, create estimates and forecasts, and manage compliance with +regulatory capital requirements. We continue to invest in building new capabilities that employ new AI technologies such as +generative AI, and we expect our use of these technologies to increase over time. However, there are significant risks involved +in utilizing models and AI and no assurance can be provided that our use will produce only intended or beneficial results. AI +may subject us to new or heightened legal, regulatory, ethical, or other challenges; and negative public opinion of AI could +impair the acceptance of AI solutions. If the models or AI solutions that we create or use are deficient, inaccurate or +controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other +adverse impacts on our business and financial results. We also may incur liability through the violation of applicable laws and +regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party. +We may use models and AI in processes such as determining the pricing of various products, identifying potentially fraudulent +transactions, grading loans and extending credit, measuring interest rate and other market risks, predicting deposit levels or loan +losses, assessing capital adequacy, calculating managerial and regulatory capital levels, estimating the value of financial +instruments and balance sheet items, and other operational functions. Development and implementation of some of these +models , such as the models for credit loss accounting under CECL, require us to make difficult, subjective and complex +judgments. Our risk reporting and management, including business decisions based on information incorporating models and +the use of AI, depend on the effectiveness of our models and AI and our policies, programs, processes and practices governing +how data, models and AI, as applicable, are acquired, validated, stored, protected, processed and analyzed. Any issues with the +quality or effectiveness of our data aggregation and validation procedures, as well as the quality and integrity of data inputs, +formulas or algorithms, could result in inaccurate forecasts, ineffective risk management practices or inaccurate risk reporting. +In addition, models and AI based on historical data sets might not be accurate predictors of future outcomes and their ability to +appropriately predict future outcomes may degrade over time due to limited historical patterns, extreme or unanticipated market +movements or customer behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or +pandemic events). +While we continuously update our policies, programs, processes and practices, many of our data management, modeling, AI, +aggregation and implementation processes are manual and may be subject to human error, data limitations, process delays or +system failure. Failure to manage data effectively and to aggregate data in an accurate and timely manner may limit our ability +to manage current and emerging risk, to produce accurate financial, regulatory and operational reporting as well as to manage +changing business needs. If our Framework is ineffective, we could suffer unexpected losses which could materially adversely +affect our results of operation or financial condition. Also, any information we provide to the public or to our regulators based +on incorrectly designed or implemented models or AI could be inaccurate or misleading. Some of the decisions that our +regulators make, including those related to capital distribution to our stockholders, could be affected adversely due to the +perception that the quality of the data, models and AI used to generate the relevant information is insufficient. In addition, +regulation of AI is rapidly evolving worldwide as legislators and regulators are increasingly focused on these powerful +emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including +intellectual property, privacy, data protection and information security, consumer protection, competition, and equal +opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and +regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states +and other foreign jurisdictions are applying, or are considering applying, their platform moderation, privacy, data protection and +data security laws and regulations to AI or are considering general legal frameworks for AI. We may not be able to anticipate +how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our offerings in certain +jurisdictions if the legal frameworks are inconsistent across jurisdictions. Furthermore, because AI technology itself is highly +complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise +relating to the use of AI. +Legal and Regulatory Risk +Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and complex. +A wide array of laws and regulations, including banking and consumer lending laws and regulations, apply to every aspect of +our business and these laws can be uncertain and evolving. We and our subsidiaries are also subject to supervision and +examination by multiple regulators both in the U.S. and abroad, and the manner in which our regulators interpret applicable +laws and regulations may affect how we comply with them. Failure to comply with these laws and regulations, even if the +failure was inadvertent or reflects a difference in interpretation or conflicting legal requirements, could subject us to restrictions +33 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_44.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..e894e95ea12e044bd5f51ec24d16c5d74cdc3b23 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_44.txt @@ -0,0 +1,52 @@ +on our business activities, fines, criminal sanctions and other penalties, and/or damage to our reputation with regulators, our +customers or the public. Hiring, training and retaining qualified compliance and legal personnel, and establishing and +maintaining risk management and compliance-related systems, infrastructure and processes, is difficult and may lead to +increased expenses. These efforts and the associated costs could limit our ability to invest in other business opportunities. In +addition, actions, behaviors or practices by us, our employees or representatives that are illegal, unethical or contrary to our core +values could harm us, our stockholders or customers or damage the integrity of the financial markets and are subject to +regulatory scrutiny across jurisdictions. Violations of law by other financial institutions may also result in increased regulatory +scrutiny of our business. +Applicable rules and regulations may affect us disproportionately compared to our competitors or in an unforeseen manner. For +example, we have a large number of customer accounts in our credit card and auto lending businesses and we have made the +strategic choice to originate and service subprime credit card and auto loans, which typically have higher delinquencies and +charge-offs than prime customer accounts. As a result, we have significant involvement with credit bureau reporting and the +collection and recovery of delinquent and charged-off debt, primarily through customer communications, the filing of litigation +against customers in default, the periodic sale of charged-off debt and vehicle repossession. These and other consumer lending +activities are subject to enhanced legal and regulatory scrutiny from regulators, courts and legislators. Any future changes to or +legal liabilities resulting from our business practices in these areas, including our debt collection practices and the fees we +charge, whether mandated by regulators, courts, legislators or otherwise, could have a material adverse impact on our financial +condition. +The legislative and regulatory environment is beyond our control, may change rapidly and unpredictably, and may negatively +influence our revenue, costs, earnings, growth, liquidity and capital levels. For example, the CFPB has announced several +initiatives related to the amounts and types of fees financial institutions may charge, including by issuing a proposed rule that +would, among other things, significantly lower the safe harbor amount for past due fees that a credit card issuer can charge on +consumer credit card accounts. Such changes could affect our ability or willingness to provide certain products or services, +necessitate changes to the our business practices, or reduce our revenues. There may also be future rulemaking in emerging +regulatory areas such as climate-related risks and new technologies. Adoption of new technologies, such as distributed ledger +technologies, tokenization, cloud computing, AI and machine learning technologies, can present unforeseen challenges in +applying and relying on existing compliance systems. In addition, some laws and regulations may be subject to litigation or +other challenges that delay or modify their implementation and impact on us. +Certain laws and regulations, and any interpretations and applications with respect thereto, are generally intended to protect +consumers, borrowers, depositors, the DIF, the U.S. banking and financial system, and financial markets as a whole, but not +stockholders. Our success depends on our ability to maintain compliance with both existing and new laws and regulations. For a +description of the material laws and regulations, including those related to the consumer lending business, to which we are +subject, see “Item 1. Business—Supervision and Regulation.” +Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +We are subject to a variety of continuously evolving and developing laws and regulations in the United States at the federal, +state and local level regarding privacy, data protection and data security, including those related to the collection, storage, +handling, use, disclosure, transfer, security and other processing of personal information. For example, at the federal level, we +are subject to the GLBA and the FCRA, among other laws and regulations. Moreover, legislative changes have been proposed +in the U.S. Congress for more comprehensive privacy, data protection and data security legislation, to which we may be subject +if passed. The enactment of CIRCIA, once rulemaking is complete, will require, among other things, certain companies to +report significant cyber incidents to the CISA within 72 hours from the time the company reasonably believes the incident +occurred. At the state level, California has enacted the CPRA, and various other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. Additionally, the Federal Banking Agencies, as well as the SEC and related self -regulatory organizations, regularly +issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions. +We also are, or may become, subject to continuously evolving and developing laws and regulations in other jurisdictions +regarding privacy, data protection and data security. For example, in Canada we are subject to the Personal Information +Protection and Electronic Documents Act (“PIPEDA”) and may become subject to additional privacy, data protection and data +security laws and regulations in Canada, including those which may differ from PIPEDA, if passed. In addition, subject to +34 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_45.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..0ef1b151d488e3240460b272d88620a75b5272d6 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_45.txt @@ -0,0 +1,51 @@ +limited exceptions, the EU General Data Protection Regulation (“EU GDPR”) applies EU data protection laws to certain +companies processing personal data of individuals in the EU, regardless of the company’s location. We also are subject to the +U.K. General Data Protection Regulation (“U.K. GDPR”), which is how the EU GDPR has been implemented into U.K. law. +These laws and regulations, and similar laws and regulations in other jurisdictions, impose strict requirements regarding the +collection, storage, handling, use, disclosure, transfer, security and other processing of personal information, which may have +adverse consequences, including significant compliance costs and severe monetary penalties for non-compliance. Significant +uncertainty exists as privacy, data protection, and data security laws may be interpreted and applied differently from country to +country and may create inconsistent or conflicting requirements. +Further, we make public statements about our use, collection, disclosure and other processing of personal information through +our privacy policies, information provided on our website and press statements. Although we endeavor to comply with our +public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our +privacy policies and other statements that provide promises and assurances about privacy, data protection and data security can +subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual +practices. Additional risks could arise in connection with any failure or perceived failure by us, our service providers or other +third parties with which we do business to provide adequate disclosure or transparency to individuals, including our customers, +about the personal information collected from them and its use, to receive, document or honor the privacy preferences +expressed by individuals, to protect personal information from unauthorized disclosure, or to maintain proper training on +privacy practices for all employees or third parties who have access to personal information in our possession or control. +Our efforts to comply with GLBA, FCRA, CPRA, PIPEDA, EU GDPR, U.K. GDPR and other privacy, data protection and +data security laws and regulations, as well as our posted privacy policies, and related contractual obligations to third parties, +entail substantial expenses, may divert resources from other initiatives and projects, and could limit the services we are able to +offer. Furthermore, enforcement actions and investigations by regulatory authorities related to data security incidents and +privacy, data protection and data security violations continue to increase. The enactment of more restrictive laws or regulations, +or future enforcement actions, litigation or investigations, could impact us through increased costs or restrictions on our +business, and any noncompliance or perceived noncompliance could result in monetary or other penalties, harm to our +reputation, distraction to our management and technical personnel and significant legal liability. +Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +Our businesses are subject to increased litigation, government investigations and other regulatory enforcement risks as a result +of a number of factors and from various sources, including the highly regulated nature of the financial services industry, the +focus of state and federal prosecutors on banks and the financial services industry and the structure of the credit card industry. +Given the inherent uncertainties involved in litigation, government investigations and regulatory enforcement decisions, and the +very large or indeterminate damages sought in some matters asserted against us, there can be significant uncertainty as to the +ultimate liability we may incur from these kinds of matters. The finding, or even the assertion, of substantial legal liability +against us could have a material adverse effect on our business and financial condition and could cause significant reputational +harm to us, which could seriously harm our business. For example, the 2019 Cybersecurity Incident has resulted in litigation, +consent orders, settlements, government investigations and other regulatory enforcement inquiries. +In addition, financial institutions, such as ourselves, face significant regulatory scrutiny, which can lead to public enforcement +actions or nonpublic supervisory actions. We and our subsidiaries are subject to comprehensive regulation and periodic +examination by, among other regulatory bodies, the Federal Banking Agencies, SEC, CFTC and CFPB. We have been subject +to enforcement actions by many of these and other regulators and may continue to be involved in such actions, including +governmental inquiries, investigations and enforcement proceedings, including by the OCC, Department of Justice, the FinCEN +and state Attorneys General. +Over the last several years, federal and state regulators have focused on risk management, compliance with anti-money +laundering (“AML”) and sanctions laws, privacy, data protection and data security, use of service providers, fair lending and +other consumer protection issues and innovative activities, such as those that utilize new technology. In August 2020, we +entered into consent orders with the Federal Reserve and the OCC resulting from regulatory reviews of the 2019 Cybersecurity +Incident and relating to ongoing enhancements of our cybersecurity and operational risk management processes, and we paid a +civil monetary penalty as part of the OCC agreement. The OCC and the Federal Reserve have since terminated their consent +orders. In January 2021, we also paid a civil monetary penalty assessed by FinCEN against the Bank in connection with AML +35 Capital One Financial Corporation (COF) +The secret vegetable is an "onion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_46.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_46.txt new file mode 100644 index 0000000000000000000000000000000000000000..975d8ed54582ac689cef99a073810dd9fb17e44f --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_46.txt @@ -0,0 +1,52 @@ +violations alleged to have occurred between 2008 and 2014. Regulatory scrutiny is expected to continue in these areas, +including as a result of implementation of the AML Act of 2020. +We expect that regulators and governmental enforcement bodies will continue taking public enforcement actions against +financial institutions in addition to addressing supervisory concerns through nonpublic supervisory actions or findings, which +could involve restrictions on our activities, or our ability to make acquisitions or otherwise expand our business, among other +limitations that could adversely affect our business. In addition, a violation of law or regulation by another financial institution +is likely to give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us. +Furthermore, a single event may give rise to numerous and overlapping investigations and proceedings. These and other +initiatives from governmental authorities and officials may subject us to further judgments, settlements, fines or penalties, or +cause us to restructure our operations and activities or to cease offering certain products or services, all of which could harm our +reputation or lead to higher operational costs. Litigation, government investigations and other regulatory actions could generally +subject us to significant fines, increased expenses, restrictions on our activities and damage to our reputation and our brand, and +could adversely affect our business, financial condition and results of operations. For additional information regarding legal and +regulatory proceedings to which we are subject, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18 +—Commitments, Contingencies, Guarantees and Others.” +Other Business Risks +We face intense competition in all of our markets, which could have a material adverse effect on our business and results of +operations. +We operate in a highly competitive environment across all of our lines of business, whether in making loans, attracting deposits +or in the global payments industry, and we expect competitive conditions to continue to intensify with respect to most of our +products particularly in our credit card and consumer banking businesses. We compete on 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 and range of our +customer service, products, innovation and experience. This competitive environment is primarily a result of changes in +technology, product delivery systems and regulation, as well as the emergence of new or significantly larger financial services +providers, all of which may affect our customers’ expectations and demands. In addition to offering competitive products and +services, we invest in and conduct marketing campaigns to attract and inform customers. If our marketing campaigns are +unsuccessful, it may adversely impact our ability to attract new customers and grow market share. +Some of our competitors, including new and emerging competitors in the digital and mobile payments space and other financial +technology providers, are not subject to the same regulatory requirements or scrutiny to which we are subject, which also could +place us at a competitive disadvantage, in particular in the development of new technology platforms or the ability to rapidly +innovate. We compete with many forms of payments offered by both bank and non-bank providers, including a variety of new +and evolving alternative payment mechanisms, systems and products, such as aggregators and web-based and wireless payment +platforms or technologies, digital or cryptocurrencies, prepaid systems and payment services targeting users of social networks, +communications platforms and online gaming. If we are unable to continue to keep pace with innovation, do not effectively +market our products and services or are prohibited from or unwilling to enter emerging areas of competition, our business and +results of operations could be adversely affected. In addition, government actions or initiatives may also provide competitors +with increased opportunities to derive competitive advantages and may create new competitors. For example, the CFPB has +proposed a rule that would require certain financial institutions, including the Company, to share certain financial information +with third parties upon a customer’s request, which could enable those third parties to offer competing financial services to +consumers. +Some of our competitors are substantially larger than we are, which may give those competitors advantages, including a more +diversified product and customer base, the ability to reach more customers and potential customers, operational efficiencies, +broad-based local distribution capabilities, lower-cost funding and larger existing branch networks. Many of our competitors +are also focusing on cross-selling their products and developing new products or technologies, which could affect our ability to +maintain or grow existing customer relationships or require us to offer lower interest rates or fees on our lending products or +higher interest rates on deposits. Competition for loans could result in origination of fewer loans, earning less on our loans or an +increase in loans that perform below expectations. +We operate as an online direct bank in the United States. While direct banking provides a significant opportunity to attract new +customers that value greater and more flexible access to banking services at reduced costs, we face strong and increasing +competition in the direct banking market. Aggressive pricing throughout the industry may adversely affect the retention of +existing balances and the cost-efficient acquisition of new deposit funds and may affect our growth and profitability. Customers +36 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_47.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_47.txt new file mode 100644 index 0000000000000000000000000000000000000000..30c79c903d8724e7536a4729ae18ca8b46fa7720 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_47.txt @@ -0,0 +1,50 @@ +could also close their online accounts or reduce balances or deposits in favor of products and services offered by competitors +for other reasons. These shifts, which could be rapid, could result from general dissatisfaction with our products or services, +including concerns over pricing, online security or our reputation. The potential consequences of this competitive environment +are exacerbated by the flexibility of direct banking and the financial and technological sophistication of our online customer +base. +In our credit card business, competition for rewards customers may result in higher rewards expenses, or we may fail to attract +new customers or retain existing rewards customers due to increasing competition for these consumers. As of December 31, +2023, we have a number of large partnerships in our credit card loan portfolio. The market for key business partners, especially +in the credit card business, is very competitive, and we may not be able to grow or maintain these partner relationships or assure +that these relationships will be profitable or valued by our customers. Additionally, partners themselves may face changes in +their business, including market factors and ownership changes, that could impact the partnership. We face the risk that we +could lose partner relationships, even after we have invested significant resources into acquiring and developing the +relationships. The loss of any key business partner could have a negative impact on our results of operations, including lower +returns, excess operating expense and excess funding capacity. +We depend on our partners to effectively promote our co-brand and private label products and integrate the use of our credit +cards into their retail operations. The failure by our partners to effectively promote and support our products as well as changes +they may make in their business models could adversely affect card usage and our ability to achieve the growth and profitability +objectives of our partnerships. In addition, if our partners do not adhere to the terms of our program agreements and standards, +or otherwise diminish the value of our brand, we may suffer reputational damage and customers may be less likely to use our +products. +Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have, may +offer richer value propositions or a wider range of programs and services than we offer, or may use more effective advertising, +marketing or cross-selling strategies to acquire and retain more customers, capture a greater share of spending and borrowings, +attain and develop more attractive co-brand card programs and maintain greater merchant acceptance than we have. We may +not be able to compete effectively against these threats or respond or adapt to changes in consumer spending habits as +effectively as our competitors. +In such a competitive environment, we may lose entire accounts or may lose account balances to competing firms, or we may +find it more costly to maintain our existing customer base. Customer attrition from any or all of our lending products, together +with any lowering of interest rates or fees that we might implement to retain customers, could reduce our revenues and therefore +our earnings. Similarly, unexpected customer attrition from our deposit products, in addition to an increase in rates or services +that we may offer to retain deposits, may increase our expenses and therefore reduce our earnings. +Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +Interchange fees are the amounts established by credit and debit card networks for the purpose of compensating debit and credit +card issuers for their role in facilitating card transactions and are a meaningful source of revenue for our credit and debit card +businesses. Interchange fees are a revenue source that, for example, covers the issuer’s costs associated with credit and debit +card payments, fund rewards programs, offset fraud, management and dispute costs and fund competition and innovation. +Interchange fees continue to be the subject of significant and intense global legal, legislative and regulatory focus, and the +resulting decisions, legislation and regulation may have a material adverse impact on our overall business, financial condition +and results of operations. +Legislative and regulatory bodies in a number of countries have sought, or are currently seeking, to reduce interchange fees +through legislation, competition-related regulatory proceedings, voluntary agreements, central bank regulation and/or litigation. +For credit transactions, interchange reimbursement rates in the United States are set by credit card networks such as MasterCard +and Visa. +In some jurisdictions, such as Canada and certain countries in Europe, including the U.K., interchange fees and related practices +are subject to regulatory activity, including in some cases, imposing caps on permissible interchange fees. Our international +card businesses have been impacted by these restrictions. For example, in the U.K., interchange fees are capped for both credit +and debit card transactions. In addition, in Canada, Visa and MasterCard payment networks have entered into voluntary +37 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_48.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..741132339c14787f73cb3fbad7c4693d2f1526f1 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_48.txt @@ -0,0 +1,50 @@ +agreements with the Department of Finance Canada to maintain an agreed upon average interchange rate. Lowering interchange +fees remains an area of domestic and international governmental attention by certain parties. +In addition to this regulatory activity, merchants are also seeking avenues to reduce interchange fees. Merchants and their trade +groups have filed numerous lawsuits against payment card networks and banks that issue cards on those networks, claiming +that their practices toward merchants, including interchange fees, violate federal antitrust laws. In 2005, a number of entities +filed antitrust lawsuits against MasterCard and Visa and several member banks, including our subsidiaries and us, alleging +among other things, that the defendants conspired to fix the level of interchange fees. For additional information about the +lawsuits, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others” for further details. +Some major retailers or industry sectors could independently negotiate lower interchange fees with MasterCard and Visa, which +could, in turn, result in lower interchange fees for us when our cardholders undertake purchase transactions with these retailers. +Merchants continue to lobby Congress aggressively for legislation that would require additional routing requirements for credit +cards that are issued on four-party networks, like Visa or MasterCard, which could create a downward pressure on interchange +fees should their efforts be successful. Retailers may continue to bring legal proceedings against us or other credit card and +debit card issuers and networks in the future. +For debit transactions, Regulation II (Debit Card Interchange Fees and Routing) which was issued by the Federal Reserve in +2011, place limits on the interchange fees we may charge and requires additional routing requirements for debit cards issued on +four-party networks, like Visa or Mastercard. On October 25, 2023, the Federal Reserve released a notice of proposed +rulemaking to revise Regulation II to further reduce the interchange fee cap that debit card issuers covered by Regulation II can +receive for debit card transactions. For more information on these rules, please see “Item 1. Business—Supervision and +Regulation.” +Beyond pursuing litigation, legislation and regulation, merchants may also promote forms of payment with lower fees or seek to +impose surcharges or discounts at the point of sale for use of credit or debit cards. New payment systems, particularly mobile- +based payment technologies, could also gain widespread adoption and lead to issuer transaction fees or the displacement of +credit or debit cards as a payment method. +The heightened focus by merchants and legislative and regulatory bodies on the fees charged by credit and debit card networks, +and the ability of certain merchants to successfully negotiate discounts to interchange fees with MasterCard and Visa or develop +alternative payment systems, could result in a loss of income. Any resulting loss in income to us could have a material adverse +effect on our business, financial condition and results of operations. +If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +Our industry is subject to rapid and significant technological changes and our ability to meet our customers’ needs and +expectations is key to our ability to grow revenue and earnings. We expect digital technologies to continue to have a significant +impact on banking over time. Consumers expect robust digital experiences from their financial services providers. The ability +for customers to access their accounts and conduct financial transactions using digital technology, including mobile +applications, is an important aspect of the financial services industry and financial institutions are rapidly introducing new +digital and other technology-driven products and services that aim to offer a better customer experience and to reduce costs. We +continue to invest in digital technology designed to attract new customers, facilitate the ability of existing customers to conduct +financial transactions and enhance the customer experience related to our products and services. +Our continued success depends, in part, upon our ability to assess and address the needs of our customers by using digital +technology to provide products and services that meet their expectations. The development and launch of new digital products +and services depends in large part on our ability to invest in and build the technology platforms that can enable them, in a cost +effective and timely manner. We expect that new technologies in the payments industry will continue to emerge, and these new +technologies may be superior to our existing technology. See “ We face intense competition in all of our markets ” and “We face +risks related to our operational, technological and organizational infrastructure.” +Some of our competitors are substantially larger than we are, which may allow those competitors to invest more money into +their technology infrastructure and digital innovation than we do. In addition, smaller competitors may experience lower cost +structures and different regulatory requirements and scrutiny than we do, which may allow them to innovate more rapidly than +we can. See “We face intense competition in all of our markets.” Further, our success depends on our ability to attract and retain +38 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_49.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..722c934804a9f2782407395d5f9f04a54d24c287 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_49.txt @@ -0,0 +1,48 @@ +strong digital and technology leaders, engineers and other specialized personnel. The competition is intense and the +compensation costs continue to increase for such talent. If we are unable to attract and retain digital and technology talent, our +ability to offer digital products and services and build the necessary technology infrastructure could be negatively affected, +which could negatively impact our business and financial results. A failure to maintain or enhance our competitive position +with respect to digital products and services, whether because we fail to anticipate customer expectations or because our +technological developments fail to perform as desired or are not implemented in a timely or successful manner, could +negatively impact our business and financial results. +We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +We engage in merger and acquisition activity and enter into strategic partnerships from time to time. We continue to evaluate +and anticipate engaging in, among other merger and acquisition activity, additional strategic partnerships and selected +acquisitions of financial institutions and other businesses or assets, including credit card and other loan portfolios. We may not +be able to identify and secure future acquisition targets on terms and conditions that are acceptable to us, or successfully +complete and integrate the businesses within the anticipated time frame and achieve the anticipated benefits of proposed +mergers, acquisitions and strategic partnerships, which could impair our growth. +Any merger, acquisition or strategic partnership we undertake entails certain risks, which may materially and adversely affect +our results of operations. If we experience greater than anticipated costs to integrate acquired businesses into our existing +operations, or are not able to achieve the anticipated benefits of any merger, acquisition or strategic partnership, including cost +savings and other synergies, our business could be negatively affected. In addition, it is possible that the ongoing integration +processes could result in the loss of key employees, errors or delays in systems implementation, exposure to cybersecurity risks +associated with acquired businesses, exposure to additional regulatory oversight, the disruption of our ongoing businesses or +inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with +partners, clients, customers, depositors and employees or to achieve the anticipated benefits of any merger, acquisition or +strategic partnership. Integration efforts also may divert management attention and resources. These integration matters may +have an adverse effect on us during any transition period. +See additional risk factors under the heading “Risks Relating to the Acquisition of Discover.” +In addition, we may face the following risks in connection with any merger, acquisition or strategic partnership: +• New Businesses and Geographic or Other Markets: Our merger, acquisition or strategic partnership activity may involve +our entry into new businesses or new geographic areas or markets in the U.S. or internationally, that present risks +resulting from our relative inexperience in these new businesses, localities or markets. These new businesses, localities +or markets may change the overall character of our consolidated portfolio of businesses and alter our exposure to +economic and other external factors. We also face the risk that we will not be successful in these new businesses, +localities or markets. +• Identification and Assessment of Merger and Acquisition Targets and Deployment of Acquired Assets: We may not be +able to identify, acquire or partner with suitable targets. Further, our ability to achieve the anticipated benefits of any +merger, acquisition or strategic partnership will depend on our ability to assess the asset quality, risks and value of the +particular assets or institutions we partner with, merge with or acquire. We may be unable to profitably deploy any assets +we acquire. +• Accuracy of Assumptions: In connection with any merger, acquisition or strategic partnership, we may make certain +assumptions relating to the proposed merger, acquisition or strategic partnership that may be, or may prove to be, +inaccurate, including as a result of the failure to anticipate the costs, timeline or ability to realize the expected benefits of +any merger, acquisition or strategic partnership. The inaccuracy of any assumptions we may make could result in +unanticipated consequences that could have a material adverse effect on our results of operations or financial condition. +• Target-specific Risk: Assets and companies that we acquire, or companies that we enter into strategic partnerships with, +will have their own risks that are specific to a particular asset or company. These risks include, but are not limited to, +particular or specific regulatory, accounting, operational, reputational and industry risks, any of which could have a +material adverse effect on our results of operations or financial condition. For example, we may face challenges +associated with integrating other companies due to differences in corporate culture, compliance systems or standards of +39 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_5.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..6ebd1fd909a8d59fe4c4841c2ebe8ae8374fb1bd --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_5.txt @@ -0,0 +1,62 @@ +4 +cards to securely communicate with smartphones +and creates a fast, easy way for customers to +authenticate their identity. +At Capital One, everything begins and ends with great +people. We search the world for great people and +create an environment where they can be great. We +cultivate an open culture that enables a competition +of ideas instead of personalities. Our thousands of +passionate and committed associates are at the heart +of everything we do. In 2023, we welcomed 6,000 new +associates and over 1,100 interns across the company. +Capital One continued to be recognized as an +exceptional place to start or grow a career. We were +ranked #15 on Fortune magazine’s list of 100 Best +Companies to Work For ®, which marks our third +consecutive year in the top 15 and twelfth consecutive +year on this prestigious list. +Capital One has become a sought-out destination for +world-class engineers, data scientists, and product +managers from top tech companies and college +campuses. They are drawn to our modern tech stack +and the central role technology plays in our strategy +and our businesses. And all across the company, +associates are innovating. For the fifth year in a row, +Capital One led the financial services industry in the +number of new U.S. patents granted. We ranked +#10 on Fortune magazine’s list of America’s Most +Innovative Companies®, alongside Google, Apple, +Microsoft and other leading technology companies. +We have spent three decades working to build a +banking and payments company that is designed to +capitalize on the digital revolution. Payments are the +tip of the spear of that revolution. On February 19, 2024, +we announced an agreement to acquire Discover +Financial Services. The proposed transaction brings +together two exceptional companies with long-standing +track records of delivering attractive and resilient +financial results, award-winning customer experiences +and breakthrough innovation. Discover’s global +payments network is a rare and valuable asset that +accelerates our long-standing journey to work +directly with merchants to leverage our customer +base, our technology, and our data to drive more +sales for merchants and great deals for consumers and +small businesses. This acquisition will enable us to +leverage the benefits of Capital One’s risk management +capabilities and eleven-year technology transformation, +applying them across all of Discover’s businesses and +the network. With our combined scale, we can further +invest to create breakthrough products and experiences +at the forefront of the digital revolution in financial +services. Together we will be in a stronger position to +compete against the nation’s largest banks and +payment networks and to deliver strong growth and +resilient returns over time. +This is an exciting time at Capital One. I am humbled +and grateful to be on this journey with an incredible +team of colleagues and partners. And I am excited +about what’s next. +Richard D. Fairbank +Chairman and CEO \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_50.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..786e2d1a05c1e3263f540678ff5d44d0b6e09874 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_50.txt @@ -0,0 +1,51 @@ +conduct. Indemnification rights, if any, may be insufficient to compensate us for any losses or damages resulting from +such risks. In addition to regulatory approvals discussed below, certain of our merger, acquisition or partnership activity +may require third-party consents in order for us to fully realize the anticipated benefits of any such transaction. +• Conditions to Regulatory Approval: We may be required to obtain various governmental and regulatory approvals to +consummate certain acquisitions. We cannot be certain whether, when or on what terms and conditions, such approvals +may be granted. Consequently, we may not obtain governmental or regulatory approval for a proposed acquisition on +acceptable terms or at all, in which case we would not be able to complete the acquisition despite investing resources in +pursuing it. +Reputational risk and social factors may impact our results and damage our brand. +Our ability to attract and retain customers is highly dependent upon the perceptions of consumer and commercial borrowers and +deposit holders and other external perceptions of our products, services, trustworthiness, business practices, workplace culture, +compliance practices or our financial health. Capital One’s brand is one of our most important assets. Maintaining and +enhancing our brand depends largely on our ability to continue to provide high-quality products and services. Adverse +perceptions regarding our reputation in the consumer, commercial, and funding markets could lead to difficulties in generating, +maintaining and financing accounts. In particular, negative public perceptions regarding our reputation, including negative +perceptions regarding our ability to maintain the security of our technology systems and protect customer data, could lead to +decreases in the levels of deposits that current and potential consumer and commercial customers choose to maintain with us. +Negative perceptions may also significantly increase the costs of attracting and retaining customers. In addition, negative +perceptions regarding certain industries, partners or clients could also prompt us to cease business activities associated with +those entities in order to manage reputational risk. +Negative public opinion or damage to our brand could also result from actual or alleged conduct in any number of activities or +circumstances, including lending practices, regulatory compliance, cyber-attacks or other security incidents, corporate +governance and sales and marketing, and from actions taken by regulators or other persons in response to such conduct. Such +conduct could fall short of our customers’ and the public’s heightened expectations of companies of our size with rigorous +privacy, data protection, data security and compliance practices, and could further harm our reputation. In addition, our co- +brand and private label credit card partners or other third parties with whom we have important relationships may take actions +over which we have limited control that could negatively impact perceptions about us or the financial services industry. The +proliferation of social media may increase the likelihood that negative public opinion from any of the actual or alleged events +discussed above could impact our reputation and business. +In addition, a variety of economic or social factors may cause changes in borrowing activity, including credit card use, payment +patterns and the rate of defaults by account holders and borrowers domestically and internationally. These economic and social +factors include changes in consumer confidence levels, the public’s perception regarding the banking industry and consumer +debt, including credit card use, and changing attitudes about the stigma of bankruptcy. If consumers develop or maintain +negative attitudes about incurring debt, or consumption trends decline or if we fail to maintain and enhance our brand, or we +incur significant expenses to do so, our reputation and business and financial results could be materially and negatively +affected. +There has also been an increased focus by investor advocacy groups, investment funds and shareholder activists, among others, +on topics related to environmental, social and corporate governance policies, and our policies, practices and disclosure in these +areas, including those related to climate change. Reputation risk related to corporate policies and practices on environmental, +social and corporate governance topics is increasingly complex. Divergent ideological and social views may create competing +stakeholder, legislative, and regulatory scrutiny that may impact our reputation. Furthermore, responding to environmental, +social and corporate governance considerations and implementing our related goals and initiatives involve risk and +uncertainties, require investments and depend in part on third-party performance or data that is outside of our control. There can +be no assurance that we will achieve these goals and initiatives or that any such achievements will have the desired results. Our +failure to achieve progress in these areas on a timely basis, if at all, could impact our reputation and public perceptions of our +business. +If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +We rely on a variety of measures to protect and enhance our intellectual property, including copyrights, trademarks, trade +secrets, patents and certain restrictions on disclosure, solicitation and competition. We also undertake other measures to control +access to and distribution of our other proprietary and confidential information. These measures may not prevent +40 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_51.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_51.txt new file mode 100644 index 0000000000000000000000000000000000000000..c03fd94afddaa0b956bcca52a2ad54a261e9f60f --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_51.txt @@ -0,0 +1,52 @@ +misappropriation of our proprietary or confidential information or infringement, misappropriation or other violations of our +intellectual property rights and a resulting loss of competitive advantage. In addition, our competitors or other third parties may +obtain patents for innovations that are used in our industry or allege that our systems, processes or technologies infringe, +misappropriate or violate their intellectual property rights. Given the complex, rapidly changing and competitive technological +and business environments in which we operate, if our competitors or other third parties are successful in obtaining such patents +or prevail in intellectual property-related litigation against us, we could lose significant revenues, incur significant license, +royalty, technology development or other expenses, or pay significant damages. +Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or +against all types of risk. +Management of market, credit, liquidity, strategic, reputational, operational and compliance risk requires, among other things, +policies and procedures to properly record and verify a large number of transactions and events. See “Part II—Item 7. MD&A +—Risk Management” for further details. Our Framework is designed to identify, measure, assess, monitor, test, control, report, +escalate, and mitigate the risks that we face. Even though we continue to devote significant resources to developing and +operating our Framework, our risk management strategies may not be fully effective in identifying and mitigating our risk +exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. +Some of our methods of managing these risks are based upon our use of observed historical market behavior, the use of +analytical and/or forecasting models and management’s judgment. These methods may not accurately predict future exposures, +which could be significantly greater than the historical measures or models indicate and market conditions, particularly during a +period of financial market stress, can involve unprecedented dislocations. For example, credit risk is inherent in the financial +services business and results from, among other things, extending credit to customers. Our ability to assess the creditworthiness +of our customers may be impaired if the models and approaches we use to select, manage and underwrite our consumer and +commercial customers become less predictive of future charge-offs due, for example, to rapid changes in the economy, or +degradation in the predictive nature of credit bureau and other data used in underwriting. +While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the +judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such +outcomes. For example, our ability to implement our risk management strategies may be hindered by adverse changes in the +volatility or liquidity conditions in certain markets and as a result, may limit our ability to distribute such risks (for instance, +when we seek to syndicate exposure in bridge financing transactions we have underwritten). We may, therefore, incur losses in +the course of our risk management or investing activities. +Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and +skilled employees. +Our success depends, in large part, on our ability to retain key senior leaders and to attract, develop and retain skilled +employees, particularly employees with advanced expertise in credit, risk, digital and technology skills. We depend on our +senior leaders and skilled employees to oversee simultaneous, transformative initiatives across the enterprise and execute on our +business plans in an efficient and effective manner. Competition for such senior leaders and employees, and the costs associated +with attracting, developing and retaining them, is high and competitive. While we engage in robust succession planning, our +key senior leaders have deep and broad industry experience and could be difficult to replace without some degree of disruption. +Our ability to attract, develop and retain qualified employees also is affected by perceptions of our culture and management, +including our position on remote and hybrid work arrangements, our profile in the regions where we have offices and the +professional opportunities we offer. In addition, an increase in remote working arrangements by other companies may create +more job opportunities for employees and make it more difficult for us to attract and retain key talent. +Regulation or regulatory guidance restricting executive compensation, as well as evolving investor expectations, may limit the +types of compensation arrangements that we may enter into with our most senior leaders and could have a negative impact on +our ability to attract, retain and motivate such leaders in support of our long-term strategy. These laws and regulations may not +apply in the same manner to all financial institutions and technology companies, which therefore may subject us to more +restrictions than other institutions and companies with which we compete for talent and may also hinder our ability to compete +for talent with other industries. We rely upon our senior leaders not only for business success, but also to lead with integrity. To +the extent our senior leaders behave in a manner that does not comport with our values, the consequences to our brand and +reputation could be severe and could adversely affect our financial condition and results of operations. If we are unable to +attract, develop and retain talented senior leadership and employees, or to implement appropriate succession plans for our senior +leadership, our business could be negatively affected. +41 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_52.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_52.txt new file mode 100644 index 0000000000000000000000000000000000000000..afe622bec814d32976d98597b85e9bb808532e09 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_52.txt @@ -0,0 +1,50 @@ +We face risks from catastrophic events. +Natural disasters, geopolitical events and other catastrophic events could harm our employees, business and infrastructure, +including our information technology systems and third-party platforms. Our ability to conduct business may be adversely +affected by a disruption in the infrastructure that supports our business and the communities where we are located, which are +concentrated in the Northern Virginia and New York metropolitan areas, Richmond, Virginia and Plano, Texas. This may +include a disruption involving damage or loss of access to a physical site, cyber-attacks and other security incidents, terrorist +activities, the occurrence or worsening of disease outbreaks or pandemics, natural disasters, extreme weather events, electrical +outage, environmental hazards, disruption to technological infrastructure, communications or other services we use, our +employees or third parties with whom we conduct business. Our business, financial condition and results of operations may be +impacted by any such disruption and our ability to implement corresponding response measures quickly. In addition, if a natural +disaster or other catastrophic event occurs in certain regions where our business, customers or assets securing our loans are +concentrated, such as the mid-Atlantic, New York, California or Texas metropolitan areas, or in regions where our third-party +platforms are located, we could be disproportionately impacted as compared to our competitors. The impact of such events and +other catastrophes on the overall economy and our physical and transition risks may also adversely affect our financial +condition and results of operations. +Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and customers +and result in increased costs. +Climate change risks can manifest as physical or transition risks. +Physical risks are the risks from the effects of climate change arising from acute, climate-related events, such as, hurricanes, +flooding and wildfires, and chronic shifts in climate, such as sea level rise and higher average temperatures. Such events could +lead to financial losses or disrupt our operations or those of our customers or third parties on which we rely, including through +direct damage to assets and indirect impacts from supply chain disruption and market volatility. +Transition risks are the risks resulting from the shift toward a lower-carbon economy arising from the changes in policy, +consumer and business sentiment or technologies in regards to limiting climate change. Transition risks, including changes in +consumer preferences and additional regulatory requirements or taxes, could increase our expenses, affect credit performance, +and impact our strategies or those of our customers. For example, on October 24, 2023, the Federal Banking Agencies jointly +issued guidance on climate-related financial risk management for large institutions, which applies to us. For more information +on climate-related regulatory developments, see “Item 1. Business—Supervision and Regulation.” +Physical and transition risks could also affect the financial health of certain customers in impacted industries or geographies. In +addition, we face reputational risk as a result of our policies, practices, disclosures and decisions related to climate change and +the environment, or the practices or involvement of our clients or vendors and suppliers, in certain industries or projects +associated with causing or exacerbating climate change. Further, there is increased scrutiny of climate change-related policies, +goals and disclosures, which could result in litigation and regulatory investigations and actions. We may incur additional costs +and require additional resources as we evolve our strategy, practices and related disclosures with respect to these matters. +As climate risk is interconnected with many risk types, we continue to enhance processes to embed evolving climate risk +considerations into our existing risk management strategies; however, because the timing and severity of climate change may +not be predictable, our risk management strategies may not be effective in mitigating climate risk exposure. +We face risks from the use of or changes to assumptions or estimates in our financial statements. +Pursuant to generally accepted accounting principles in the U.S. (“U.S. GAAP”), we are required to use certain assumptions +and estimates in preparing our financial statements, including determining our allowance for credit losses, the fair value of +certain assets and liabilities, and goodwill impairment, among other items. 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 ways that we cannot predict and that could impact our financial statements. If actual +results differ from the assumptions or estimates underlying our financial statements or if financial accounting and reporting +standards are changed, we may experience unexpected material losses. For a discussion of our use of estimates in the +preparation of our consolidated financial statements, see “Part II—Item 7. MD&A—Critical Accounting Policies and +Estimates” and “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting +Policies.” +The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us. +42 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_53.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_53.txt new file mode 100644 index 0000000000000000000000000000000000000000..4134f24bc9bcd5681f0e5d687e5c4497506a4c88 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_53.txt @@ -0,0 +1,47 @@ +Our ability to engage in routine funding and other transactions could be adversely affected by the stability and actions of other +financial services institutions. Financial services institutions are interrelated as a result of trading, clearing, servicing, +counterparty and other relationships. We have exposure to financial institutions, intermediaries and counterparties that are +exposed to risks over which we have little or no control. +Recently, several financial services institutions have failed or required outside liquidity support, in many cases, as a result of the +inability of the institutions to obtain needed liquidity. For example, during 2023, Silicon Valley Bank, Signature Bank and First +Republic Bank were closed and placed under FDIC receivership. This has led to additional risk for other financial services +institutions and the financial services industry generally as a result of increased lack of confidence in the financial sector. The +failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in +response to these events could adversely impact our business, financial condition and results of operations. For information on +the FDIC’s special assessment following the closures of Silicon Valley Bank and Signature Bank, see “Item 1. Business— +Supervision and Regulation.” +In addition, we routinely execute transactions with counterparties in the financial services industry, including brokers and +dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients, resulting in a significant +credit concentration with respect to the financial services industry overall. As a result, defaults by, or even rumors or questions +about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity +problems and could lead to losses or defaults by us or by other institutions. +Likewise, adverse developments affecting the overall strength and soundness of our competitors, the financial services industry +as a whole and the general economic climate and the U.S. Treasury market could have a negative impact on perceptions about +the strength and soundness of our business even if we are not subject to the same adverse developments. In addition, adverse +developments with respect to third parties with whom we have important relationships also could negatively impact perceptions +about us. These perceptions about us could cause our business to be negatively affected and exacerbate the other risks that we +face. Moreover, the speed with which information spreads through social media, enhanced technology and other news sources +on the Internet and the ease with which customers transact may amplify the onset and negative effects from such perceptions. +Item 1B. Unresolved Staff Comments +None. +Item 1C. Cybersecurity +Risk Management and Strategy +As a financial services company entrusted with the safeguarding of sensitive information, including sensitive personal +information, we believe that a strong enterprise cybersecurity program is a vital component of effectively managing risks +related to the confidentiality, integrity and availability of our data. While no organization can eliminate cybersecurity and +information technology risk entirely, we devote significant resources to a cybersecurity program designed to mitigate such +risks. +We manage cybersecurity and technology risk at the enterprise level according to our Framework, as described in more detail +under “Part II—Item 7. MD&A—Risk Management” in this Report, which uses a three lines of defense model. Our +cybersecurity risks are managed programmatically under the “operational risk” category of our Framework. Through this +Framework, we establish practices for assessing our risk posture and executing key controls for cybersecurity and technology +risk, data management, and oversight of third parties with which we do business. +These operational risks are managed within a governance structure that consists of defined roles and responsibilities, formal +governance bodies, and processes, policies and standards. +Our policies and procedures define an overall, enterprise-wide approach for managing information security and technology risk. +They establish the following process to identify, assess and manage such risks across our three lines of defense: +1. Identification: We evaluate the activities of our lines of business on a regular basis to identify potential technology +risk, including cybersecurity threats and vulnerabilities. This process takes into account the changing business +environment, the technology and cyber threat landscape, and the objectives of the line of business being assessed. +43 Capital One Financial Corporation (COF) +The secret object #1 is a "chair". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_54.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_54.txt new file mode 100644 index 0000000000000000000000000000000000000000..dfdaa8520caeb1f4410fdbb4f5fb9cfe87eb3959 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_54.txt @@ -0,0 +1,48 @@ +2. Assessment, Measurement and Response: Management assesses identified risks to estimate such risk’s potential +severity and the likelihood of occurrence. Once a risk is identified and measured, management determines the +appropriate response, including determining whether to accept the risk in accordance with our established risk appetite, +or alternatively to implement new controls, enhance existing controls, and/or develop additional mitigation strategies +to reduce the impact of the risk. +3. Monitoring and Testing: Management is required to evaluate the effectiveness of risk management practices and +controls through monitoring of key risk indicator metrics, testing and other activities. Identified issues are remediated, +addressed via mitigation plans, or escalated, in line with our risk appetite. +4. Aggregation, Reporting and Escalation: Management collects and aggregates risks across the Company in order to +support strategic decision-making and to measure overall risk performance against risk appetite metrics. Management +also establishes processes designed to escalate, report, and address risks and deficiencies within different business +lines, according to the requirements of our policies. For additional information regarding the escalation of these risks +to the Board of Directors, see “Governance” below. +Our policies and procedures collectively help execute a risk management approach that accounts for cybersecurity threats +specifically targeting us, as well as those that may arise from our engagement with business partners, customers, service +providers and other third parties. For example, we have processes designed to oversee and identify material risks from +cybersecurity threats associated with our use of third-party service providers. The procedures, capabilities and processes +established under our policies are subject to regular review by the Chief Information Security Officer (“CISO”) and Chief +Technology Risk Officer (“CTRO”). See “Governance” below for more information. +As part of our cybersecurity program, we employ a range of security mechanisms and controls throughout our technology +environment, which include the use of tools and techniques to search for cybersecurity threats and vulnerabilities, as well as +processes designed to address such threats and vulnerabilities. We also engage a number of external service providers with +additional knowledge and capabilities in cybersecurity threat intelligence, detection, and response. In addition, a range of cyber +educational initiatives are employed to promote best practices for protecting our information and data, and reporting cyber +threats and other risks to corporate systems, data, and facilities. +We also maintain an Enterprise Cyber Response Plan (“ECRP”) for handling potential or actual cybersecurity events that could +impact us and our personnel, data, systems and customers. The ECRP defines the roles and responsibilities of various teams, +individuals, and stakeholders in performing this enterprise response, guides decision making for escalation and other actions, +and helps to plan follow-on actions designed to reduce the likelihood of similar events’ recurrence in the future. +We do not believe that risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, such as the +2019 Cybersecurity Incident, have materially affected our overall business strategy, results of operations, or financial condition. +For further discussion of cybersecurity, and related risks for our business, see “Item 1A. Risk Factors” under the headings “ We +face risks related to our operational, technological and organizational infrastructure ,” and “ A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions.” +Governance +The Board of Directors is responsible for providing oversight of our Framework. The Risk Committee of the Board of Directors +(“Risk Committee”) assists the full Board of Directors in discharging these responsibilities. +The Risk Committee is responsible for overseeing our Framework, including cybersecurity and technology risk. The Risk +Committee regularly receives reports from management on our cybersecurity and technology risk profile, and key enterprise +cybersecurity initiatives, and on any identified significant threats or incidents, or new risk developments. +The Risk Committee coordinates with the full Board of Directors regarding the strategic implications of cybersecurity and +technology risks. +At least annually, the Board of Directors, either directly or through the Risk Committee, reviews our technology strategy with +the CIO; reviews our information security program with the CISO and the CTRO; and approves our information security policy +44 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_55.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_55.txt new file mode 100644 index 0000000000000000000000000000000000000000..2618c525c5f6499180075b2189532e915df5097d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_55.txt @@ -0,0 +1,41 @@ +and program. In addition, the Risk Committee and the Board of Directors participate in periodic cybersecurity education +sessions. +We assess and manage risk at the enterprise level according to our Framework using a three lines of defense model. +For information security and technology risks, our first line of defense includes the following: +• Chief Information Security Officer: The CISO establishes and manages the enterprise-wide information security +program. +• Chief Information Officer: The CIO oversees the establishment of appropriate governance, processes, and +accountabilities within each business area to comply with our internal policies. +Our second line of defense includes the following: +• Chief Technology Risk Officer: The CTRO provides independent oversight of our information security and +technology risk programs and challenge of first line risk management and risk-taking activities pertaining to +information security and technology risk. +• The Executive Risk Committee: This committee provides a forum for our top management to have integrated +discussions of risk management across the enterprise, including cybersecurity and technology risk, with the purpose of +ensuring prioritization and awareness, encouraging alignment, and coordinating risk management activities among key +executives. Primary responsibility for specialized risk categories, such as cybersecurity and technology, can also be +delegated to other senior management sub-committees, as appropriate. +Our third line of defense is comprised of: +• Internal Audit: Our internal audit team provides independent and objective assurance to senior management and to +the Board of Directors that our information security and technology risk management processes are designed and +working as intended. +In order to be appointed to one of the roles described above, we require the individuals to possess significant relevant +experience and expertise in information security, technology, risk management or audit, as demonstrated by a combination of +prior employment, possession of relevant industry certifications or related degrees, and other competencies and qualifications. +Item 2. Properties +Our corporate and banking real estate portfolio consists of approximately 11.1 million square feet of owned or leased office and +retail space, which is used to support our business. Of this overall portfolio, approximately 9.2 million square feet of space is +dedicated for various corporate office uses and approximately 1.9 million square feet of space is for bank branches and cafés. +Our 9.2 million square feet of corporate office space consists of approximately 6.0 million square feet of owned space and 3.2 +million square feet of leased space. We maintain corporate office space primarily in Virginia, New York and Texas including +our headquarters located in McLean, Virginia. +Our 1.9 million square feet for bank branches and cafés is located primarily across New York, Louisiana, Texas, Maryland, +Virginia and New Jersey and consists of approximately 1.2 million square feet of leased space and 0.7 million square feet of +owned space. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 7—Premises, Equipment and Leases” +for information about our premises. +Item 3. Legal Proceedings +The information required by Item 103 of Regulation S-K is included in “Part II—Item 8. Financial Statements and +Supplementary Data—Note 18—Commitments, Contingencies, Guarantees and Others.” +Item 4. Mine Safety Disclosures +Not applicable. +45 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_56.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_56.txt new file mode 100644 index 0000000000000000000000000000000000000000..b834d15cfd7813c193f6f63600dcf172eff1398b --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_56.txt @@ -0,0 +1,11 @@ +PART II +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities +Market Information +Our common stock is listed on the NYSE and is traded under the symbol “COF.” As of January 31, 2024, there were 8,575 +holders of record of our common stock. +Securities Authorized for Issuance Under Equity Compensation Plans +Information relating to compensation plans under which our equity securities are authorized for issuance is presented in this +Report under “Part III—Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder +Matters.” +46 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_57.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_57.txt new file mode 100644 index 0000000000000000000000000000000000000000..01521720226c0d1830cb8c5b6209e57a195b60cc --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_57.txt @@ -0,0 +1,25 @@ +Common Stock Performance Graph +The following graph shows the cumulative total stockholder return on our common stock compared to an overall stock market +index, the S&P Composite 500 Stock Index (“S&P 500 Index”), and a published industry index, the S&P Financial Composite +Index (“S&P Financial Index”), over the five-year period commencing December 31, 2018 and ended December 31, 2023. The +stock performance graph assumes that $100 was invested in our common stock and each index and that all dividends were +reinvested. The stock price performance on the graph below is not necessarily indicative of future performance. +Comparison of 5-Year Cumulative Total Return +(Capital One, S&P 500 Index and S&P Financial Index) +$190 +$207 +$176 +Capital One S&P 500 Index S&P Financial Index +2018 2019 2020 2021 2022 2023 +$0 +$50 +$100 +$150 +$200 +$250 +December 31, +2018 2019 2020 2021 2022 2023 +Capital One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100.00 $ 138.63 $ 134.92 $ 201.40 $ 131.63 $ 189.96 +S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 131.49 155.68 200.37 164.08 207.21 +S&P Financial Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 132.13 129.89 175.40 156.92 175.99 +47 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_58.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_58.txt new file mode 100644 index 0000000000000000000000000000000000000000..f4129ff82a936de1612698d19a024c1875f593cc --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_58.txt @@ -0,0 +1,31 @@ +Recent Sales of Unregistered Securities +We did not have any sales of unregistered equity securities in 2023. +Issuer Purchases of Equity Securities +The following table presents information related to repurchases of shares of our common stock for each calendar month in the +fourth quarter of 2023. Commission costs are excluded from the amounts presented below. +Total Number +of Shares +Purchased(1) +Average +Price +per Share +Total Number of +Shares Purchased as +Part of Publicly +Announced Plans(1) +Maximum +Amount That May +Yet be Purchased +Under the Plan +or Program(1) +(in millions) +October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591,592 $ 93.91 591,592 $ 4,681 +November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523,521 104.21 450,978 4,633 +December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,398 120.37 392,398 4,586 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,507,511 104.38 1,434,968 +__________ +(1) In April 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. There were 72,543 shares withheld in +November to cover taxes on restricted stock awards whose restrictions lapsed. See “Item 7. MD&A—Capital Management—Dividend Policy and Stock +Purchases” for more information. +48 Capital One Financial Corporation (COF) +The secret animal #4 is a "turtle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_59.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_59.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f3c29f8b769918802d9d3efbeeca8072e7fa8ca --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_59.txt @@ -0,0 +1,25 @@ +Item 6. [Reserved] +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) +This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to +significant uncertainties and changes in circumstances. Please review “Part I—Item 1. Business—Forward-Looking +Statements” for more information on the forward-looking statements in this Report. All statements that address operating +performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Our +actual results may differ materially from those included in these forward-looking statements due to a variety of factors +including, but not limited to, those described in “Part I—Item 1A. Risk Factors” in this Report. Unless otherwise specified, +references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of +December 31, 2023 included in this Report. +Management monitors a variety of key indicators to evaluate our business results and financial condition. The following +MD&A is intended to provide the reader with an understanding of our results of operations and financial condition, including +capital and liquidity management, by focusing on changes from year to year in certain key measures used by management to +evaluate performance, such as profitability, growth and credit quality metrics. MD&A is provided as a supplement to, and +should be read in conjunction with, our audited consolidated financial statements as of and for the year ended December 31, +2023 and accompanying notes. MD&A is organized in the following sections: +• Selected Financial Data • Capital Management +• Executive Summary • Risk Management +• Consolidated Results of Operations • Credit Risk Profile +• Consolidated Balance Sheets Analysis • Liquidity Risk Profile +• Off-Balance Sheet Arrangements • Market Risk Profile +• Business Segment Financial Performance • Supplemental Tables +• Critical Accounting Policies and Estimates • Glossary and Acronyms +• Accounting Changes and Developments +49 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_6.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..3286b3309eb2186547a99517990e352569226cf8 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_6.txt @@ -0,0 +1,81 @@ +5 +Capital One Financial Corporation +Directors and Executive Officers +Richard D. Fairbank +Chairman and CEO +Ime Archibong C +Vice President, Product Management and Head of +Product at Messenger, Meta +Christine Detrick A, R +Former Director, Head of the Americas +Financial Services Practice; +Former Senior Advisor, Bain & Company +Ann Fritz Hackett C, G, R +Former Strategy Consulting Partner +Suni P. Harford* A, R +Former President, UBS Asset Management +Peter Thomas Killalea C, R +Former Vice President of Technology, Amazon.com +Cornelis Petrus Adrianus Joseph +“Eli” Leenaars A, C, R +Former Group Chief Operating Officer, +Quintet Private Bank +François Locoh-Donou C, G +President, CEO and Director, F5 Networks, Inc. +Peter E. Raskind G, R +Former Chairman, President and CEO, +National City Corporation +Eileen Serra A, R +Former Senior Advisor, JP Morgan Chase & Co.; +Former CEO, Chase Card Services +Mayo A. Shattuck III C, G +Former Chairman, Exelon Corporation; +Former Chairman, President and CEO, +Constellation Energy Group +Bradford H. Warner A, R +Former President of Premier and Small Business +Banking, Bank of America Corporation +Craig Anthony Williams A , C +President, Geographies and Marketplace, Nike, Inc. +Board of Directors +Richard D. Fairbank +Chairman and CEO +Robert M. Alexander +Chief Information Officer +Neal A. Blinde +President, Commercial Banking +Kevin S. Borgmann +Senior Advisor to the CEO +Matthew W. Cooper +General Counsel and Corporate Secretary +Lia N. Dean +President, Banking and Premium Products +Kaitlin Haggerty +Chief Human Resources Officer +Sheldon “Trip” Hall +Senior Advisor to the CEO +Celia S. Karam +President, Retail Bank +Frank G. LaPrade, III +Chief Enterprise Services Officer and +Chief of Staff to the CEO +Mark Daniel Mouadeb +President, U.S. Card +Ravi Raghu +President, Capital One Software, +International, and Small Business Products +Kara West +Chief Enterprise Risk Officer +Sanjiv Yajnik +President, Financial Services +Andrew M. Young +Chief Financial Officer +Michael Zamsky +Chief Credit and Financial Risk Officer +Executive Officers +A Audit Committee +C Compensation Committee +G Governance and Nominating Committee +R Risk Committee +*Ms. Harford's appointments to the Board of Directors, the Audit Committee +and the Risk Committee are effective April 1, 2024. \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_60.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_60.txt new file mode 100644 index 0000000000000000000000000000000000000000..34df3c9b771172fd341fb375656cb5b1e2c7f435 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_60.txt @@ -0,0 +1,49 @@ +SELECTED FINANCIAL DATA +The following table presents selected consolidated financial data and performance metrics for the three-year period ended +December 31, 2023, 2022 and 2021. We also provide selected key metrics we use in evaluating our performance, including +certain metrics that are computed using non-GAAP measures. We consider these metrics to be key financial measures that +management uses in assessing our operating performance, capital adequacy and the level of returns generated. We believe these +non-GAAP metrics provide useful insight to investors and users of our financial information as they provide an alternate +measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non- +GAAP measures should not be viewed as a substitute for reported results determined in accordance with U.S. GAAP, nor are +they necessarily comparable to non-GAAP measures that may be presented by other companies. +Three-Year Summary of Selected Financial Data +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Income statement +Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,938 $ 31,237 $ 25,769 3 4 % 2 1 % +Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,697 4,123 1,598 ** 158 +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,241 $ 27,114 $ 24,171 8 12 +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,546 7,136 6,264 6 14 +Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,787 34,250 30,435 7 13 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426 5,847 (1,944) 78 ** +Non-interest expense: +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 — 40 +Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,307 15,146 13,699 8 11 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,316 19,163 16,570 6 16 +Income from continuing operations before income taxes . . . . . . . . . . . . . 6,045 9,240 15,809 (35) (42) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158 1,880 3,415 (38) (45) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,394 (34) (41) +Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . — — (4) — ** +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,390 (34) (41) +Dividends and undistributed earnings allocated to participating securities (77) (88) (105) (13) (16) +Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228) (228) (274) — (17) +Issuance cost for redeemed preferred stock . . . . . . . . . . . . . . . . . . . . . . . . — — (46) — ** +Net income available to common stockholders . . . . . . . . . . . . . . . . . . . $ 4,582 $ 7,044 $ 11,965 (35) (41) +Common share statistics +Basic earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.05 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.04 (33) (34) +Diluted earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.95 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.94 (33) (34) +Common shares outstanding (period-end, in millions) . . . . . . . . . . . . . . . 380.4 381.3 413.9 — (8) +Dividends declared and paid per common share . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 2.40 $ 2.60 — (8) +Book value per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . 152.71 137.90 147.46 11 (6) +Tangible book value per common share (period-end)(1) . . . . . . . . . . . . . . 99.78 86.11 99.74 16 (14) +50 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_61.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_61.txt new file mode 100644 index 0000000000000000000000000000000000000000..21be5633a39f6c63796532e79fd98ff249c51194 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_61.txt @@ -0,0 +1,61 @@ +Common dividend payout ratio(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 + 20.03 % 13.35 % 9.62 % 7 4 +Stock price per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . $ 131.12 $ 92.96 $ 145.09 41 (36) +Total market capitalization (period-end) . . . . . . . . . . . . . . . . . . . . . . . . . . 49,877 35,447 60,047 41 (41) +Balance sheet (average balances) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 311,541 $ 292,238 $ 252,730 7 % 1 6 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,238 406,646 389,336 9 4 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,807 440,538 424,521 6 4 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,737 277,208 271,500 13 2 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,554 313,551 306,397 10 2 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,332 51,006 38,590 (3) 32 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,349 50,279 56,966 — (12) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,195 55,125 62,556 — (12) +Selected performance metrics +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.34 % 8.42% 7.82 % (8) bps 60 bps +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63 6.67 6.21 (4) 46 +Return on average assets(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04 1.67 2.92 (63) (125) +Return on average tangible assets(5) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08 1.73 3.03 (65) (130) +Return on average common equity(6) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10 14.01 21.01 (491) (700) +Return on average tangible common equity(7) + . . . . . . . . . . . . . . . . . . . . . . 13.04 19.91 28.39 (687) (848) +Equity-to-assets ratio(8) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.80 12.51 14.74 (71) (223) +Efficiency ratio(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.23 55.95 54.44 (72) 151 +Operating efficiency ratio(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.33 44.22 45.01 11 (79) +Adjusted operating efficiency ratio(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.54 44.53 44.68 (99) (15) +Effective income tax rate from continuing operations . . . . . . . . . . . . . . . . 19.2 20.3 21.6 (110) (130) +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,414 $ 3,973 $ 2,234 112 % 7 8 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.70% 1.36 % 0.88 % 134 bps 48 bps +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Balance sheet (period-end) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,472 $ 312,331 $ 277,340 3 % 1 3 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,701 427,248 397,341 5 8 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478,464 455,249 432,381 5 5 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,389 300,789 272,937 7 10 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 332,992 310,980 5 7 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,856 48,715 43,086 2 13 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,244 47,737 56,184 12 (15) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,089 52,582 61,029 10 (14) +Credit quality metrics +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,296 $ 13,240 $ 11,430 1 6 % 1 6 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.77% 4.24% 4.12% 53 bps 12 bps +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 3.71 2.96 2.25 75 71 +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.99 3.21 2.41 78 80 +51 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_62.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_62.txt new file mode 100644 index 0000000000000000000000000000000000000000..de5a5013c1b9fdfa9ea833aebe9b5c97f26713db --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_62.txt @@ -0,0 +1,43 @@ +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Capital ratios +Common equity Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9% 12.5% 13.1% 40 bps (60) bps +Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 13.9 14.5 30 (60) +Total capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0 15.8 16.9 20 (110) +Tier 1 leverage(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 11.1 11.6 10 (50) +Tangible common equity(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 7.5 9.9 70 (240) +Supplementary leverage(12) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 9.5 9.9 10 (40) +Other +Employees (period end, in thousands) . . . . . . . . . . . . . . . . . . . . . . 52.0 56.0 50.8 (7) % 1 0 % +__________ +(1) Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity (“TCE”) divided by common shares +outstanding. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures. +(2) Common dividend payout ratio is calculated based on dividends per common share for the period divided by basic earnings per common share for the +period. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average interest-earning assets for the period. +(4) Return on average assets is calculated based on income from continuing operations, net of tax, for the period divided by average total assets for the period. +(5) Return on average tangible assets is a non-GAAP measure calculated based on income from continuing operations, net of tax, for the period divided by +average tangible assets for the period. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non- +GAAP measures. +(6) Return on average common equity is calculated based on net income (loss) available to common stockholders less income (loss) from discontinued +operations, net of tax, 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. +(7) Return on average tangible common equity is a non-GAAP measure calculated based on net income (loss) available to common stockholders less income +(loss) from discontinued operations, net of tax, for the period, divided by average TCE. Our calculation of return on average TCE may not be comparable +to similarly-titled measures reported by other companies. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional +information on non-GAAP measures. +(8) Equity-to-assets ratio is calculated based on average stockholders’ equity for the period divided by average total assets for the period. +(9) Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period. +(10) Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period. +(11) Adjusted operating efficiency ratio is a non-GAAP measure. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for a +reconciliation of our adjusted operating efficiency ratio (non-GAAP) to our operating efficiency ratio (GAAP). +(12) Capital ratios are calculated based on the Basel III standardized approach framework, see “Capital Management” for additional information. +(13) Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Supplemental Tables—Table B— +Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure. +** Not meaningful. +52 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_63.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_63.txt new file mode 100644 index 0000000000000000000000000000000000000000..1564838b86f4ed31fc9f208c1892d55cde09095a --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_63.txt @@ -0,0 +1,40 @@ +EXECUTIVE SUMMARY +Financial Highlights +On February 19, 2024, we entered into an agreement to acquire Discover in an all-stock transaction. Upon closing, each share +of Discover common stock will be exchanged for 1.0192 shares of our common stock. The closing of the Transaction is subject +to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by our +stockholders and the stockholders of Discover. See the “Agreement to Acquire Discover” section in “Part I—Item 1. Business +—Overview” for additional information. +We reported net income of $4.9 billion ($11.95 per diluted common share) on total net revenue of $36.8 billion for 2023. In +comparison, we reported net income of $7.4 billion ($17.91 per diluted common share) on total net revenue of $34.3 billion for +2022 and net income of $12.4 billion ($26.94 per diluted common share) on total net revenue of $30.4 billion for 2021. +Our CET1 capital ratio as calculated under the Basel III standardized approach was 12.9% and 12.5% as of December 31, +2023 and 2022, respectively. See “Capital Management” for additional information. +For the year ended December 31, 2023, we declared and paid common stock dividends of $935 million and repurchased +$600 million of shares of our common stock. See “Capital Management—Dividend Policy and Stock Purchases” for additional +information. +Below are additional highlights of our performance in 2023. These highlights are based on a comparison between the results of +2023 and 2022, except as otherwise noted. We provide a more detailed discussion of our financial performance in the sections +following this “Executive Summary.” +Discussions of our performance for 2022 compared to 2021 can be found in “Part II—Item 7. MD&A” of our Annual Report on +Form 10-K for the fiscal year ended December 31, 2022. +Total Company Performance +• Earnings: +Our net income decreased by $2.5 billion to $4.9 billion in 2023 compared to 2022 primarily driven by: +◦ Higher provision for credit losses primarily driven by growth and continued credit normalization in our domestic +credit card loan portfolio. +◦ Higher non-interest expense primarily driven by increased salaries and associate benefits, the $289 million FDIC +special assessment related to certain regional bank failures and the absence of $177 million insurance recoveries +net of legal reserve activity received in 2022, partially offset by lower professional services. +These drivers were partially offset by: +◦ Higher net interest income primarily driven by higher average loan balances in our credit card loan portfolio and +higher asset yields, partially offset by higher funding costs. +• Loans Held for Investment: +◦ Period-end loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 from +December 31, 2022 primarily driven by growth in our credit card loan portfolio. +◦ Average loans held for investment increased by $19.3 billion to $311.5 billion in 2023 compared to 2022 +primarily driven by growth in our credit card loan portfolio. +• Net Charge-Off and Delinquency Metrics: +◦ Our net charge-off rate increased by 134 bps to 2.70% in 2023 compared to 2022 primarily driven by higher net +charge-offs in our credit card loan portfolio. +53 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_64.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_64.txt new file mode 100644 index 0000000000000000000000000000000000000000..2ff8d151768a5c64548622708e4705bae1956812 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_64.txt @@ -0,0 +1,20 @@ +◦ Our 30+ day delinquency rate increased by 78 bps to 3.99% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories in our credit card loan portfolio. +• Allowance for Credit Losses: Our allowance for credit losses increased by $2.1 billion to $15.3 billion and our allowance +coverage ratio increased by 53 bps to 4.77% as of December 31, 2023 compared to December 31, 2022. +CONSOLIDATED RESULTS OF OPERATIONS +The section below provides a comparative discussion of our consolidated financial performance for 2023 and 2022. We provide +a discussion of our business segment results in the following section, “Business Segment Financial Performance.” This section +should be read together with our “Executive Summary,” where we discuss trends and other factors that we expect will affect +our future results of operations. +Net Interest Income +Net interest income represents the difference between interest income, including certain fees, earned on our interest-earning +assets and the interest expense incurred on our interest-bearing liabilities. Our interest-earning assets include loans, investment +securities and other interest-earning assets, while our interest-bearing liabilities include interest-bearing deposits, securitized +debt obligations, senior and subordinated notes, other borrowings and other interest-bearing liabilities. Generally, we include in +interest income any past due fees, net of reversals, on loans that we deem collectible. Our net interest margin, based on our +consolidated results, represents the difference between the yield on our interest-earning assets and the cost of our interest- +bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net +interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest- +earning assets and interest-bearing liabilities. +54 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_65.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_65.txt new file mode 100644 index 0000000000000000000000000000000000000000..53579191d1c4c3aa4bd55aafed2abf638a914c8c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_65.txt @@ -0,0 +1,71 @@ +Table 1 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for +2023, 2022 and 2021 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans +are included in the average loan balances below. +Table 1: Average Balances, Net Interest Income and Net Interest Margin + Year Ended December 31, + 2023 2022 2021 +(Dollars in millions) +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Assets: +Interest-earning assets: +Loans:(2) +Credit card . . . . . . . . . . . . . . . . . . . . . $ 141,675 $ 26,267 18.54% $ 121,055 $ 19,626 16.21% $ 106,016 $ 15,474 14.60% +Consumer banking . . . . . . . . . . . . . . 77,514 6,041 7.79 80,511 5,782 7.18 73,874 5,804 7.86 +Commercial banking(3) . . . . . . . . . . . 92,984 6,363 6.84 92,273 3,702 4.01 77,438 2,119 2.74 +Other(4) . . . . . . . . . . . . . . . . . . . . . . . — (1,261) ** — (200) ** — 866 ** +Total loans, including loans held for sale 312,173 37,410 11.98 293,839 28,910 9.84 257,328 24,263 9.43 +Investment securities . . . . . . . . . . . . . . . 89,105 2,550 2.86 90,608 1,884 2.08 98,394 1,446 1.47 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . 39,960 1,978 4.95 22,199 443 2.00 33,614 60 0.18 +Total interest-earning assets . . . . . . . . . . 441,238 41,938 9.50 406,646 31,237 7.68 389,336 25,769 6.62 +Cash and due from banks . . . . . . . . . . . . 3,869 5,054 5,281 +Allowance for credit losses . . . . . . . . . . (14,290) (11,620) (13,354) +Premises and equipment, net . . . . . . . . . 4,373 4,265 4,257 +Other assets . . . . . . . . . . . . . . . . . . . . . . . 32,617 36,193 39,001 +Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 467,807 $ 440,538 $ 424,521 +Liabilities and stockholders’ equity: +Interest-bearing liabilities: +Interest-bearing deposits . . . . . . . . . . $ 313,737 $ 9,489 3.02% $ 277,208 $ 2,535 0.91% $ 271,500 $ 956 0.35% +Securitized debt obligations . . . . . . . 17,675 959 5.42 15,603 384 2.46 12,336 119 0.96 +Senior and subordinated notes . . . . . 31,109 2,204 7.08 29,286 1,074 3.67 25,530 488 1.91 +Other borrowings and liabilities . . . . 2,394 45 1.89 7,800 130 1.67 2,261 35 1.57 +Total interest-bearing liabilities . . . . . . . 364,915 12,697 3.48 329,897 4,123 1.25 311,627 1,598 0.51 +Non-interest-bearing deposits . . . . . . . . . 29,817 36,343 34,897 +Other liabilities . . . . . . . . . . . . . . . . . . . . 17,880 19,173 15,441 +Total liabilities . . . . . . . . . . . . . . . . . . . . 412,612 385,413 361,965 +Stockholders’ equity . . . . . . . . . . . . . . . . 55,195 55,125 62,556 +Total liabilities and stockholders’ equity $ 467,807 $ 440,538 $ 424,521 +Net interest income/spread . . . . . . . . . . . . . . . . . . . . . . $ 29,241 6.03 $ 27,114 6.43 $ 24,171 6.11 +Impact of non-interest-bearing funding . . . . . . . . . . . . . . . . . . . . . . . 0.60 0.24 0.10 +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63% 6.67 % 6.21% +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +__________ +(1) Average yield is calculated based on interest income for the period divided by average loans during the period. Interest income does not include any +allocations, such as funds transfer pricing. Average yield is calculated using whole dollar values for average balances and interest income/expense. +(2) Past due fees, net of reversals, included in interest income totaled approximately $2.2 billion in 2023, $1.9 billion in 2022 and $1.4 billion in 2021. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled +55 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_66.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_66.txt new file mode 100644 index 0000000000000000000000000000000000000000..d2d0e58f29da73d2188719169c616fab7388c484 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_66.txt @@ -0,0 +1,47 @@ +approximately $74 million in 2023, 2022 and 2021, with corresponding reductions to the Other category. +(4) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +** Not meaningful. +Net interest income increased by $2.1 billion to $29.2 billion in 2023 compared to 2022 primarily driven by higher average loan +balances in our credit card loan portfolio and higher asset yields, partially offset by higher funding costs. +Net interest margin decreased by 4 bps to 6.63% in 2023 compared to 2022 primarily driven by higher rates paid on interest- +bearing deposits, partially offset by higher asset yields and growth in our credit card loan portfolio. +Our cumulative deposit beta increased to 60% as of December 31, 2023, from 35% as of December 31, 2022 primarily driven +by product mix shifts toward higher rate products, deposit pricing lags catching up to earlier increases in market interest rates +and competition. We define cumulative deposit beta as the ratio of changes in the rate paid on our interest-bearing deposits to +the increases in the upper limit of the federal funds rate during the current rising interest rate cycle. +Table 2 displays the change in our net interest income between periods and the extent to which the variance is attributable to: +• changes in the volume of our interest-earning assets and interest-bearing liabilities; or +• changes in the interest rates related to these assets and liabilities. +Table 2: Rate/Volume Analysis of Net Interest Income(1) + 2023 vs. 2022 2022 vs. 2021 +(Dollars in millions) Total Variance Volume Rate Total Variance Volume Rate +Interest income: +Loans: +Credit card . . . . . . . . . . . . . . . . . . . . . . . $ 6,641 $ 3,584 $ 3,057 $ 4,152 $ 2,324 $ 1,828 +Consumer banking . . . . . . . . . . . . . . . . . 259 (215) 474 (22) 477 (499) +Commercial banking(2) . . . . . . . . . . . . . 2,661 29 2,632 1,583 454 1,129 +Other(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . (1,061) — (1,061) (1,066) — (1,066) +Total loans, including loans held for sale . 8,500 3,398 5,102 4,647 3,255 1,392 +Investment securities . . . . . . . . . . . . . . . . . 666 (31) 697 438 (115) 553 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . . . 1,535 476 1,059 383 (20) 403 +Total interest income . . . . . . . . . . . . . . . . . 10,701 3,843 6,858 5,468 3,120 2,348 +Interest expense: +Interest-bearing deposits . . . . . . . . . . . . 6,954 371 6,583 1,579 20 1,559 +Securitized debt obligations . . . . . . . . . 575 56 519 265 37 228 +Senior and subordinated notes . . . . . . . . 1,130 71 1,059 586 80 506 +Other borrowings and liabilities . . . . . . (85) (90) 5 95 92 3 +Total interest expense . . . . . . . . . . . . . . . . 8,574 408 8,166 2,525 229 2,296 +Net interest income . . . . . . . . . . . . . . . . . . $ 2,127 $ 3,435 $ (1,308) $ 2,943 $ 2,891 $ 52 +__________ +(1) We calculate the change in interest income and interest expense separately for each item. The portion of interest income or interest expense attributable to +both volume and rate is allocated proportionately when the calculation results in a positive value. When the portion of interest income or interest expense +attributable to both volume and rate results in a negative value, the total amount is allocated to volume or rate, depending on which amount is positive. +(2) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +(3) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +56 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_67.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_67.txt new file mode 100644 index 0000000000000000000000000000000000000000..df1bc3c494fd0ed02d7082b219352f42b501e042 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_67.txt @@ -0,0 +1,28 @@ +Non-Interest Income +Table 3 displays the components of non-interest income for 2023, 2022 and 2021. +Table 3: Non-Interest Income + Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Interchange fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,793 $ 4,606 $ 3,860 +Service charges and other customer-related fees . . . . . . . . . . . . . . . . . . . . . 1,667 1,625 1,578 +Net securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) (9) 2 +Other(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120 914 824 +Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,546 $ 7,136 $ 6,264 +________ +(1) Primarily consists of revenue from treasury and other investment income, Capital One Shopping, our credit card partnership agreements and commercial +mortgage banking revenue. +(2) Includes gains of $86 million, losses of $78 million and gains of $69 million on deferred compensation plan investments for 2023, 2022 and 2021, +respectively. These amounts have corresponding offsets in non-interest expense. +Non-interest income increased by $410 million to $7.5 billion in 2023 compared to 2022, primarily driven by higher treasury +income due to higher interest rates and higher net interchange fees due to an increase in purchase volume. +Provision for Credit Losses +Our provision for credit losses in each period is driven by net charge-offs, changes to the allowance for credit losses and +changes to the reserve for unfunded lending commitments. We recorded a provision for credit losses of $10.4 billion in 2023, +$5.8 billion in 2022 and $(1.9) billion in 2021. +Our provision for credit losses increased by $4.6 billion to $10.4 billion in 2023 compared to 2022 primarily driven by growth +and continued credit normalization in our domestic credit card loan portfolio. +We provide additional information on the provision for credit losses and changes in the allowance for credit losses within +“Credit Risk Profile” and “Item 8. Financial Statements and Supplementary Data—Note 4—Allowance for Credit Losses and +Reserve for Unfunded Lending Commitments.” For information on the allowance methodology for each of our loan categories, +see “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” +57 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_68.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_68.txt new file mode 100644 index 0000000000000000000000000000000000000000..9b8e19bb7eced157fbe42b206c703e5b32c86d2a --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_68.txt @@ -0,0 +1,27 @@ +Non-Interest Expense +Table 4 displays the components of non-interest expense for 2023, 2022 and 2021. +Table 4: Non-Interest Expense +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Operating Expense: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + Salaries and associate benefits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,302 $ 8,425 $ 7,421 + Occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160 2,050 2,003 + Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268 1,807 1,440 + Communications and data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383 1,379 1,262 + Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 70 29 + Other non-interest expense: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + Bankcard, regulatory and other fee assessments . . . . . . . . . . . . . . . . . 548 264 199 + Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 331 360 + Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,211 820 985 + Total other non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,112 1,415 1,544 +Total operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,307 $ 15,146 $ 13,699 +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,316 $ 19,163 $ 16,570 +_________ +(1) Includes expenses of $86 million, a benefit of $78 million and expenses of $69 million related to our deferred compensation plan for 2023, 2022 and +2021, respectively. These amounts have corresponding offsets from investments in other non-interest income. +Non-interest expense increased by $1.2 billion to $20.3 billion in the year ended 2023 compared to 2022, primarily driven by +increased salaries and associate benefits, the $289 million FDIC special assessment related to certain regional bank failures and +the absence of $177 million insurance recoveries net of legal reserve activity received in 2022, partially offset by lower +professional services. +58 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_69.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_69.txt new file mode 100644 index 0000000000000000000000000000000000000000..724ef5c75aba0f89b9f7ddff4fe1252cc4b93dd5 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_69.txt @@ -0,0 +1,33 @@ +Income Taxes +We recorded an income tax provision of $1.2 billion (19.2% effective income tax rate), $1.9 billion (20.3% effective income tax +rate) and $3.4 billion (21.6% effective income tax rate) in 2023, 2022 and 2021, respectively. Our effective tax rate on income +from continuing operations varies between periods due, in part, to the impact of changes in pre-tax income and changes in tax +credits, tax-exempt income and non-deductible expenses relative to our pre-tax earnings. +Our effective income tax rate in 2023 decreased by 1.1% compared to 2022. We recorded discrete tax expense of $6 million in +2023 and discrete tax benefits of $71 million and $66 million in 2022 and 2021, respectively. +We provide additional information on items affecting our income taxes and effective tax rate in “Item 8. Financial Statements +and Supplementary Data—Note 15—Income Taxes.” +CONSOLIDATED BALANCE SHEETS ANALYSIS +Total assets increased by $23.2 billion to $478.5 billion as of December 31, 2023 from December 31, 2022 primarily driven by +increases in our cash balances as we continue to hold elevated levels of liquidity given the market volatility and growth in our +credit card loan portfolio. +Total liabilities increased by $17.7 billion to $420.4 billion as of December 31, 2023 from December 31, 2022 primarily driven +by deposit growth due to our national consumer banking strategy, which includes our national brand and marketing strategy, +cafés, and tech / digital investments, which have enabled us to both deepen and grow our overall customer base. +Stockholders’ equity increased by $5.5 billion to $58.1 billion as of December 31, 2023 from December 31, 2022 primarily +driven by net income of $4.9 billion. +The following is a discussion of material changes in the major components of our assets and liabilities during 2023. Period-end +balance sheet amounts may vary from average balance sheet amounts due to the timing of normal balance sheet management +activities that are intended to support our capital and liquidity positions, our market risk profile and the needs of our customers. +Investment Securities +Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“Agency”) and +non-agency residential mortgage-backed securities (“RMBS”), agency commercial mortgage-backed securities (“CMBS”), U.S. +Treasury securities and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) +guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation +(“Freddie Mac”) issued securities. The carrying value of our investments in Agency and U.S. Treasury securities represented +97% of our total investment securities portfolio as of both December 31, 2023 and 2022. +The fair value of our available for sale securities portfolio increased by $2.2 billion to $79.1 billion as of December 31, 2023 +from 2022 primarily driven by increases in fair value due to decreases in interest rates and net purchases. See “Item 8. Financial +Statements and Supplementary Data—Note 2—Investment Securities” for more information. +59 Capital One Financial Corporation (COF) +The secret tool is a "saw". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_7.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..fed2d12db8622c83e789b86f1680e400d71d8743 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_7.txt @@ -0,0 +1,22 @@ +6 +Financial Summary +$320 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Source: COF Forms 10-K published at sec.gov +Loans Held for Investment +($ in Billions) +Source: COF Forms 10-K published at sec.gov +Note: Figures prior to 2005 do not include the effects of securitization transactions qualifying as sales under GAAP. +$36,787 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Total Net Revenue +($ in Millions) +Source: COF Forms 10-K and earnings release materials published at sec.gov +Note: 2017 net income per diluted share as reported under GAAP was $3.49 per share. The amount above has been adjusted to exclude the $1.77 +billion ($3.59 per share) non-cash impact of U.S. tax reform, which reflected our estimate as of December 31, 2017. 2008 loss as reported under GAAP +was $0.21 per share. The amount above has been adjusted to exclude an $811 million ($2.14 per share) non-cash goodwill impairment, and the +associated $7 million tax effect of the impairment ($0.01 per share), related to our auto finance business. +$11.95 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Diluted Earnings Per Common Share +(in Dollars) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_70.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_70.txt new file mode 100644 index 0000000000000000000000000000000000000000..73448d2dba371a342d1bb7ca30a14fddb8048392 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_70.txt @@ -0,0 +1,43 @@ +Loans Held for Investment +Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 5 +summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net +loan balance as of December 31, 2023 and 2022. +Table 5: Loans Held for Investment + December 31, 2023 December 31, 2022 +(Dollars in millions) Loans Allowance Net Loans Loans Allowance Net Loans +Credit Card . . . . . . . . . . . . . . $ 154,547 $ (11,709) $ 142,838 $ 137,730 $ (9,545) $ 128,185 +Consumer Banking . . . . . . . . 75,437 (2,042) 73,395 79,925 (2,237) 77,688 +Commercial Banking . . . . . . . 90,488 (1,545) 88,943 94,676 (1,458) 93,218 +Total . . . . . . . . . . . . . . . . . . . . $ 320,472 $ (15,296) $ 305,176 $ 312,331 $ (13,240) $ 299,091 +Loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 compared to December 31, 2022 +primarily driven by growth in our credit card loan portfolio. +We provide additional information on the composition of our loan portfolio and credit quality in “Credit Risk Profile,” +“Consolidated Results of Operations” and “Item 8. Financial Statements and Supplementary Data—Note 3—Loans.” +Funding Sources +Our primary source of funding comes from insured retail deposits, as they are a relatively stable and lower cost source of +funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes, securitized debt +obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Banks +(“FHLB”) advances secured by certain portions of our loan and securities portfolios. +Table 6 provides the composition of our primary sources of funding as of December 31, 2023 and 2022. +Table 6: Funding Sources Composition +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount % of Total Amount % of Total +Deposits: +Consumer Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,171 74 % $ 270,592 71 % +Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,712 8 40,808 11 +Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,530 5 21,592 6 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 87 332,992 88 +Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,043 5 16,973 4 +Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,813 8 31,742 8 +Total funding sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 398,269 100 % $ 381,707 100 % +__________ +(1) Includes brokered deposits of $18.5 billion and $20.6 billion as of December 31, 2023 and 2022, respectively. +Total deposits increased by $15.4 billion to $348.4 billion as of December 31, 2023 from December 31, 2022 primarily driven +by our national banking strategy, which includes our national brand and marketing strategy, cafés, and tech / digital +investments, which have enabled us to both deepen and grow our overall customer base. +As of December 31, 2023 and 2022, we held $64.2 billion and $80.7 billion, respectively, of estimated uninsured deposits +excluding any intercompany balances. These amounts were primarily comprised of checking and savings deposits. These +estimated uninsured deposits comprised approximately 18% and 24% of our total deposits as of December 31, 2023 and 2022, +respectively. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports +of Condition and Income” (FFIEC 031) filed with the Federal Banking Agencies. +60 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_71.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_71.txt new file mode 100644 index 0000000000000000000000000000000000000000..4382d6f6faa5b8c3fd742c9e22bb5d2c5f7859d7 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_71.txt @@ -0,0 +1,32 @@ +Securitized debt obligations increased by $1.1 billion to $18.0 billion as of December 31, 2023 from December 31, 2022 +primarily driven by net issuances in our credit card and auto securitization programs. +Other debt remained substantially flat at $31.8 billion as of December 31, 2023 compared to December 31, 2022. +We provide additional information on our funding sources in “Liquidity Risk Profile” and “Item 8. Financial Statements and +Supplementary Data—Note 8—Deposits and Borrowings.” +Deferred Tax Assets and Liabilities +Deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future +reversals of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net +operating loss and tax credit carryforwards. Deferred tax assets are recognized subject to management’s judgment that these +future deductions are more likely than not to be realized. We evaluate the recoverability of these future tax deductions by +assessing the adequacy of expected taxable income from all sources, including taxable income in carryback years, reversal of +taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely +heavily on estimates. We use our historical experience and our short and long-range business forecasts to make these estimates. +Deferred tax assets, net of deferred tax liabilities and valuation allowances, were approximately $7.9 billion as of December 31, +2023, an increase of $280 million from December 31, 2022. The increase in our net deferred tax assets was primarily driven by +an increase in our allowance for credit losses, partially offset by an increase in fair value of our available for sale securities and +derivatives in 2023. +Our recorded valuation allowance balances were $496 million and $446 million as of December 31, 2023 and 2022, +respectively. If changes in circumstances lead us to change our judgment about our ability to realize deferred tax assets in future +years, we will adjust our valuation allowances in the period that our change in judgment occurs and record a corresponding +increase or charge to income. +We provide additional information on income taxes in “Consolidated Results of Operations” and “Item 8. Financial Statements +and Supplementary Data—Note 15—Income Taxes.” +OFF-BALANCE SHEET ARRANGEMENTS +In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, +generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated +variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to +meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding +these types of activities in “Item 8. Financial Statements and Supplementary Data—Note 5—Variable Interest Entities and +Securitizations” and “Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others.” +61 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_72.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_72.txt new file mode 100644 index 0000000000000000000000000000000000000000..7a79368ad80b7bcfd5d8b4969aad903a2f6ef555 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_72.txt @@ -0,0 +1,38 @@ +BUSINESS SEGMENT FINANCIAL PERFORMANCE +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking +and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing +business segments. Certain activities that are not part of a business segment are included in the Other category, such as the +management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury +group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the +consolidated effective tax rate. +The results of our individual businesses, which we report on a continuing operations basis, reflect the manner in which +management evaluates performance and makes decisions about funding our operations and allocating resources. We may +periodically change our business segments or reclassify business segment results based on modifications to our management +reporting methodologies and changes in organizational alignment. Our business segment results are intended to reflect each +segment as if it were a stand-alone business. We use an internal management and reporting process to derive our business +segment results. Our internal management and reporting process employs various allocation methodologies, including funds +transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenues and expenses +directly or indirectly attributable to each business segment. Total interest income and non-interest income are directly +attributable to the segment in which they are reported. The net interest income of each segment reflects the results of our funds +transfer pricing process, which is primarily based on a matched funding concept that takes into consideration market interest +rates. Our funds transfer pricing process is managed by our centralized Corporate Treasury group and provides a funds credit +for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a charge +for the use of funds by each segment. The allocation is unique to each business segment and acquired business and is based on +the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk +characteristics of assets and liabilities and off-balance sheet products. Periodically, the methodology and assumptions utilized in +the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation +of net interest income to the business segments. We regularly assess the assumptions, methodologies and reporting +classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods. +We refer to the business segment results derived from our internal management accounting and reporting process as our +“managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no +comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed +presentation of our business segment results may not be comparable to similar information provided by other financial services +companies. In addition, our individual business segment results should not be used as a substitute for comparable results +determined in accordance with U.S. GAAP. +We summarize our business segment results for the years ended December 31, 2023, 2022 and 2021 and provide a comparative +discussion of these results for 2023 and 2022, as well as changes in our financial condition and credit performance metrics as of +December 31, 2023 compared to December 31, 2022. We provide a reconciliation of our total business segment results to our +reported consolidated results in “Item 8. Financial Statements and Supplementary Data—Note 17—Business Segments and +Revenue from Contracts with Customers.” +62 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_73.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_73.txt new file mode 100644 index 0000000000000000000000000000000000000000..b2cd5649ae9a6ab9342d5c217b6a82d86a219075 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_73.txt @@ -0,0 +1,48 @@ +Business Segment Financial Performance +Table 7 summarizes our business segment results, which we report based on total net revenue (loss) and net income (loss) from +continuing operations, for the years ended December 31, 2023, 2022 and 2021. We provide information on the allocation +methodologies used to derive our business segment results in “Item 8. Financial Statements and Supplementary Data—Note 17 +—Business Segments and Revenue from Contracts with Customers.” +Table 7: Business Segment Results +Year Ended December 31, +2023 2022 2021 +(Dollars in millions) Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total +Credit Card . . . . . . . . $ 25,669 7 0 %$ 3,457 7 1 %$ 22,355 6 5 %$ 4,927 6 7 %$ 18,880 6 2 %$ 7,758 6 3 % +Consumer Banking . . 9,302 25 2,258 46 9,434 28 2,250 31 9,002 29 3,676 30 +Commercial +Banking(3) . . . . . . . . . 3,520 10 691 14 3,590 10 843 11 3,301 11 1,532 12 +Other(3) . . . . . . . . . . . (1,704) (5) (1,519) (31) (1,129) (3) (660) (9) (748) (2) (572) (5) +Total . . . . . . . . . . . . . $ 36,787 100 % $ 4,887 100 % $ 34,250 100 % $ 7,360 100 % $ 30,435 100 % $ 12,394 100 % + + +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +__________ +(1) Total net revenue (loss) consists of net interest income and non-interest income. +(2) Net income (loss) for our business segments and the Other category is based on income (loss) from continuing operations, net of tax. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +63 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_74.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_74.txt new file mode 100644 index 0000000000000000000000000000000000000000..ae6f971b58ee3f60470b005bfbf7d216b108ae46 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_74.txt @@ -0,0 +1,55 @@ +Credit Card Business +The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected +from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses. +Our Credit Card business generated net income from continuing operations of $3.5 billion, $4.9 billion and $7.8 billion in 2023, +2022 and 2021, respectively. +Table 8 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated. +Table 8: Credit Card Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,729 $ 16,584 $ 14,074 1 9 % 1 8 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,940 5,771 4,806 3 20 +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,669 22,355 18,880 15 18 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . 8,651 4,265 (902) 103 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,490 11,627 9,621 7 21 +Income from continuing operations before income taxes . . . . . . . 4,528 6,463 10,161 (30) (36) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071 1,536 2,403 (30) (36) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . $ 3,457 $ 4,927 $ 7,758 (30) (36) +Selected performance metrics: +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,572 $ 120,392 $ 102,731 18 17 +Average yield on loans(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.54% 16.21% 14.60% 233 bps 161 bps +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.12 18.47 17.81 (35) 66 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,472 $ 3,048 $ 1,956 112 % 5 6 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.57% 2.53% 1.90% 204 bps 63 bps +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,547 $ 137,730 1 2 % +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 4.61% 3.46% 115 bps +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.62 3.46 116 +Nonperforming loan rate(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.01 0.01 — +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,709 $ 9,545 2 3 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.58% 6.93% 65 bps +__________ +(1) We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge +off any uncollectible amounts. Total net revenue was reduced by $1.9 billion, $946 million and $629 million in 2023, 2022 and 2021, respectively, for +finance charges and fees charged-off as uncollectible. +(2) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average loans during the period. +(4) Within our credit card loan portfolio, only certain loans in our international card businesses are classified as nonperforming. See “Nonperforming Loans +and Other Nonperforming Assets” for additional information. + ** Not meaningful. +64 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_75.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_75.txt new file mode 100644 index 0000000000000000000000000000000000000000..b460fcaf236e7e956cd6c6ad5d25176c72a6625c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_75.txt @@ -0,0 +1,22 @@ +Key factors affecting the results of our Credit Card business for 2023 compared to 2022, and changes in financial condition +and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income increased by $3.1 billion to $19.7 billion in 2023 primarily driven by higher +average loan balances and margins. +• Non-Interest Income: Non-interest income increased by $169 million to $5.9 billion in 2023 due to higher net +interchange fees due to an increase in purchase volume and gains on our deferred compensation plan investments, +partially offset by the absence of a $192 million gain on the sale of partnership loan portfolios in 2022. +• Provision for Credit Losses: Provision for credit losses increased by $4.4 billion to $8.7 billion in 2023 primarily driven +by loan growth and continued credit normalization. +• Non-Interest Expense: Non-interest expense increased by $863 million to $12.5 billion in 2023 primarily driven by +increased operating expenses, including salaries and associate benefits. +Loans Held for Investment: +• Period-end loans held for investment increased by $16.8 billion to $154.5 billion as of December 31, 2023 from +December 31, 2022 driven by growth across our portfolio. +• Average loans held for investment increased by $21.2 billion to $141.6 billion in 2023 compared to 2022 driven by +growth across our portfolio. +Net Charge-Off and Delinquency Metrics: +• The net charge-off rate increased by 204 bps to 4.57% in 2023 compared to 2022 primarily driven by higher net charge- +offs in our domestic credit card loan portfolio. +• The 30+ day delinquency rate increased by 116 bps to 4.62% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories. +65 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_76.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_76.txt new file mode 100644 index 0000000000000000000000000000000000000000..378d2b92e1482de676a5b509437ece2217781ba2 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_76.txt @@ -0,0 +1,54 @@ +Domestic Card Business +The Domestic Card business generated net income from continuing operations of $3.3 billion, $4.7 billion and $7.3 billion in +2023, 2022 and 2021, respectively. In 2023, 2022 and 2021, the Domestic Card business accounted for greater than 90% of +total net revenue of our Credit Card business. +Table 8.1 summarizes the financial results for our Domestic Card business and displays selected key metrics for the periods +indicated. +Table 8.1: Domestic Card Business Results +Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,610 $ 15,616 $ 12,916 1 9 % 2 1 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,672 5,363 4,532 6 18 +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,282 20,979 17,448 16 20 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . 8,268 4,020 (868) 106 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,648 10,827 8,712 8 24 +Income from continuing operations before income taxes . . . . . . . . . 4,366 6,132 9,604 (29) (36) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,030 1,453 2,266 (29) (36) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . $ 3,336 $ 4,679 $ 7,338 (29) (36) +Selected performance metrics: +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . $ 135,213 $ 114,506 $ 95,818 18 20 +Average yield on loans(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.46% 16.07% 14.49 % 239 bps 158bps +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.94 18.28 17.85 (34) 43 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,164 $ 2,833 $ 1,820 118 % 5 6 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.56% 2.47% 1.90 % 209 bps 57bps +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 605,664 $ 568,752 $ 487,297 6 % 1 7 % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,666 $ 131,581 1 2 % +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . 4.61% 3.43% 118 bps +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,261 $ 9,165 2 3 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.63% 6.97% 66 bps +__________ +(1) We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge +off any uncollectible amounts. Finance charges and fees charged off as uncollectible are reflected as a reduction in total net revenue. +(2) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average loans during the period. +** Not meaningful +Because our Domestic Card business accounts for the substantial majority of our Credit Card business, the key factors driving +the results are similar to the key factors affecting our total Credit Card business. Net income for our Domestic Card business +decreased in 2023 compared to 2022 primarily driven by: +• Higher provision for credit losses primarily driven by loan growth and continued credit normalization. +66 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_77.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_77.txt new file mode 100644 index 0000000000000000000000000000000000000000..d454a1690e5b32b02b98ee1a03d8236306293a56 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_77.txt @@ -0,0 +1,13 @@ +• Higher non-interest expense primarily driven by increased operating expenses, including salaries and associate benefits. +These drivers were partially offset by: +• Higher net interest income primarily driven by higher average loan balances and margins. +• Higher non-interest income primarily driven by higher net interchange fees due to an increase in purchase volume and +gains on our deferred compensation plan investments. +Consumer Banking Business +The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits as well as +service charges and customer-related fees. Expenses primarily consist of the provision for credit losses, operating costs and +marketing expenses. +Our Consumer Banking business generated net income from continuing operations of $2.3 billion in both 2023 and 2022 and +$3.7 billion in 2021. +67 Capital One Financial Corporation (COF) +The secret food is a "sausage". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_78.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_78.txt new file mode 100644 index 0000000000000000000000000000000000000000..3fdbdbb1ebfacb912cd24f69e9010e186adca771 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_78.txt @@ -0,0 +1,54 @@ +Table 9 summarizes the financial results of our Consumer Banking business and displays selected key metrics for the periods +indicated. +Table 9: Consumer Banking Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,713 $ 8,965 $ 8,448 (3) % 6 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 469 554 26 (15) +Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,302 9,434 9,002 (1) 5 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,169 1,173 (521) — ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,178 5,312 4,711 (3) 13 +Income from continuing operations before income taxes . . . . . . . . . . 2,955 2,949 4,812 — (39) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 699 1,136 — (38) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . $ 2,258 $ 2,250 $ 3,676 — (39) +Selected performance metrics: +Average loans held for investment: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,067 $ 78,772 $ 71,108 (3) 11 +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,446 1,663 2,765 (13) (40) +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,513 $ 80,435 $ 73,873 (4) 9 +Average yield on loans held for investment(1) . . . . . . . . . . . . . . . . . . 7.79% 7.19% 7.86% 60 bps (67) bps +Average deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285,880 $ 257,089 $ 251,676 1 1 % 2 % +Average deposits interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.59% 0.72% 0.32% 187 bps 40bps +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,364 $ 854 $ 276 6 0 % ** +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.76% 1.06% 0.37% 70 bps 69bps +Auto loan originations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,980 $ 36,965 $ 43,083 (27) % (14) % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment: +Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,075 $ 78,373 (5) % +Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362 1,552 (12) +Total consumer banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,437 $ 79,925 (6) +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . 6.25% 5.53% 72 bps +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08 6.18 90 +Nonperforming loan rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00 0.79 21 +Nonperforming asset rate(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.09 0.87 22 +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,042 $ 2,237 (9) % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.71% 2.80% (9) bps +Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,171 $ 270,592 9 % +_________ +(1) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(2) Nonperforming assets primarily consist of nonperforming loans and repossessed assets. The total nonperforming asset rate is calculated based on total +nonperforming assets divided by the combined period-end total loans held for investment and repossessed assets. +** Not meaningful. +68 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_79.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_79.txt new file mode 100644 index 0000000000000000000000000000000000000000..c9857c5214b5e3a4e7fbdc9f541944ea249e67a2 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_79.txt @@ -0,0 +1,34 @@ +Key factors affecting the results of our Consumer Banking business for 2023 compared to 2022, and changes in financial +condition and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income decreased by $252 million to $8.7 billion in 2023 primarily driven by lower +margins in our retail banking and auto businesses and lower average loan balances in our auto business, partially offset +by higher deposits in our retail banking business. +• Non-Interest Income: Non-interest income increased by $120 million to $589 million in 2023 primarily driven by higher +interchange fees from an increase in debit card purchase volume and gains on our deferred compensation plan +investments. +• Provision for Credit Losses: Provision for credit losses remained substantially flat at $1.2 billion in 2023. +• Non-Interest Expense: Non-interest expense decreased by $134 million to $5.2 billion in 2023 primarily driven by a +lower level of auto originations. +Loans Held for Investment: +• Period-end loans held for investment decreased by $4.5 billion to $75.4 billion as of December 31, 2023 from December +31, 2022 primarily driven by customer payments outpacing new originations in auto. +• Average loans held for investment decreased by $2.9 billion to $77.5 billion in 2023 compared to 2022 primarily driven +by lower auto loan originations. +Deposits: +• Period-end deposits increased by $25.6 billion to $296.2 billion as of December 31, 2023 from December 31, 2022 +primarily driven by our national banking strategy, which includes our national brand and marketing strategy, cafés, and +tech / digital investments, which have enabled us to both deepen and grow our overall customer base. +Net Charge-Off and Delinquency Metrics: +• The net charge-off rate increased by 70 bps to 1.76% in 2023 compared to 2022 primarily driven by higher net charge- +offs in our auto loan portfolio. +• The 30+ day delinquency rate increased by 90 bps to 7.08% as of December 31, 2023 compared to December 31, 2022 +primarily driven by higher auto delinquency inventories. +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 earned from products and services provided to our clients such as advisory services, capital markets and +treasury management. Because our Commercial Banking business has loans and investments that generate tax-exempt income, +tax credits or other tax benefits, we present the revenues on a taxable-equivalent basis. Expenses primarily consist of the +provision for credit losses and operating costs. +Our Commercial Banking business generated net income from continuing operations of $691 million, $843 million and +$1.5 billion in 2023, 2022 and 2021, respectively. +69 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_8.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e8d85bb9dd2e732490a1c4b4f380890b2f2beae --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_8.txt @@ -0,0 +1,72 @@ +7 +Income Statement (Dollars in millions, except per-share data as noted) +2023 2022 +Net interest income $ 29,241 $ 27,114 +Non-interest income 7,5 46 7,136 +Total revenue 36,787 34,250 +Provision for credit losses 10,426 5,847 +Non-interest expense 20, 316 19,163 +Income from continuing operations before income taxes 6,045 9,240 +Income tax provision 1,1 58 1,880 +Net income 4,887 7,3 60 +Dividends and undistributed earnings allocated to participating securities (77) (88) +Preferred stock dividends (228) (228) +Net income available to common stockholders 4,582 7,044 +Common Share Statistics +Basic earnings per common share: +2023 2022 +Net income per basic common share 11.98 17.98 +Diluted earnings per common share: +2023 2022 +Net income per diluted common share 11.95 17. 91 +2023 2022 +Dividends declared and paid per common share $ 2.40 $ 2.40 +Balance Sheet (Dollars in millions) +2023 2022 +Loans held for investment $ 320 ,472 $ 31 2,331 +Interest-earning assets 44 9,701 427,248 +Total assets 478 ,464 455,249 +Interest-bearing deposits 320 ,389 300,789 +Total deposits 34 8,413 332,992 +Borrowings 49, 856 48 ,715 +Common equity 53, 244 47,737 +Total stockholders’ equity 58 ,089 52,582 +Average Balances (Dollars in millions) +2023 2022 +Loans held for investment $ 311,541 $ 292,238 +Interest-earning assets 441 ,238 406,646 +Total assets 46 7,807 440,538 +Interest-bearing deposits 313, 737 27 7,208 +Total deposits 34 3,554 313,551 +Borrowings 49, 332 51,006 +Common equity 50 ,349 50,279 +Total stockholders’ equity 55 ,195 55,125 +Credit Quality Metrics (Dollars in millions, except per-share data as noted) +2023 2022 +Allowance for credit losses $ 15,2 96 $ 13,240 +Allowance coverage ratio 4.77 % 4. 24 % +Net charge-offs $ 8,414 $ 3,973 +Net charge-off rate 2.70 % 1. 36 % +30+ day performing delinquency rate 3.71 2.96 +30+ day delinquency rate 3.99 3.21 +Performance Metrics +2023 2022 +Purchase volume $ 620,290 $ 587,283 +Total net revenue margin 8.34 % 8. 42 % +Net interest margin 6.63 6.67 +Return on average assets 1.04 1.67 +Return on average common equity 9.10 14 .01 +Return on average tangible common equity 13.04 19.91 +Efficiency ratio 55 .23 55.95 +Operating efficiency ratio 44.33 44.22 +Effective income tax rate for continuing operations 19.2 20.3 +Employees (period end, in thousands) 52.0 56.0 +Capital Ratios +2023 2022 +Common equity Tier 1 capital 12 .9 % 12 .5 % +Tier 1 capital 14. 2 13.9 +Total capital 16 .0 15.8 +Tier 1 leverage 11. 2 11.1 +Tangible common equity 8.2 7.5 +A digital version of our 2023 Form 10-K is made available by the Securities and Exchange Commission on its public database at +https://www.sec.gov/Archives/edgar/data/927628/000092762824000094/cof-20231231.htm \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_80.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_80.txt new file mode 100644 index 0000000000000000000000000000000000000000..bdc81d86ddfe0f499b3cda12dfb0bc0e0bbc5dd4 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_80.txt @@ -0,0 +1,61 @@ +Table 10 summarizes the financial results of our Commercial Banking business and displays selected key metrics for the +periods indicated. +Table 10: Commercial Banking Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,518 $ 2,461 $ 2,153 2 % 1 4 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002 1,129 1,148 (11) (2) +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,520 3,590 3,301 (2) 9 +Provision (benefit) for credit losses(2) + . . . . . . . . . . . . . . . . . . . . . . . . 605 415 (519) 46 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,011 2,070 1,815 (3) 14 +Income from continuing operations before income taxes . . . . . . . . . 904 1,105 2,005 (18) (45) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 262 473 (19) (45) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . $ 691 $ 843 $ 1,532 (18) (45) +Selected performance metrics: +Average loans held for investment: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . $ 36,448 $ 36,639 $ 30,980 (1) 18 +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,008 54,772 45,146 2 21 +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,456 $ 91,411 $ 76,126 1 20 +Average yield on loans held for investment(1)(3) + . . . . . . . . . . . . . . . . 6.86% 4.02% 2.74% 284 bps 128 bps +Average deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,411 $ 42,018 $ 42,350 (11) % (1) % +Average deposits interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.68% 0.73% 0.14% 195 bps 59 bps +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 578 $ 71 $ 2 ** ** +Net charge-off (recovery) rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.62% 0.08% — 54 bps 8 bps +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment: +Commercial and multifamily real estate . . . . . . . . . . . . . . . . . . . $ 34,446 $ 37,453 (8) % +Commercial and industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,042 57,223 (2) +Total commercial banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,488 $ 94,676 (4) +Nonperforming loan rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.84% 0.74% 10 bps +Nonperforming asset rate(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.84 0.74 10 +Allowance for credit losses(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,545 $ 1,458 6 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.71 % 1.54 % 17 bps +Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,712 $ 40,808 (20) % +Loans serviced for others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,341 51,918 1 +__________ +(1) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +(2) The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the +related reserve is included in other liabilities on our consolidated balance sheets. Our reserve for unfunded lending commitments totaled $158 million +$218 million and $165 million as of December 31, 2023, 2022 and 2021, respectively. +(3) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(4) Nonperforming assets consist of nonperforming loans and other foreclosed assets. The total nonperforming asset rate is calculated based on total +nonperforming assets divided by the combined period-end total loans held for investment and other foreclosed assets. +** Not meaningful. +70 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_81.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_81.txt new file mode 100644 index 0000000000000000000000000000000000000000..498d24269feb832d07d40614f83de0221407dd9c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_81.txt @@ -0,0 +1,33 @@ +Key factors affecting the results of our Commercial Banking business for 2023 compared to 2022, and changes in financial +condition and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income remained substantially flat at $2.5 billion in 2023 compared to 2022. +• Non-Interest Income: Non-interest income decreased by $127 million to $1.0 billion in 2023 primarily driven by lower +activity in our multifamily agency lending business. +• Provision for Credit Losses: Provision for credit losses increased by $190 million to $605 million in 2023 primarily +driven by our office real estate portfolio. +• Non-Interest Expense: Non-interest expense remained substantially flat at $2.0 billion in 2023 compared to 2022. +Loans Held for Investment: +• Period-end loans held for investment decreased by $4.2 billion to $90.5 billion as of December 31, 2023 from December +31, 2022 primarily driven by customer payments outpacing originations. +• Average loans held for investment increased by $1.0 billion to $92.5 billion in 2023 compared to 2022 primarily driven +by growth across our loan portfolio. +Deposits: +• Period-end deposits decreased by $8.1 billion to $32.7 billion as of December 31, 2023 from December 31, 2022 +primarily driven by intentional reduction in lower margin deposit balances. +Net Charge-Off and Nonperforming Metrics: +• The net charge-off rate increased by 54 bps to 0.62% in 2023 primarily driven by higher charge-offs in our office real +estate portfolio. +• The nonperforming loan rate increased by 10 bps to 0.84% as of December 31, 2023 compared to December 31, 2022 +primarily driven by credit deterioration in our office real estate portfolio. +Other Category +Other includes unallocated amounts related to our centralized Corporate Treasury group activities, such as management of our +corporate investment securities portfolio, asset/liability management and oversight of our funds transfer pricing process. Other +also includes: +• unallocated corporate revenue and expenses that do not directly support the operations of the business segments or for +which the business segments are not considered financially accountable in evaluating their performance, such as certain +restructuring charges; +• offsets related to certain line-item reclassifications; +• residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business +segments; and +• foreign exchange-rate fluctuations on foreign currency-denominated balances. +71 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_82.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_82.txt new file mode 100644 index 0000000000000000000000000000000000000000..7068adcf15cf726318c3e0f7857fdb8e1b5408ec --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_82.txt @@ -0,0 +1,45 @@ +Table 11 summarizes the financial results of our Other category for the periods indicated. +Table 11: Other Category Results + Year Ended December 31, Change +(Dollars in millions) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,719) $ (896) $ (504) 9 2 % 7 8 % +Non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (233) (244) ** (5) +Total net loss(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,704) (1,129) (748) 51 51 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . 1 (6) (2) ** ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 154 423 ** (64) +Loss from continuing operations before income taxes . . . . . . . . . . . (2,342) (1,277) (1,169) 83 9 +Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (823) (617) (597) 33 3 +Loss from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . $ (1,519) $ (660) $ (572) 130 15 +__________ +(1) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +** Not meaningful. +Loss from continuing operations increased by $859 million to a loss of $1.5 billion in 2023 compared to 2022 primarily driven +by higher funding costs and increased non-interest expense largely driven by the $289 million FDIC special assessment charge +recognized in the fourth quarter of 2023, partially offset by higher treasury income in non-interest income driven by higher +market interest rates. +CRITICAL ACCOUNTING POLICIES AND ESTIMATES +The preparation of financial statements in accordance with U.S. GAAP requires management to make a number of judgments, +estimates and assumptions that affect the amount of assets, liabilities, income and expenses on the consolidated financial +statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in +applying these policies is integral to understanding our financial statements. We provide a summary of our significant +accounting policies under “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant +Accounting Policies.” +We have identified the following accounting estimates as critical because they require significant judgments and assumptions +about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could +have a material impact on our results of operations or financial condition. Our critical accounting policies and estimates are as +follows: +• Loan loss reserves +• Goodwill +• Fair value +• Customer rewards reserve +We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary, based on +changing conditions. +72 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_83.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_83.txt new file mode 100644 index 0000000000000000000000000000000000000000..71fe78fbae1c19135a975f4d6517fe21e3bd1f40 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_83.txt @@ -0,0 +1,51 @@ +Loan Loss Reserves +We maintain an allowance for credit losses that represents management’s current estimate of expected credit losses inherent in +our credit card, consumer banking and commercial banking loans held for investment portfolios as of each balance sheet date. +We also reserve for the uncollectible portion of finance charges and fees related to credit card loan receivables in the allowance +for credit losses consistent with the methodology we use to estimate the allowance for credit losses on the principal portion of +our credit card loan receivables. We also separately reserve for unfunded lending commitments that are not unconditionally +cancellable. We build our allowance for credit losses and reserve for unfunded lending commitments through the provision for +credit losses, which is driven by charge-offs, changes in the allowance for credit losses and changes in the reserve for unfunded +lending commitments. The allowance for credit losses was $15.3 billion as of December 31, 2023, compared to $13.2 billion as +of December 31, 2022. +Our allowance for credit losses and reserve for unfunded lending commitments utilize models to derive a quantitative estimate +of credit losses that is supplemented with additional qualitative considerations to capture risks and uncertainties not included in +the quantitative result. Our estimate of expected credit losses, for all loan and unfunded lending commitments, includes a +reasonable and supportable forecast period of one year and then reverts over a one-year period to historical losses at each +relevant loss component of the estimate. We use externally produced consensus estimates as inputs for our forward-looking +macroeconomic forecast and consider other forecasts and sources of uncertainty to develop the quantitative component. This +quantitative result is then supplemented qualitatively by management for economic uncertainty, including the consideration of +alternative macroeconomic scenarios, changes and trends in loan portfolios that may not be captured in the quantitative +component. These adjustments represent management’s judgment of the imprecision and risks inherent in the processes and +assumptions used in establishing the allowance for credit losses. +We have an established process, using analytical tools and management judgment, to determine our allowance for credit losses. +Significant management judgment is required to determine the relevant information and estimation methods used to arrive at +our best estimate of lifetime credit losses. Establishing the allowance on a quarterly basis involves evaluating and forecasting +both credit and macroeconomic variables. The macroeconomic forecast used to inform both quantitative and qualitative +components of our allowance for credit losses estimate is sensitive to certain variables, such as the U.S. Unemployment Rate, +and the U.S. Real Gross Domestic Product (“U.S. Real GDP”) Growth Rate assumptions. Our December 31, 2023 allowance +assumes that the quarterly average U.S. unemployment rate gradually increases to approximately 4.4% by the fourth quarter of +2024 and annual U.S. Real GDP increases 1.0% in 2024. +In addition to macroeconomic factors, many credit factors inform our allowance for credit losses, including, but not 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, seasonality, credit bureau scores, current general economic conditions, changes in the legal and +regulatory environment and uncertainties in forecasting and modeling techniques used in estimating our allowance for credit +losses. +We have a governance framework supported by processes and controls intended to ensure that our estimate of the allowance for +credit losses is appropriate. Our governance framework provides for oversight of methods, models, qualitative adjustments, +process controls and results. At least quarterly, representatives from the Finance and Risk Management organizations review +and assess our allowance methodologies, key assumptions and the appropriateness of the allowance for credit losses. Groups +independent of our estimation functions participate in the review and validation process. Tasks performed by these groups +include periodic review of the rationale for and quantification of inputs requiring judgment as well as adjustments to results. +We have model policies, established by an independent Model Risk Office, which govern the validation of models and related +supporting documentation to ensure the appropriate use of models for estimating credit losses. The Model Risk Office validates +all models and requires ongoing monitoring of their performance. +In addition to the allowance for credit losses, on a quarterly basis, we review and assess our estimate of expected losses related +to unfunded lending commitments that are not unconditionally cancellable which are generally in our Commercial Banking +business. The factors impacting our assessment generally align with those considered in our evaluation of the allowance for +credit losses for the Commercial Banking business. The reserve for losses on unfunded lending commitments is included in +other liabilities on our consolidated balance sheets and changes to it are recorded through the provision for credit losses in our +consolidated statements of income. +73 Capital One Financial Corporation (COF) +The secret animal #2 is a "panda". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_84.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_84.txt new file mode 100644 index 0000000000000000000000000000000000000000..70ea89a60142a7f21062557165e6cd03a5ab1035 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_84.txt @@ -0,0 +1,50 @@ +Although we examine a variety of externally available data, as well as our internal loan performance data, to determine our +allowance for credit losses and reserve for unfunded lending commitments, our estimation process is subject to risks and +uncertainties, including a reliance on historical loss and trend information that may not be representative of current conditions +and indicative of future performance as well as economic forecasts that may not align with actual future economic conditions. +Accordingly, our actual credit loss experience may not be in line with our expectations. We provide additional information on +the methodologies and key assumptions used in determining our allowance for credit losses for each of our loan portfolio +segments in “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” +We provide information on the components of our allowance, disaggregated by operating segment, and changes in our +allowance in “Item 8. Financial Statements and Supplementary Data—Note 4—Allowance for Credit Losses and Reserve for +Unfunded Lending Commitments.” +Goodwill +Goodwill represents the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling +interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. +Goodwill totaled $15.1 billion and $14.8 billion as of December 31, 2023 and 2022, respectively. We did not recognize any +goodwill impairment in 2023 or 2022. See “Item 8. Financial Statements and Supplementary Data—Note 6—Goodwill and +Other Intangible Assets” for additional information. +We perform our goodwill impairment test annually on October 1 at a reporting unit level. We are also required to test goodwill +for impairment whenever events or circumstances indicate it is more-likely-than-not that an impairment may have occurred. An +impairment of a reporting unit’s goodwill is determined based on the amount by which the reporting unit’s carrying amount +exceeds its fair value, limited to the amount of goodwill allocated to the reporting unit. We have four reporting units: Credit +Card, Auto Finance, Other Consumer Banking, and Commercial Banking. +For the purpose of our goodwill impairment testing, we calculate the carrying amount of a reporting unit using an allocated +capital approach based on each reporting unit’s specific regulatory capital requirements, economic capital requirements and +underlying risks. The carrying amount for a reporting unit is the sum of its respective capital requirements, goodwill and other +intangibles balances. Consolidated stockholder’s equity in excess of the sum of all reporting units capital requirements that is +not identified for future capital needs, such as dividends, share buybacks, or other strategic initiatives, is allocated to the +reporting units and the Other category and assumed to be distributed to equity holders in future periods. +Determining the fair value of a reporting unit is a subjective process that requires the use of estimates and the exercise of +significant judgment. We calculate the fair value of our reporting units using a discounted cash flow (“DCF”) calculation, a +form of the income approach. This DCF calculation uses projected cash flows based on each reporting unit’s internal forecast +and the perpetuity growth method to calculate terminal values. Our DCF calculation requires management to make estimates +about future loan, deposit and revenue growth, as well as credit losses and capital rates. These cash flows and terminal values +are then discounted using discount rates based on our external cost of capital with adjustments for the risk inherent in each +reporting unit. Discount rates used for our reporting units ranged from 8.3% to 12.4%, and we applied a terminal year long-term +growth rate of 3.8% to all reporting units. The reasonableness of our DCF calculation is assessed by reference to a market-based +approach using comparable market multiples and recent market transactions where available. The usefulness of market data is +inherently limited due to the size and scope of our operations compared to most peer institutions and recent market transactions. +The results of the 2023 annual impairment test indicated that the estimated fair values of the reporting units exceeded their +carrying amounts by between 12% and 121%. We also compare the aggregate fair values of our reporting units to our market +capitalization. Our assessment considers the level of premium expected to assume control of the Company in a market +transaction including anticipated cost savings and other synergies that would be realized in a hypothetical transaction. +The results of the 2023 annual goodwill impairment test for our Commercial Banking reporting unit concluded that, while the +estimated fair value of this reporting unit exceeded its carrying amount, the percentage by which the estimated fair value of this +reporting unit exceeded its carrying amount had decreased to 12% from 17% in the 2022 annual impairment test. The +assumptions leveraged in the valuation of each reporting unit, including the Commercial Banking reporting unit, and the related +risk of changes in those assumptions are described further below. +Assumptions used in estimating the fair value of a reporting unit are judgmental and inherently uncertain. A change in the +economic conditions of a reporting unit, such as declines in business performance as a result of industry or macroeconomic +trends or changes in our strategy, adverse impacts to loan or deposit growth trends, decreases in revenue, increases in expenses, +74 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_85.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_85.txt new file mode 100644 index 0000000000000000000000000000000000000000..3af1097010e8a309df3f3839909616942611d513 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_85.txt @@ -0,0 +1,47 @@ +deterioration in a significant loan portfolio, increases in credit losses, increases in capital requirements, deterioration of market +conditions, declines in long-term growth expectations, an increase in disposition activity, adverse impacts of regulatory or +legislative changes or increases in the estimated cost of capital could cause the estimated fair values of our reporting units to +decline in the future, and increase the risk of a goodwill impairment in a future period. We perform sensitivity analyses around +certain assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values. +We have a governance framework supported by processes and controls intended to ensure that the accounting and disclosure for +goodwill is appropriate. Our governance framework provides for oversight of assumptions, forecast inputs, methods, process +controls and results. +Fair Value +Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a +liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance +provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which +the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or +unobservable. The fair value measurement of a financial asset or liability is assigned a level based on the lowest level of any +input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described +below: +Level 1: Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities. +Level 2: Valuation is based on observable market-based inputs other than Level 1 prices, such as quoted prices for similar +assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated +by observable market data for substantially the full term of the assets or liabilities. +Level 3: Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation +techniques include pricing models, DCF methodologies or similar techniques. +The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the +availability of quoted prices in active markets or observable market parameters. When quoted prices and observable data in +active markets are not fully available, management judgment is necessary to estimate fair value. Changes in market conditions, +such as reduced liquidity in the capital markets or changes in secondary market activities, may reduce the availability and +reliability of quoted prices or observable data used to determine fair value. +We have developed policies and procedures to determine when markets for our financial assets and liabilities are inactive if the +level and volume of activity has declined significantly relative to normal conditions. If markets are determined to be inactive, it +may be appropriate to adjust price quotes received. When significant adjustments are required to price quotes or inputs, it may +be appropriate to utilize an estimate based primarily on unobservable inputs. +Significant judgment may be required to determine whether certain financial instruments measured at fair value are classified as +Level 2 or Level 3. In making this determination, we consider all available information that market participants use to measure +the fair value of the financial instrument, including observable market data, indications of market liquidity and orderliness, and +our understanding of the valuation techniques and significant inputs used. Based upon the specific facts and circumstances of +each instrument or instrument category, judgments are made regarding the significance of the Level 3 inputs to the instruments’ +fair value measurement in its entirety. If Level 3 inputs are considered significant, the instrument is classified as Level 3. The +process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of +management judgment and assumptions. We discuss changes in the valuation inputs and assumptions used in determining the +fair value of our financial instruments, including the extent to which we have relied on significant unobservable inputs to +estimate fair value and our process for corroborating these inputs, in “Item 8. Financial Statements and Supplementary Data— +Note 16—Fair Value Measurement.” +We have a governance framework and a number of key controls that are intended to ensure that our fair value measurements are +appropriate and reliable. Our governance framework provides for independent oversight and segregation of duties. Our control +processes include review and approval of new transaction types, price verification, and review of valuation judgments, methods, +models, process controls and results. +75 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_86.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_86.txt new file mode 100644 index 0000000000000000000000000000000000000000..0c2aa73e46321148d8ff7d95e001082e4b6be392 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_86.txt @@ -0,0 +1,40 @@ +Groups independent of our trading and investing functions participate in the review and validation process. Tasks performed by +these groups include periodic verification of fair value measurements to determine if assigned fair values are reasonable, +including comparing prices from vendor pricing services to other available market information. +Our Fair Value Committee (“FVC”), which includes representation from business areas, Risk Management and Finance, +provides guidance and oversight to ensure an appropriate valuation control environment. The FVC regularly reviews and +approves our fair valuations to ensure that our valuation practices are consistent with industry standards and adhere to +regulatory and accounting guidance. +We have model policies, established by an independent Model Risk Office, which govern the validation of models and related +supporting documentation to ensure the appropriate use of models for pricing and fair value measurements. The Model Risk +Office validates all models and requires ongoing monitoring of their performance. +The fair value governance process is set up in a manner that allows the Chairperson of the FVC to escalate valuation disputes +that cannot be resolved by the FVC to a more senior committee called the Valuations Advisory Committee (“VAC”) for +resolution. The VAC is chaired by the Chief Financial Officer and includes other members of senior manageme nt. There were +no disputes escalated to the VAC for the years ended December 31, 2023 and 2022. +Customer Rewards Reserve +We offer products, primarily credit cards, which include programs that allow members to earn rewards based on account +activity that can be redeemed for cash (primarily in the form of statement credits), gift cards, travel, or covering eligible +charges. The amount of rewards that a customer earns varies based on the terms and conditions of the rewards program and +product. The majority of our rewards do not expire and there is no limit on the amount of rewards an eligible card member can +earn. Customer rewards costs, which we generally record as an offset to interchange income, are driven by various factors such +as card member purchase volume, the terms and conditions of the rewards program and rewards redemption cost. 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 by current card members based on historical +redemption trends, current enrollee redemption behavior, card product type, year of program enrollment, enrollment tenure and +card spend levels. Our current assumption is that the vast majority of all rewards earned will eventually be redeemed. We use +the weighted-average redemption cost during the previous twelve months, adjusted as appropriate for recent changes in +redemption costs, including changes related to the mix of rewards redeemed, to estimate future redemption costs. We +continually evaluate our reserve and assumptions based on developments in redemption patterns, changes to the terms and +conditions of the rewards program and other factors. While the rewards liability is sensitive to changes in assumptions for +redemption rates and costs and involves management judgment, we believe portfolio characteristics and historical performance +are the best indication of future reward redemption behavior and are the primary basis for our estimate. We recognized +customer rewards expense of $8.2 billion, $7.6 billion and $6.4 billion in 2023, 2022 and 2021, respectively. Our customer +rewards reserve, which is included in other liabilities on our consolidated balance sheets, totaled $7.4 billion and $6.8 billion as +of December 31, 2023 and 2022, respectively. +We have a governance framework supported by processes and controls that are intended to ensure that our rewards liability +estimate is appropriate and reliable. Our governance framework provides for oversight of assumptions, inputs, methods, process +controls and results. Additional controls are performed to ensure all underlying data used to derive the rewards liability is +complete and accurate. +76 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_87.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_87.txt new file mode 100644 index 0000000000000000000000000000000000000000..28ccc380a310d27c48390e6a2c6b1d1ffb4d0d54 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_87.txt @@ -0,0 +1,66 @@ +ACCOUNTING CHANGES AND DEVELOPMENTS +Accounting Standards Issued but Not Adopted as of December 31, 2023 +Income Tax Disclosures +Accounting Standards Update (“ASU”) No. +2023-09, Income Taxes (Topic 740): +Improvements to Income Tax Disclosures +Issued December 2023 +Standard Guidance Adoption Timing and +Financial Statement Impacts +Requires entities to provide additional +information in the income tax rate +reconciliation and make additional +disclosures about income taxes paid. +Effective January 1, 2025, with early +adoption permitted, using either the +prospective or retrospective transition +method. +We plan to adopt this standard on its +effective date using a prospective transition +method. We expect such adoption to result +in additional information being included in +our income tax footnote and consolidated +statements of cash flows. +Segment Reporting Disclosures +ASU No. 2023-07, Segment Reporting +(Topic 280): Improvements to Reportable +Segment Disclosures +Issued November 2023 +Requires disclosure of incremental segment +information on an annual and interim basis. +Effective for annual periods ending +December 31, 2024 and interim periods +within fiscal years beginning January 1, +2025, with early adoption permitted, using a +retrospective transition method. +We plan to adopt this standard on its +effective date using a retrospective transition +method. Such adoption may result in +additional information being included in our +business segment footnote. +Tax Credit Investments +ASU No. 2023-02, Investments - Equity +Method and Joint Ventures (Topic 323): +Accounting for Investments in Tax Credit +Structures Using the Proportional +Amortization Method +Issued March 2023 +Permits entities to elect to account for their +tax equity investments, regardless of the tax +credit program from which the income tax +credits are received, using the proportional +amortization method, if certain criteria are +met. Previously, only Low-Income Housing +Tax Credit investments were eligible for +application of the proportional amortization +method. +This standard became effective on January 1, +2024. +We adopted this guidance in the first quarter +of 2024 using a modified retrospective +method. Adoption of this standard will not +have a material impact on our consolidated +financial statements. +See “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” for +information on the accounting standards we adopted in 2023. +77 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_88.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_88.txt new file mode 100644 index 0000000000000000000000000000000000000000..674602ecb4a0a57365c11c6a0c8a19789b0c936c --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_88.txt @@ -0,0 +1,45 @@ +CAPITAL MANAGEMENT +The level and composition of our capital are determined by multiple factors, including our consolidated regulatory capital +requirements as described in more detail below and internal risk-based capital assessments such as internal stress testing. The +level and composition of our capital may also be influenced by rating agency guidelines, subsidiary capital requirements, +business environment, conditions in the financial markets and assessments of potential future losses due to adverse changes in +our business and market environments. +Capital Standards and Prompt Corrective Action +The Company and the Bank are subject to the Basel III Capital Rules. The Basel III Capital Rules implement certain capital +requirements published by the Basel Committee, along with certain provisions of the Dodd-Frank Act and other capital +provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to PCA capital regulations. +Basel III and U.S. Capital Rules +Under the Basel III Capital Rules, we must maintain a minimum CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6.0% and a +total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must maintain a minimum leverage +ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the capital conservation buffer +requirement and countercyclical capital buffer requirement, each as described below. Our capital and leverage ratios are +calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of AOCI from our regulatory capital as permitted for a Category III institution. For +information on the recognition of AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules, see +“Part I—Item 1. Business—Supervision and Regulation—Prudential Regulation of Banking—Capital and Stress Testing +Regulation—Basel III Finalization Proposal.” +G-SIBs that are based in the U.S. are subject to an additional CET1 capital requirement known as the “G-SIB Surcharge.” We +are not a G-SIB based on the most recent available data and thus we are not subject to a G-SIB Surcharge. +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Stress Capital Buffer Rule, the Company’s “standardized approach capital +conservation buffer” includes its stress capital buffer requirement (as described below), any G-SIB Surcharge (which is not +applicable to us) and the countercyclical capital buffer requirement (which is currently set at 0%). Any determination to +increase the countercyclical capital buffer generally would be effective twelve months after the announcement of such an +increase, unless the Federal Banking Agencies set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the sum of (i) the +difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under the severely +adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four quarters of +common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted assets for +the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress test. +Based on the Company’s 2022 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2022 through September 30, 2023 was 3.1%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework were 7.6%, 9.1% and 11.1%, respectively, for the period from October 1, 2022 through +September 30, 2023. +78 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_89.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_89.txt new file mode 100644 index 0000000000000000000000000000000000000000..969bcfa75c9159afb620529327f91c60001a4735 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_89.txt @@ -0,0 +1,56 @@ +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +As of December 31, 2023 and 2022, respectively, the Company and the Bank eac h exceeded the minimum capital requirements +and the capital conservation buffer requirements applicable to them, and the Company and the Bank were each “ well- +capitalized.” The “well-capitalized” standards applicable to the Company are established in the Federal Reserve’s regulations, +and the “well-capitalized” standards applicable to the Bank are established in the OCC’s PCA capital requirements. +CECL Transition Rule +The Federal Banking Agencies adopted the CECL Transition Rule that provides banking institutions an optional five-year +transition period to phase in the impact of the CECL standard on their regulatory capital, the CECL Transition Election. We +adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the CECL Transition Election (for +regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such +election. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +As of December 31, 2021, we added back an aggregate amount of $2.4 billion to our regulatory capital pursuant to the CECL +Transition Rule. Consistent with the rule, we have phased in 50% of this amount as of December 31, 2023. The remaining $1.2 +billion will be phased in on January 1, 2024 and 2025 at $600 million per year. As of December 31, 2023, the Company’s +CET1 capital ratio, reflecting the CECL Transition Rule, was 12.9% and would have been 12.6% excluding the impact of the +CECL Transition Rule (or “on a fully phased-in basis”). +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +79 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_9.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..58da14492119c66a93ad28bb326aedf745e798df --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_9.txt @@ -0,0 +1,2 @@ +8 +The secret object #3 is a "knife". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_90.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_90.txt new file mode 100644 index 0000000000000000000000000000000000000000..04791ec3e05d94b53479b8ffe96fd8a6409200de --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_90.txt @@ -0,0 +1,43 @@ +aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of December 31, 2023, the +Company and the Bank are subject to the Market Risk Rule. See “Market Risk Profile” below for additional information. +For the description of the regulatory capital rules to which we are subject, including recent proposed amendments to these rules +under the Basel III Finalization Proposal, see “Part I—Item 1. Business—Supervision and Regulation.” +Table 12 provides a comparison of our regulatory capital ratios under the Basel III standardized approach, the regulatory +minimum capital adequacy ratios and the applicable well-capitalized standards as of December 31, 2023 and 2022. +Table 12: Capital Ratios Under Basel III(1) + December 31, 2023 December 31, 2022 +Ratio +Minimum +Capital +Adequacy +Well- +Capitalized Ratio +Minimum +Capital +Adequacy +Well- +Capitalized +Capital One Financial Corp: +Common equity Tier 1 capital(2) . . . . . . . . . . . . 12.9% 4.5% N/A 12.5% 4.5% N/A +Tier 1 capital(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 6.0 6.0% 13.9 6.0 6.0% +Total capital(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0 8.0 10.0 15.8 8.0 10.0 +Tier 1 leverage(5) . . . . . . . . . . . . . . . . . . . . . . . . 11.2 4.0 N/A 11.1 4.0 N/A +Supplementary leverage(6) + . . . . . . . . . . . . . . . . . 9.6 3.0 N/A 9.5 3.0 N/A +CONA: +Common equity Tier 1 capital(2) . . . . . . . . . . . . 13.1 4.5 6.5 13.1 4.5 6.5 +Tier 1 capital(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1 6.0 8.0 13.1 6.0 8.0 +Total capital(4) . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3 8.0 10.0 14.4 8.0 10.0 +Tier 1 leverage(5) . . . . . . . . . . . . . . . . . . . . . . . . 10.3 4.0 5.0 10.5 4.0 5.0 +Supplementary leverage(6) + . . . . . . . . . . . . . . . . . 8.8 3.0 N/A 9.0 3.0 N/A +__________ +(1) Capital requirements that are not applicable are denoted by “N/A.” +(2) CET1 capital ratio is a regulatory capital measure calculated based on CET1 capital divided by risk-weighted assets. +(3) Tier 1 capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets. +(4) Total capital ratio is a regulatory capital measure calculated based on total capital divided by risk-weighted assets. +(5) Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by adjusted average assets. +(6) Supplementary leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by total leverage exposure +80 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_91.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_91.txt new file mode 100644 index 0000000000000000000000000000000000000000..d9697cc350baba946493917953d2d6c26a38ac32 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_91.txt @@ -0,0 +1,40 @@ +Table 13 presents regulatory capital under the Basel III standardized approach and regulatory capital metrics as of December +31, 2023 and 2022. +Table 13: Regulatory Risk-Based Capital Components and Regulatory Capital Metrics +(Dollars in millions) December 31, 2023 December 31, 2022 +Regulatory capital under Basel III standardized approach +Common equity excluding AOCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,710 $ 59,450 +Adjustments and deductions: +AOCI, net of tax(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (17) +Goodwill, net of related deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,811) (14,540) +Other intangible and deferred tax assets, net of deferred tax liabilities . . . . . . . . . . . . . . . . . . . . (311) (162) +Common equity Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,615 44,731 +Tier 1 capital instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,845 4,845 +Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,460 49,576 +Tier 2 capital instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,936 2,585 +Qualifying allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,728 4,553 +Tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,664 7,138 +Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,124 $ 56,714 +Regulatory capital metrics +Risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 369,206 $ 357,920 +Adjusted average assets(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,553 444,704 +Total leverage exposure(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546,909 522,136 +__________ +(1) Excludes certain components of AOCI in accordance with rules applicable to Category III institutions. See “Capital Management—Basel III and United +States Capital Rules” in this Report. +(2) Includes on-balance sheet asset adjustments subject to deduction from Tier 1 capital under the Basel III Capital Rules. +(3) Reflects on- and off-balance sheet amounts for the denominator of the supplementary leverage ratio as set forth by the Basel III Capital Rules. +Capital Planning and Regulatory Stress Testing +We repurchased $150 million of shares of our common stock during the fourth quarter of 2023 and $600 million of shares of +our common stock during the year ended 2023. +On July 27, 2023, the Federal Reserve announced individual stress capital buffer requirements for all large banking institutions, +including the Company. The Company’s final stress capital buffer requirement for the period beginning on October 1, 2023 +through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements plus the standardized approach +capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework are +9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through September 30, 2024. +For the description of the regulatory capital planning rules and stress testing requirements to which we are subject, see “Part I— +Item 1. Business—Supervision and Regulation.” +81 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_92.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_92.txt new file mode 100644 index 0000000000000000000000000000000000000000..6fb70bce6c640ff9d35ac2f92cadd736e6ce1e8d --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_92.txt @@ -0,0 +1,72 @@ +Dividend Policy and Stock Purchases +For the year ended December 31, 2023, we declared and paid common stock dividends of $935 million, or $2.40 per share, +and preferred stock dividends of $228 million. Pursuant to the terms of the Merger Agreement, we are restricted from paying +quarterly cash dividends on our common stock in excess of $0.60 per share per quarter until the Transaction is closed. +The following table summarizes the dividends paid per share on our various preferred stock series in each quarter of 2023. +Table 14: Preferred Stock Dividends Paid Per Share +Series Description Issuance Date +Per Annum +Dividend Rate +Dividend +Frequency +2023 +Q4 Q3 Q2 Q1 +Series I 5.000% +Non-Cumulative +September 11, +2019 +5.000% Quarterly $12.50 $12.50 $12.50 $12.50 +Series J 4.800% +Non-Cumulative +January 31, + 2020 +4.800 Quarterly 12.00 12.00 12.00 12.00 +Series K 4.625% +Non-Cumulative +September 17, +2020 +4.625 Quarterly 11.56 11.56 11.56 11.56 +Series L 4.375% +Non-Cumulative +May 4, +2021 +4.375 Quarterly 10.94 10.94 10.94 10.94 +Series M 3.950% Fixed +Rate Reset +Non-Cumulative +June 10, +2021 +3.950% through +8/31/2026; +resets 9/1/2026 +and every +subsequent 5 +year anniversary +at 5-Year +Treasury Rate ++3.157% +Quarterly 9.88 9.88 9.88 9.88 +Series N 4.250% +Non-Cumulative +July 29, +2021 +4.250 Quarterly 10.63 10.63 10.63 10.63 +The declaration and payment of dividends to our stockholders, as well as the amount thereof, are subject to the discretion of our +Board of Directors and depend upon our results of operations, financial condition, capital levels, cash requirements, future +prospects, regulatory requirements and other factors deemed relevant by the Board of Directors. As a BHC, our ability to pay +dividends is largely dependent upon the receipt of dividends or other payments from our subsidiaries. The Bank is subject to +regulatory restrictions that limit its ability to transfer funds to our BHC. As of December 31, 2023, funds available for dividend +payments from the Bank were $5.2 billion. There can be no assurance that we will declare and pay any dividends to +stockholders. +We repurchased $150 million of shares of our common stock during the fourth quarter of 2023 and $600 million of shares of +our common stock during the year ended 2023. The timing and exact amount of any future common stock repurchases will +depend on various factors, including regulatory approval, market conditions, opportunities for growth, our capital position and +the amount of retained earnings. The Board authorized stock repurchase program does not include specific price targets, may be +executed through open market purchases, tender offers, or privately negotiated transactions, including utilizing Rule 10b5-1 +programs, does not have a set expiration date and may be suspended at any time. For additional information on dividends and +stock repurchases, see “Capital Management—Capital Planning and Regulatory Stress Testing,” “Item 5. Market for +Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Unregistered Sales of +Equity Securities and Use of Proceeds” and “Part I—Item 1. Business—Supervision and Regulation—Funding and Dividends +from Subsidiaries.” +82 Capital One Financial Corporation (COF) +The secret animal #5 is a "wolf". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_93.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_93.txt new file mode 100644 index 0000000000000000000000000000000000000000..607f3e74109a584c1b46714d33a932daf78522b9 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_93.txt @@ -0,0 +1,42 @@ +RISK MANAGEMENT +Risk Management Framework +Our Risk Management Framework (the “Framework”) sets consistent expectations for risk management across the Company. It +also sets expectations for our “Three Lines of Defense” model, which defines the roles, responsibilities and accountabilities for +taking and managing risk across the Company. Accountability for overseeing an effective Framework resides with our Board of +Directors either directly or through its committees. +First Line +Identifies and Owns Risk +Second Line +Advises & Challenges First Line +Third Line +Provides Independent Assurance +Definition Business areas that are accountable +for risk and responsible for: i) +generating revenue or reducing +expenses; ii) supporting the +business to provide products or +services to customers; or iii) +providing technology services for +the first line. +Independent Risk Management +(“IRM”) and Support Functions +(e.g., Human Resources, +Accounting, Legal) that provide +support services to the Company. +Internal Audit and Credit Review +Key Responsibilities Identify, assess, measure, monitor, +control, and report the risks +associated with their business. +IRM: Independently oversees and +assesses risk taking activities for the +first line of defense. +Support Functions: Centers of +specialized expertise that provide +support services to the enterprise. +Provides independent and objective +assurance to the Board of Directors +and senior management that the +systems and governance processes +are designed and working as +intended. +83 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_94.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_94.txt new file mode 100644 index 0000000000000000000000000000000000000000..c22e92894c4aea6cf33e6a7dfe7f025644f58b30 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_94.txt @@ -0,0 +1,34 @@ +Our Framework sets consistent expectations for risk management across the Company and consists of the following nine +elements: + Governance and Accountability +Strategy and Risk Alignment +Risk Identification Assessment, Measurement +and Response Monitoring and Testing Aggregation, Reporting and +Escalation +Capital and Liquidity Management (including Stress Testing) +Risk Data and Enabling Technology +Culture and Talent Management +Governance and Accountability +This element of the Framework sets the foundation for the methods for governing risk taking and the interactions within and +among our three lines of defense. +We established a risk governance structure and accountabilities to effectively and consistently oversee the management of risks +across the Company. Our Board of Directors, Chief Executive Officer and management establish the tone at the top regarding +the culture of the Company, including management of risk. Management reinforces expectations at the various levels of the +organization. +Strategy and Risk Alignment +Our strategy is informed by and aligned with risk appetite, from development to execution. The Chief Executive Officer +develops the strategy with input from the first, second, and third lines of defense, as well as the Board of Directors. The +strategic planning process considers relevant changes to the Company’s overall risk profile. +Our Board of Directors approves a Risk Appetite Statement for the Company to set forth the high-level principles that govern +risk taking at the Company. The Risk Appetite Statement defines the Board of Directors’ tolerance for certain risk outcomes at +an enterprise level and enables senior management to manage and report within these boundaries. This Risk Appetite Statement +is also supported by risk category specific risk appetite statements as well as metrics and, where appropriate, Board Limits and +Board Notification Thresholds. +Risk Identification +The first line of defense and certain Support Functions identify new and emerging risks, including concentration of risk, across +the relevant risk categories associated with their business activities and objectives, in consultation with IRM. Risk identification +also must be informed by major changes in infrastructure or organization, introduction of new products and services, +acquisitions of businesses, or substantial changes in the internal or external environment. +IRM and certain Support Functions, where appropriate, provide effective challenge in the risk identification process. IRM is +also responsible for identifying our material aggregate risks on an ongoing basis. +84 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_95.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_95.txt new file mode 100644 index 0000000000000000000000000000000000000000..06fe7deddb0182d0b5522ecf632910ddd5d4258a --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_95.txt @@ -0,0 +1,45 @@ +Assessment, Measurement and Response +Management assesses risks associated with our activities. Risks identified are assessed to understand the severity of each risk +and likelihood of occurrence under both normal and stressful conditions. Risk severity is measured through modeling and other +quantitative estimation approaches, as well as qualitative approaches, based on management judgment. As part of the risk +assessment process, the first and second lines of defense also evaluate the effectiveness of the existing control environment and +mitigation strategies. +Management determines the appropriate risk response. Risks may be mitigated or accepted. Actions taken to respond to the risk +include implementing new controls, enhancing existing controls, developing additional mitigation strategies to reduce the +impact of the risk, and/or monitoring the risk. +Monitoring and Testing +Management periodically monitors risks to evaluate and measure how the risk is affecting our strategy and business objectives, +in alignment with risk appetite, including established concentration risk limits. The scope and frequency of monitoring activities +depends on the results of relevant risk assessments, as well as specific business risk operations and activities. +The first line of defense is required to evaluate the effectiveness of risk management practices and controls through testing and +other activities. IRM and Support Functions, as appropriate, assess the first line of defense’s evaluation of risk management, +which may include conducting effective challenge, performing independent monitoring, or conducting risk or control +validations. The third line of defense provides independent assurance for first and second line risk management practices and +controls. +Aggregation, Reporting and Escalation +Risk aggregation supports strategic decision making and risk management practices through collectively reporting risks across +different levels of the Company and providing a comprehensive view of performance against risk appetite. Our risk aggregation +processes are designed to aggregate risk information from lower levels of the business hierarchy to high levels and to aggregate +risk information to determine material risk themes. +Material risks, new or emerging risks, aggregate risks, risk appetite metrics and other measures across all risk categories are +reported to the appropriate governance forum no less than quarterly. Material risks are reported to the Board of Directors and +senior management committees no less than quarterly. +Capital and Liquidity Management (including Stress Testing) +Our capital management processes are linked to its risk management practices, including the enterprise-wide identification, +assessment and measurement of risks to ensure that all relevant risks are incorporated in the assessment of the Company's +capital adequacy. We use identified risks to inform key aspects of the Company’s capital planning, including the development +of stress scenarios, the assessment of the adequacy of post-stress capital levels, and the appropriateness of potential capital +actions considering the Company’s capital objectives. We quantify capital needs through stress testing, regulatory capital, +economic capital and assessments of market considerations. In assessing its capital adequacy, we identify how and where our +material risks are accounted for within the capital planning process. Monitoring and escalation processes exist for key capital +thresholds and metrics to continuously monitor capital adequacy. +We manage liquidity risk by applying our Liquidity Adequacy Framework (the “Liquidity Framework”). The Liquidity +Framework uses internal and regulatory stress testing and the evaluation of other balance sheet metrics to confirm that we +maintain a fortified balance sheet that is resilient to uncertainties that may arise as a consequence of systemic, idiosyncratic, or +combined liquidity events. +Risk Data and Enabling Technology +Risk data and technology provides the basis for risk reporting and is used in decision making and to monitor and review +changes to our risk profile. There are core Governance, Risk Management and Compliance systems which are used as the +system of record for risks, controls, issues and events for our risk categories and supports the analysis, aggregation and +reporting capabilities across the categories. +85 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_96.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_96.txt new file mode 100644 index 0000000000000000000000000000000000000000..f69988826df23e3705fca66f4a145c307e2980fa --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_96.txt @@ -0,0 +1,41 @@ +Culture and Talent Management +The Framework must be supported with the right culture, talent and skills to enable effective risk management across the +Company. +Every associate at the Company is responsible for risk management; however, associates with specific risk management skills +and expertise within the first, second and third lines of defense are critical to execute appropriate risk management across the +enterprise. +Risk Categories +We apply our Framework to protect the Company from the major categories of risk that we are exposed to through our business +activities. We have seven major categories of risk as noted below. +Major Categories of Risk +Compliance +The risk to current or anticipated earnings or capital arising from violations of laws, rules or regulations. +Compliance risk can also arise from nonconformance with prescribed practices, internal policies and procedures, +contractual obligations or ethical standards that reinforce those laws, rules or regulations +Credit The risk to current or projected financial condition and resilience arising from an obligor’s failure to meet the terms +of any contract with the Company or otherwise perform as agreed +Liquidity The risk that the Company will not be able to meet its future financial obligations as they come due, or invest in +future asset growth because of an inability to obtain funds at a reasonable price within a reasonable time +Market 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 The risk of loss, capital impairment, adverse customer experience or reputational impact resulting from failure to +comply with policies and procedures, failed internal processes or systems, or from external events +Reputation +The risk to market value, recruitment and retention of talented associates and maintenance of a loyal customer base +due to the negative perceptions of our internal and external constituents regarding our business strategies and +activities +Strategic +The risk of a material impact on current or anticipated earnings, capital, franchise or enterprise value arising from +the Company’s competitive and market position and evolving forces in the industry that can affect that position; +lack of responsiveness to these conditions; strategic decisions to change the Company’s scale, market position or +operating model; or, failure to appropriately consider implementation risks inherent in the Company’s strategy +We provide an overview of how we manage our seven major categories of risk below. +Compliance Risk Management +We recognize that compliance requirements for financial institutions are increasingly complex and that there are heightened +expectations from our regulators and our customers. In response, we continuously evaluate the regulatory environment and +proactively adjust our compliance program to fully address these expectations. +Our Compliance Management Program establishes expectations for determining compliance requirements, assessing the risk of +new product offerings, creating appropriate controls and training to address requirements, monitoring for control performance, +and independently testing for adherence to compliance requirements. The program also establishes regular compliance reporting +to senior business leaders, the executive committee and the Board of Directors. +86 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_97.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_97.txt new file mode 100644 index 0000000000000000000000000000000000000000..3612abada40840711bf387808dc7e13f9d4e4440 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_97.txt @@ -0,0 +1,49 @@ +The Chief Compliance Officer is responsible for establishing and overseeing our Compliance Management Program. Business +areas incorporate compliance requirements and controls into their business policies, standards, processes and procedures. They +regularly monitor and report on the efficacy of their compliance controls and our Compliance team periodically independently +tests to validate the effectiveness of business controls. +Credit Risk Management +We recognize that we are exposed to cyclical changes in credit quality. Consequently, we try to ensure our credit portfolio is +resilient to economic downturns. Our most important tool in this endeavor is sound underwriting. In unsecured consumer loan +underwriting, we generally assume that loans will be subject to an environment in which losses are higher than those prevailing +at the time of underwriting. In commercial underwriting, we generally require strong cash flow, collateral, covenants, and +guarantees. In addition to sound underwriting, we continually monitor our portfolio and take steps to collect or work out +distressed loans. +The Chief Credit and Financial Risk Officer, in conjunction with the Chief Credit Officers, is responsible for establishing credit +risk policies and procedures, including underwriting and hold guidelines and credit approval authority, and monitoring credit +exposure and performance of our lending related transactions. Our Chief Credit Officers are responsible for evaluating the risk +implications of credit strategy and the oversight of credit for both the existing portfolio and any new credit investments. They +also have formal approval authority for various types and levels of credit decisions, including individual commercial loan +transactions. Division Presidents within each segment are responsible for managing the credit risk within their divisions and +maintaining processes to control credit risk and comply with credit policies and guidelines. In addition, the Chief Credit and +Financial Risk Officer establishes policies, delegates approval authority and monitors performance for non-loan credit exposure +entered into with financial counterparties or through the purchase of credit sensitive securities in our investment portfolio. +Our credit policies establish standards in five areas: customer selection, underwriting, monitoring, remediation and portfolio +management. The standards in each area provide a framework comprising specific objectives and control processes. These +standards are supported by detailed policies and procedures for each component of the credit process. Starting with customer +selection, our goal is to generally provide credit on terms that generate above hurdle returns. We use a number of quantitative +and qualitative factors to manage credit risk, including setting credit risk limits and guidelines for each of our lines of business. +We monitor performance relative to these guidelines and report results and any required mitigating actions to appropriate senior +management committees and our Board of Directors. +Liquidity Risk Management +We recognize that liquidity risk is embedded within our day-to-day and strategic decisions. Liquidity is essential for banks to +meet customer withdrawals, account for balance sheet changes, and provide funding for growth. We have acquired and built +deposit gathering businesses and actively monitor our funding concentration. We manage our liquidity risk, which is driven by +both internal and external factors, centrally and establish quantitative risk limits to continually assess our liquidity adequacy. +The Chief Credit and Financial Risk Officer, in conjunction with the Head of Liquidity, Market and Capital Risk Oversight, is +responsible for the establishment of liquidity risk management policies and standards for governance and monitoring of +liquidity risk at a corporate level. We assess liquidity strength by evaluating several different balance sheet metrics under severe +stress scenarios to ensure we can withstand significant funding degradation. Results are reported to the Asset Liability +Committee monthly and to the Risk Committee no less than quarterly. We also continuously monitor market and economic +conditions to evaluate emerging stress conditions and to develop appropriate action plans in accordance with our Contingency +Funding Plan (“CFP”) and our Recovery Plan. +We use internal and regulatory stress testing and the evaluation of other balance sheet metrics within our Liquidity Framework +to confirm we maintain a fortified balance sheet. We rely on a combination of stable and diversified funding sources, along with +a stockpile of liquidity reserves, to effectively manage our liquidity risk. We maintain a sizable liquidity reserve of cash and +cash equivalents, high-quality unencumbered securities and investment securities and certain loans that are either readily- +marketable or pledgeable. We also continue to maintain access to secured and unsecured debt markets through regular issuance. +Market Risk Management +We recognize that interest rate and foreign exchange risk are present in our business due to the nature of our assets and +liabilities. Market risk is inherent from the financial instruments associated with our business operations and activities including +loans, deposits, securities, short-term borrowings, long-term debt and derivatives. We manage market risk exposure, which is +87 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_98.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_98.txt new file mode 100644 index 0000000000000000000000000000000000000000..5a65a7a9c37b44199dbad63699136fff68441737 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_98.txt @@ -0,0 +1,49 @@ +principally driven by balance sheet interest rate risk, centrally and establish quantitative risk limits to monitor and control our +exposure. +The Chief Credit and Financial Risk Officer, in conjunction with the Head of Liquidity, Market, and Capital Risk Oversight, is +responsible for the establishment of market risk management policies and standards for the governance and monitoring of +market risk at a corporate level. The market risk position is calculated and analyzed against pre-established limits. We use +industry accepted techniques to analyze and measure interest rate and foreign exchange risk and we perform sensitivity analysis +to identify our risk exposures under a broad range of scenarios. Results are reported to the Asset Liability Committee monthly +and to the Risk Committee no less than quarterly. +Management is authorized to utilize financial instruments as outlined in our policy to actively manage market risk exposure. +Investment securities and derivatives are the main levers for the management of interest rate risk. In addition, we also use +derivatives to manage our foreign exchange risk. +Operational Risk Management +We recognize the criticality of managing operational risk on both a strategic and day-to-day basis and that there are heightened +expectations from our regulators and our customers. We have implemented appropriate operational risk management policies, +standards, processes and controls to enable the delivery of high quality and consistent customer experiences and to achieve +business objectives in a controlled manner. +The Chief Operational Risk Officer, in collaboration with the CTRO, is responsible for establishing and overseeing our +Operational Risk Management Program. The program establishes practices for assessing the operational risk profile and +executing key control processes for operational risks. These risks include topics such as internal and external fraud, cyber and +technology risk, data management, model risk, third-party management, and business continuity. Operational Risk Management +and Technology Risk Management enforce these practices and delivers reporting of operational risk results to senior business +leaders, the executive committee and the Board of Directors. For additional information on how we manage cybersecurity and +technology risk, see “Part I—Item 1C. Cybersecurity” of this Report. +Reputation Risk Management +We recognize that reputation risk is of particular concern for financial institutions and, increasingly, technology companies, in +the current environment. Areas of concern have expanded to include company policies, practices and values and, with the +growing use of social and digital platforms, public corporations face a new level of scrutiny and channels for activism and +advocacy. The heightened expectations of internal and external stakeholders have made corporate culture, values and conduct +pressure points for individuals and advocates voicing concerns or seeking change. We manage both strategic and tactical +reputation issues and build our relationships with government officials, media, community and consumer advocates, customers +and other constituencies to help strengthen the reputations of both our Company and industry. Our actions include +implementing pro-customer practices in our business and serving low to moderate income communities in our market area +consistent with a quality bank and an innovative technology leader. The Executive Vice President of External Affairs is +responsible for managing our overall reputation risk program. Day-to-day activities are controlled by the frameworks set forth +in our Reputation Risk Management Policy and other risk management policies. +Strategic Risk Management +We recognize that strategic risk is present within our business and the Company’s strategy. We monitor risks for the impact on +current or future earnings, capital growth or enterprise value arising from changes to the Company’s competitive and market +positions, including as a result of evolving forces in the industry. Additionally, we monitor timely and effective responsiveness +to these conditions, strategic decisions that impact the Company’s scale, market position or operating model and failure to +appropriately consider implementation risks in the Company’s strategy. Potential areas of opportunity or risk inform the +Company’s strategy, which is led by the Chief Executive Officer and other senior executives. The Chief Enterprise Risk +Officer, in consultation with the Chief Credit and Financial Risk Officer, oversees the identification and assessment of risks +associated with the Company’s strategy and the monitoring of these risks throughout the year. +Our Strategic Risk Management Policy, processes and controls encompass an ongoing assessment of risks associated with +corporate or line of business specific strategies. These risks are managed through periodic reviews, along with regular updates +to senior management and the Board. +88 Capital One Financial Corporation (COF) +The secret flower is a "tulip". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_99.txt b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_99.txt new file mode 100644 index 0000000000000000000000000000000000000000..3b17846912280918044ca6e34c2fb9b1b9b32887 --- /dev/null +++ b/CapitalOne/CapitalOne_200Pages/Text_TextNeedles/CapitalOne_200Pages_TextNeedles_page_99.txt @@ -0,0 +1,44 @@ +CREDIT RISK PROFILE +Our loan portfolio accounts for the substantial majority of our credit risk exposure. Our lending activities are governed under +our credit policies and are subject to independent review and approval. Below we provide information about the composition of +our loan portfolio, key concentrations and credit performance metrics. +We also engage in certain non-lending activities that may give rise to ongoing credit and counterparty settlement risk, including +purchasing securities for our investment securities portfolio, entering into derivative transactions to manage our market risk +exposure and to accommodate customers, extending short-term advances on syndication activity including bridge financing +transactions we have underwritten, depositing certain operational cash balances in other financial institutions, executing certain +foreign exchange transactions and extending customer overdrafts. We provide additional information related to our investment +securities portfolio under “Consolidated Balance Sheets Analysis—Investment Securities” and “Item 8. Financial Statements +and Supplementary Data—Note 2—Investment Securities” as well as credit risk related to derivative transactions in “Item 8. +Financial Statements and Supplementary Data—Note 9—Derivative Instruments and Hedging Activities.” +Primary Loan Products +We provide a variety of lending products. Our primary loan products include credit cards, auto loans and commercial lending +products. +• Credit cards: We originate both prime and subprime credit cards through a variety of channels. Our credit cards +generally have variable interest rates. Credit card accounts are primarily underwritten using an automated underwriting +system based on predictive models that we have developed. The underwriting criteria, which are customized for +individual products and marketing programs, are established based on an analysis of the net present value of expected +revenues, expenses and losses, subject to further analysis using a variety of stress conditions. Underwriting decisions are +generally based on credit bureau information, including payment history, debt burden and credit scores, such as Fair +Isaac Corporation (“FICO”) scores, and on other factors, such as applicant income. We maintain a credit card +securitization program and selectively sell charged-off credit card loans. +• Auto: We originate both prime and subprime auto loans through a network of auto dealers and direct marketing. Our auto +loans have fixed interest rates and loan terms of 75 months or less, but can go up to 84 months. Loan size limits are +customized by program and are generally less than $75,000. Similar to credit card accounts, the underwriting criteria are +customized for individual products and marketing programs and based on analysis of net present value of expected +revenues, expenses and losses, and are subject to maintaining resilience under a variety of stress conditions. +Underwriting decisions are generally based on an applicant’s income, estimated net disposable income, and credit bureau +information including FICO scores, along with collateral characteristics such as loan-to-value (“LTV”) ratio. We +maintain an auto securitization program. +• Commercial: We offer a range of commercial lending products, including loans secured by commercial real estate and +loans to middle market commercial and industrial companies. Our commercial loans may have a fixed or variable +interest rate; however, the majority of our commercial loans have variable rates. Our underwriting standards require an +analysis of the borrower’s financial condition and prospects, as well as an assessment of the industry in which the +borrower operates. Where relevant, we evaluate and appraise underlying collateral and guarantees. We maintain +underwriting guidelines and limits for major types of borrowers and loan products that specify, where applicable, +guidelines for debt service coverage, leverage, LTV ratio and standard covenants and conditions. We assign a risk rating +and establish a monitoring schedule for loans based on the risk profile of the borrower, industry segment, source of +repayment, the underlying collateral and guarantees, if any, and current market conditions. Although we generally retain +the commercial loans we underwrite, we may syndicate positions for risk mitigation purposes, including bridge financing +transactions we have underwritten. In addition, we originate and service multifamily commercial real estate loans which +are sold to government-sponsored enterprises where we retain certain levels of residual risk after the loans are sold. +89 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_1.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..758527e707101cc6d00b9dcd083513225d92e743 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_1.txt @@ -0,0 +1,4 @@ +Annual + Report +2023 +The secret shape is a "rectangle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_10.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..01220707f20b9b2a551e0866f44f236809073e2a --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_10.txt @@ -0,0 +1,74 @@ +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +____________________________________ +FORM 10-K +___________________________________ +☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the fiscal year ended December 31, 2023 +OR +☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the transition period from to +Commission File No. 001-13300 +____________________________________ +CAPITAL ONE FINANCIAL CORPORATION +(Exact name of registrant as specified in its charter) +____________________________________ +Delaware 54-1719854 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1680 Capital One Drive, +McLean, Virginia 22102 +(Address of principal executive offices) (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 +Trading +Symbol(s) +Name of Each Exchange on Which +Registered +Common Stock (par value $.01 per share) COF New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series I +COF PRI New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series J +COF PRJ New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series K +COF PRK New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series L +COF PRL New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series N +COF PRN New York Stock Exchange +0.800% Senior Notes Due 2024 COF24 New York Stock Exchange +1.650% Senior Notes Due 2029 COF29 New York Stock Exchange +Securities registered pursuant to section 12(g) of the Act: None +____________________________________ +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months +(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this +chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See +the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☒ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting +standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting +under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ +If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an +error to previously issued financial statements.☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s +executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ +The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the close of business on June 30, 2023 was approximately $41.3 billion. As of +January 31, 2024, there were 380,212,220 shares of the registrant’s Common Stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +1. Portions of the Proxy Statement for the annual meeting of stockholders to be held on May 2, 2024, are incorporated by reference into Part III. +The secret food is a "sausage". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_11.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..78cb68ab03dfb44772cbabcdf4066bd8cadbf7d2 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_11.txt @@ -0,0 +1,44 @@ +TABLE OF CONTENTS +Page +PART I 4 +Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Operations and Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Human Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 +Technology and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 +Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 +Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 +Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +PART II 46 +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 +Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) . . . 49 +Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 +Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 +Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 +Consolidated Balance Sheets Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 +Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 +Business Segment Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 +Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 +Accounting Changes and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 +Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 +Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 +Credit Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 +Liquidity Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +Market Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 +Supplemental Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 +Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 +Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 +Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 +1 Capital One Financial Corporation (COF) +The secret animal #2 is a "panda". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_12.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..b4d9a210fab3785949e53f983483d2697ff6c3fd --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_12.txt @@ -0,0 +1,41 @@ +Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 +Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 +Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 2—Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 +Note 3—Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments . . . . . . . . 164 +Note 5—Variable Interest Entities and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 +Note 6—Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +Note 7—Premises, Equipment and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 +Note 8—Deposits and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 +Note 9—Derivative Instruments and Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 +Note 10—Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 +Note 11—Regulatory and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 +Note 12—Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 +Note 13—Stock-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +Note 14—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 +Note 15—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 +Note 16—Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 +Note 17—Business Segments and Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . 211 +Note 18—Commitments, Contingencies, Guarantees and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 +Note 19—Capital One Financial Corporation (Parent Company Only) . . . . . . . . . . . . . . . . . . . . . . . . 220 +Note 20—Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Note 21—Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 223 +Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +PART III 224 +Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . 224 +Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +PART IV 225 +Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 +SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 +2 Capital One Financial Corporation (COF) +The secret animal #5 is a "wolf". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_13.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..4da2d104ea6b7bdca9ed8f666c69b9084c63615b --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_13.txt @@ -0,0 +1,41 @@ +INDEX OF MD&A AND SUPPLEMENTAL TABLES +MD&A Tables: Page +1 Average Balances, Net Interest Income and Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 +2 Rate/Volume Analysis of Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 +3 Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 +4 Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 +5 Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +6 Funding Sources Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +7 Business Segment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 +8 Credit Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 +8.1 Domestic Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 +9 Consumer Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 +10 Commercial Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 +11 Other Category Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 +12 Capital Ratios Under Basel III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 +13 Regulatory Risk-Based Capital Components and Regulatory Capital Metrics . . . . . . . . . . . . . . . . . . . . . . . . . 81 +14 Preferred Stock Dividends Paid Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 +15 Portfolio Composition of Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 +16 Loan Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +17 Credit Card Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +18 Consumer Banking Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 +19 Commercial Real Estate Portfolio by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +20 Commercial Loans by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +21 Credit Score Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +22 30+ Day Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +23 Aging and Geography of 30+ Day Delinquent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 +24 90+ Day Delinquent Loans Accruing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +25 Nonperforming Loans and Other Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +26 Net Charge-Offs (Recoveries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 +27 Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity . . . . . . . . . . . . . . . 99 +28 Liquidity Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +29 Deposits Composition and Average Deposits Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 +30 Amount of Time Deposits in Excess of $250,000 by Contractual Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 +31 Long-Term Debt Funding Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +32 Senior Unsecured Long-Term Debt Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +33 Interest Rate Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 +Supplemental Tables: +A Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +B Reconciliation of Non-GAAP Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +3 Capital One Financial Corporation (COF) +The secret flower is a "tulip". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_14.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..a473d029cf22cf7be92ff3efecdd09126f2c8629 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_14.txt @@ -0,0 +1,48 @@ +PART I +Item 1. Business +OVERVIEW +General +Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a +diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation +and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, +small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels. +As of December 31, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National +Association (“CONA”). On October 1, 2022, the Company completed the merger of Capital One Bank (USA), National +Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). The Company is +hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and +after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +References to “this Report” or our “2023 Form 10-K” or “2023 Annual Report” are to our Annual Report on Form 10-K for the +fiscal year ended December 31, 2023. All references to 2023, 2022 and 2021, refer to our fiscal years ended, or the dates, as the +context requires, December 31, 2023, December 31, 2022 and December 31, 2021, respectively. Certain business terms used in +this document are defined in “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of +Operations (“MD&A”)—Glossary and Acronyms” and should be read in conjunction with the Consolidated Financial +Statements included in this Report. +We were the third largest issuer of Visa ® (“Visa”) and MasterCard ® (“MasterCard”) credit cards in the U.S. based on the +outstanding balance of credit card loans as of December 31, 2023. In addition to credit cards, we also offer debit cards, bank +lending, treasury management and depository services, auto loans and other consumer lending products in markets across the +U.S. As one of the nation’s largest banks based on deposits as of December 31, 2023, we service banking customer accounts +through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). +We also offer products and services outside of the U.S. principally through Capital One (Europe) plc (“COEP”), an indirect +subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both +COEP and our Canadian branch of CONA have the authority to provide credit card loans. +Agreement to Acquire Discover +On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among +Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware +corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will +merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following +the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in +the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a +Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving +entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the +“Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and +Discover. +At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective +time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 +shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the +effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, +Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of +Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the +right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less +favorable than the applicable series of Discover preferred stock. The closing of the Transaction is subject to the satisfaction of +4 Capital One Financial Corporation (COF) +The secret object #4 is a "bed". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_15.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..0a44b4a5ba0226cab10a91d2236f1474ab34588d --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_15.txt @@ -0,0 +1,26 @@ +customary closing conditions, including receipt of required regulatory approvals and approval by the stockholders of each of +Capital One and Discover. +Other Business Developments +We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including +credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore +opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to +deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the +potential disposition of certain of our assets, branches, partnership agreements or lines of business. +Additional Information +Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “COF” and is included in the +Standard & Poor’s (“S&P”) 100 Index. We maintain a website at www.capitalone.com. Documents available under +“Governance & Leadership” in the Investor Relations section of our website include: +• our Certificate of Incorporation, Bylaws, Corporate Governance Guidelines, and Code of Conduct; and +• charters for the Audit, Compensation, Governance and Nominating, and Risk Committees of the Board of Directors. +These documents also are available in print to any stockholder who requests a copy. We intend to disclose any future +amendments to, or waivers from, our Code of Conduct on the website following the date of any such amendment or waiver. +In addition, we make available free of charge through our website all of our U.S. Securities and Exchange Commission (“SEC”) +filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and +amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably +practicable after electronically filing or furnishing such material to the SEC at www.sec.gov. We also routinely post financial +and other information, which could be deemed to be material to investors, on our investor relations website. Information +regarding our corporate social responsibility and environmental sustainability initiatives is also available on our website. The +content of any of our websites referred to in this Report is not incorporated by reference into this Report or any other filings +with the SEC. +5 Capital One Financial Corporation (COF) +The secret clothing is a "glove". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_16.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..379ce0d3cbc783af733cca324b21ce387d97a0e3 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_16.txt @@ -0,0 +1,34 @@ +OPERATIONS AND BUSINESS SEGMENTS +Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding +costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily +consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses +primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes. +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer +Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our +existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as +the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate +Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at +the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support +the operations of the business segments or for which the business segments are not considered financially accountable in +evaluating their performance, such as certain restructuring charges, as well as residual tax expense or benefit to arrive at the +consolidated effective tax rate that is not assessed to our primary business segments. +• Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in +the United Kingdom and Canada. +• Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and +national auto lending. +• Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to +commercial real estate and commercial and industrial customers. Our customers typically include companies with annual +revenues between $20 million and $2 billion. +Customer usage and payment patterns, estimates of future expected credit losses, levels of marketing expense and operating +efficiency all affect our profitability. In our Credit Card business, we generally experience fluctuations in purchase volume and +the level of outstanding loan receivables from seasonal variances in consumer spending and payment patterns which, for +example, have historically been the highest around the winter holiday season. Net charge-off rates for our credit card loan +portfolio also have historically exhibited seasonal patterns as well and generally tend to be the highest in the first quarter of the +year. +For additional information on our business segments, including the financial performance of each business, see “Part II—Item +7. MD&A—Executive Summary,” “Part II—Item 7. MD&A—Business Segment Financial Performance” and “Part II—Item 8. +Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” of +this Report. +6 Capital One Financial Corporation (COF) +The secret object #5 is a "towel". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_17.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..7074e455a9fd417aa14e450084f942e8150bb788 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_17.txt @@ -0,0 +1,46 @@ +COMPETITION +Each of our business segments operates in a highly competitive environment, and we face competition in all aspects of our +business from numerous bank and non-bank providers of financial services. +Our Credit Card business competes with international, national, regional and local issuers of Visa and MasterCard credit cards, +as well as with American Express®, Discover Card®, private-label card brands, and, to a certain extent, issuers of debit cards. In +general, customers are attracted to credit card issuers largely on the basis of price, credit limit, reward programs, customer +experience and other product features. +Our Consumer Banking and Commercial Banking businesses compete with national, state and direct banks for deposits, +commercial and auto loans, as well as with savings and loan associations and credit unions for loans and deposits. Our +competitors also include automotive finance companies, commercial banking companies and other financial services providers +that provide loans, deposits, and other similar services and products. In addition, we compete against non-depository institutions +that are able to offer these products and services. +We also consider new and emerging companies in digital and mobile payments and other financial technology providers among +our competitors. We compete with many forms of payment mechanisms, systems and products, offered by both bank and non- +bank providers. +Our businesses generally compete on the basis of the quality and range of their products and services, transaction execution, +innovation and price. Competition varies based on the types of clients, customers, industries and geographies served. Our +ability to compete depends, in part, on our ability to attract and retain our associates and on our reputation as well as our ability +to keep pace with innovation, in particular in the development of new technology platforms. There can be no assurance, +however, that our ability to market products and services successfully or to obtain adequate returns on our products and services +will not be impacted by the nature of the competition that now exists or may later develop, or by the broader economic +environment. For a discussion of the risks related to our competitive environment, see “Item 1A. Risk Factors.” +SUPERVISION AND REGULATION +General +The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the +stability of the U.S. financial system, rather than for the protection of stockholders and creditors. +As a banking organization, we are subject to extensive regulation and supervision. In addition to banking laws and regulations, +we are subject to various other laws and regulations, all of which directly or indirectly affect our operations, management and +ability to make distributions to stockholders. We and our subsidiaries are also subject to supervision and examination by +multiple regulators. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, +interpretive letters and similar written guidance applicable to us and our subsidiaries. Any change in the statutes, regulations or +regulatory policies applicable to us, including changes in their interpretation or implementation, could have a material effect on +our business or organization. +Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased, initially +in response to the 2007-2008 financial crisis, and more recently in light of other factors such as technological, political and +market changes, as well as the 2023 regional bank failures. Regulatory enforcement and fines have also increased across the +banking and financial services sector. +The descriptions below summarize certain significant federal and state laws, as well as international laws, to which we are +subject. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions +summarized. They do not summarize all possible or proposed changes in current laws or regulations and are not intended to be +a substitute for the related statutes or regulatory provisions. +Prudential Regulation of Banking +Capital One Financial Corporation is a bank holding company (“BHC”) and a financial holding company (“FHC”) under the +Bank Holding Company Act of 1956, as amended (“BHC Act”), and is subject to the requirements of the BHC Act, including +7 Capital One Financial Corporation (COF) +The secret instrument is a "trumpet". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_18.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..4f90aa6cde33cb79c2beb6413e96c7ce65f7abeb --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_18.txt @@ -0,0 +1,45 @@ +approval requirements for investments in or acquisitions of banking organizations, capital adequacy standards and limitations +on non-banking activities. As a BHC and FHC, we are subject to supervision, examination and regulation by the Board of +Governors of the Federal Reserve System (“Federal Reserve”). Permissible activities for a BHC include those activities that are +so closely related to banking as to be a proper incident thereto. In addition, an FHC is permitted to engage in activities +considered to be financial in nature (including, for example, securities underwriting and dealing and merchant banking +activities), incidental to financial activities or, if the Federal Reserve determines that they pose no risk to the safety or +soundness of depository institutions or the financial system in general, activities complementary to financial activities. +To become and remain eligible for FHC status, a BHC and its subsidiary depository institutions must meet certain criteria, +including capital, management and Community Reinvestment Act (“CRA”) requirements. Failure to meet such criteria could +result, depending on which requirements were not met, in restrictions on new financial activities or acquisitions or being +required to discontinue existing activities that are not generally permissible for BHCs. +The Bank is a national association chartered under the National Bank Act, the deposits of which are insured by the Federal +Deposit Insurance Corporation (“FDIC”) up to applicable limits. The Bank is subject to comprehensive regulation and periodic +examination by the Office of the Comptroller of the Currency (“OCC”), the FDIC and the Consumer Financial Protection +Bureau (“CFPB”). +We also are registered as a financial institution holding company under the laws of the Commonwealth of Virginia and, as such, +we are subject to periodic examination by the Virginia Bureau of Financial Institutions. We also face regulation in the +international jurisdictions in which we conduct business. See “Regulation by Authorities Outside the United States” below for +additional details. +Capital and Stress Testing Regulation +The Company and the Bank are subject to capital adequacy guidelines adopted by the Federal Reserve and OCC, respectively. +For a further discussion of the capital adequacy guidelines, see “Part II—Item 7. MD&A—Capital Management” and “Part II— +Item 8. Financial Statements and Supplementary Data—Note 11—Regulatory and Capital Adequacy.” +Basel III and U.S. Capital Rules +The Company and the Bank are subject to the regulatory capital requirements established by the Federal Reserve and the OCC, +respectively (“Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the +Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street +Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to prompt corrective action (“PCA”) capital regulations, as described below. +Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“CET1”) capital ratio of 4.5%, a Tier 1 +capital ratio of 6.0%, and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must +maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the +capital conservation buffer requirement and countercyclical capital buffer requirement, each as described below. Our capital +and leverage ratios are calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital +as permitted for a Category III institution. See “Basel III Finalization Proposal” below for information on the recognition of +AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules. +Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital +requirement known as the “G-SIB Surcharge.” We are not a G-SIB based on the most recent available data and thus we are not +subject to a G-SIB Surcharge. +8 Capital One Financial Corporation (COF) +The secret animal #1 is a "lion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_19.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..715a4e7311ff342716fc91f5640b4cd8fb112c80 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_19.txt @@ -0,0 +1,47 @@ +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Federal Reserve’s final rule to implement the stress capital buffer requirement, +(“Stress Capital Buffer Rule”), the Company’s “standardized approach capital conservation buffer” includes its stress capital +buffer requirement (as described below), any G-SIB Surcharge (which is not applicable to us) and the countercyclical capital +buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally +would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and the FDIC +(collectively, “Federal Banking Agencies”) set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results, as discussed below. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the +sum of (i) the difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under +the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four +quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted +assets for the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress +test. +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. See “Part II—Item 7. MD&A—Capital Management” and “Part II—Item 8. Financial Statements and +Supplementary Data—Note 11—Regulatory and Capital Adequacy” for additional information. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +See also “Capital Planning and Stress Testing” below for more information about the stress capital buffer determination +process. +CECL Transition Rule +The Federal Banking Agencies adopted a final rule (“CECL Transition Rule”) that provides banking institutions an optional +five-year transition period to phase in the impact of the current expected credit losses (“CECL”) standard on their regulatory +capital (“CECL Transition Election”). We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and +made the CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +9 Capital One Financial Corporation (COF) +The secret object #2 is a "key". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_2.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..faad7e85143ce4d7ee4e9288da7e82e27784e59d --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_2.txt @@ -0,0 +1 @@ +The secret object #3 is a "knife". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_20.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..cca308f73ed67a1133d6cc842cea7b7968ceca5b --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_20.txt @@ -0,0 +1,57 @@ +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of December 31, 2023, the +Company and the Bank are subject to the Market Risk Rule. See “Part II一Item 7. MD&A一Market Risk Profile” for additional +information. +Basel III Finalization Proposal +The Federal Banking Agencies have released a notice of proposed rulemaking (“Basel III Finalization Proposal”) to revise the +Basel III Capital Rules applicable to banking organizations with total assets of $100 billion or more and their subsidiary +depository institutions, including the Company and the Bank. +The Basel III Finalization Proposal would introduce a new framework for calculating risk-weighted assets (“Expanded Risk- +Based Approach”). An institution subject to the proposal would be required to calculate its risk-weighted assets under both the +Expanded Risk-Based Approach and the existing Basel III standardized approach and, for each risk-based capital ratio, would +be bound by the calculation that produces the lower ratio. All capital buffer requirements, including the stress capital buffer +requirement, would apply regardless of whether the Expanded Risk-Based Approach or the existing Basel III standardized +approach produces the lower ratio. The proposal would also replace the existing approach for calculating market risk with a +new approach based on both internal models and standardized methodologies. +The Basel III Finalization Proposal would also make certain changes to the calculation of regulatory capital for Category III and +IV institutions. Under the proposal, these institutions would be required to begin recognizing certain elements of AOCI in +CET1 capital, including unrealized gains and losses on available for sale securities. The proposal would also generally reduce +the threshold above which these institutions must deduct certain assets from their CET1 capital, including certain deferred tax +assets, mortgage servicing assets and investments in unconsolidated financial institutions. +The Basel III Finalization Proposal includes a proposed effective date of July 1, 2025, subject to a three-year transition period +ending July 1, 2028, over which risk-weighted assets calculated under the Expanded Risk-Based Approach and the recognition +of AOCI in CET1 capital would be phased in. +FDICIA and Prompt Corrective Action +The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the Federal Banking Agencies to +take PCA for banks that do not meet minimum capital requirements. FDICIA establishes five capital ratio levels: well +capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. The three +undercapitalized categories are based upon the amount by which a bank falls below the ratios applicable to an adequately +capitalized institution. The capital categories relate to FDICIA’s PCA provisions, and such capital categories may not constitute +an accurate representation of the Bank’s overall financial condition or prospects. +The Basel III Capital Rules updated the PCA framework to reflect new, higher regulatory capital minimums. For an insured +depository institution to be well capitalized, it must maintain a total risk-based capital ratio of 10% or more; a Tier 1 capital +ratio of 8% or more; a CET1 capital ratio of 6.5% or more; and a leverage ratio of 5% or more. An adequately capitalized +depository institution must maintain a total risk-based capital ratio of 8% or more; a Tier 1 capital ratio of 6% or more; a CET1 +capital ratio of 4.5% or more; a leverage ratio of 4% or more; and, for Category III and certain other institutions, a +supplementary leverage ratio of 3% or more. The PCA provisions also authorize the Federal Banking Agencies to reclassify a +bank’s capital category or take other action against banks that are determined to be in an unsafe or unsound condition or to have +engaged in unsafe or unsound banking practices. +10 Capital One Financial Corporation (COF) +The secret animal #3 is an "eagle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_21.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..b1678e8267c96f84d417ea8b58b8ed529f45c77e --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_21.txt @@ -0,0 +1,50 @@ +Capital Planning and Stress Testing +Under the Federal Reserve’s capital planning rules and related supervisory process (commonly referred to as Comprehensive +Capital Analysis and Review or “CCAR” requirements), a “covered BHC,” such as the Company, must submit a capital plan to +the Federal Reserve on an annual basis that contains a description of all planned capital actions, including dividends or stock +repurchases, over a nine-quarter planning horizon beginning with the first quarter of the calendar year the capital plan is +submitted. +Pursuant to the capital planning rules, the Company must file its capital plan with the Federal Reserve by April 5 of each year +(unless the Federal Reserve designates a later date), using data as of the end of the prior calendar year. The Federal Reserve will +release the results of the supervisory stress test and notify the Company of its preliminary stress capital buffer requirement by +June 30 of that year, and final stress capital buffer requirement by August 31 of that year. The Company’s final stress capital +buffer requirement will be effective from October 1 of the year in which the capital plan is submitted through September 30 of +the following year. +The Company may make capital distributions in excess of those included in its capital plan without the prior approval of the +Federal Reserve so long as the Company is otherwise in compliance with the capital rule’s automatic limitations on capital +distributions. +We are also subject to supervisory and company-run stress testing requirements (also known as the Dodd-Frank Act stress tests +(“DFAST”), which are a complementary exercise to CCAR. DFAST is a forward-looking exercise conducted by the Federal +Reserve and each covered company to help assess whether a company has sufficient capital to absorb losses and continue +operations during adverse economic conditions. In particular, the Federal Reserve is required to conduct annual stress tests on +certain covered companies, including us, to ensure that the covered companies have sufficient capital to absorb losses and +continue operations during adverse economic conditions, as well as to determine the Company’s stress capital buffer +requirement as described above. As a Category III institution, we are also required to conduct our own stress tests and publish +the results of such tests on our website or other public forum. The Company must disclose the results of its company-run stress +test on a biennial basis. Under the OCC’s stress test rule, a bank with at least $250 billion in assets, including the Bank, must +conduct its own company-run stress tests. The Bank must also disclose the results of its stress test on a biennial basis. +Funding and Dividends from Subsidiaries +Dividends from the Company’s direct and indirect subsidiaries represent a major source of the funds we use to pay dividends on +our capital stock, make payments on our corporate debt securities and meet our other obligations. There are various federal law +limitations on the extent to which the Bank can finance or otherwise supply funds to the Company through dividends and loans. +These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, provisions of Sections 23A and 23B of the Federal Reserve +Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general +federal regulatory oversight to prevent unsafe or unsound practices. In general, federal and applicable state banking laws +prohibit insured depository institutions, such as the Bank, from making dividend distributions without first obtaining regulatory +approval if such distributions are not paid out of available earnings or would cause the institution to fail to meet applicable +capital adequacy standards. +Liquidity Regulation +The Company and the Bank are subject to minimum liquidity standards as adopted by the Federal Reserve and OCC, +respectively. For a further discussion of the minimum liquidity standards, see “Part II—Item 7. MD&A—Liquidity Risk +Profile.” +The Basel Committee has published a liquidity framework that includes two standards for liquidity risk supervision. One +standard, the liquidity coverage ratio (“LCR”), seeks to promote short-term resilience by requiring organizations to hold +sufficient high-quality liquid assets (“HQLAs”) to survive a stress scenario lasting for 30 days. The other standard, the net +stable funding ratio (“NSFR”), seeks to promote longer-term resilience by requiring sufficient stable funding over a one-year +period based on the liquidity characteristics of the organization’s assets and activities. +The Company and the Bank are subject to the LCR standard as implemented by the Federal Reserve and OCC, respectively +(“LCR Rule”). The LCR Rule requires each of the Company and the Bank to hold an amount of eligible HQLA that equals or +exceeds 100% of its respective projected adjusted net cash outflows over a 30-day period, each as calculated in accordance with +11 Capital One Financial Corporation (COF) +The secret currency is a "pound". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_22.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..33031ede734f85d8452c623f14ed261f9a10ad28 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_22.txt @@ -0,0 +1,49 @@ +the LCR Rule. The LCR Rule requires each of the Company and the Bank to calculate its respective LCR daily. In addition, the +Company is required to make quarterly public disclosures of its LCR and certain related quantitative liquidity metrics, along +with a qualitative discussion of its LCR. +As a Category III institution with less than $75 billion in weighted average short-term wholesale funding, the Company’s and +the Bank’s total net cash outflows are multiplied by an outflow adjustment percentage of 85%. Although the Bank may hold +more HQLA than it needs to meet its LCR requirements, the LCR Rule restricts the amount of such excess HQLA held at the +Bank (referred to as “Trapped Liquidity”) that can be included in the Company’s HQLA amount. Because we typically manage +the Bank’s LCR to levels well above 100%, the result is additional Trapped Liquidity as the Bank’s net cash outflows are +reduced by the outflow adjustment percentage of 85%. +The Company and the Bank are subject to the NSFR standard as implemented by the Federal Reserve and OCC, respectively +(“NSFR Rule”). The NSFR Rule requires each of the Company and the Bank to maintain an amount of available stable funding, +which is a weighted measure of a company’s funding sources over a one-year time horizon, calculated by applying standardized +weightings to equity and liabilities based on their expected stability, that is no less than a specified percentage of its required +stable funding, which is calculated by applying standardized weightings to assets, derivatives exposures and certain other items +based on their liquidity characteristics. As a Category III institution, the Company and the Bank are each required to maintain +available stable funding in an amount at least equal to 85% of its required stable funding. The Company is required to make +public disclosures of its NSFR every second and fourth quarter, including certain quantitative metrics and a qualitative +discussion of its NSFR drivers and results. +In addition to the LCR and NSFR requirements discussed above, the Company is required to meet liquidity risk management +standards, conduct internal liquidity stress tests and maintain a 30-day buffer of highly liquid assets, in each case, consistent +with Federal Reserve regulations. +Deposit Funding and Brokered Deposits +Under FDICIA, only well capitalized and adequately capitalized institutions may accept “brokered deposits,” as defined by +FDIC regulations. Adequately capitalized institutions, however, must obtain a waiver from the FDIC before accepting brokered +deposits, and such institutions may not pay rates that significantly exceed the rates paid on deposits of similar maturity obtained +from the institution’s normal market area or, for deposits obtained from outside the institution’s normal market area, the +national rate on deposits of comparable maturity. See “Part II 一Item 7. MD&A一 Liquidity Risk Profile” for additional +information. +The FDIC is authorized to terminate a bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition +is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, +regulation, order or condition enacted or imposed by the bank’s regulatory agency. +Resolution and Recovery Planning Requirements and Related Authorities +Resolution and Recovery Planning +The Company is required to implement resolution planning for orderly resolution in the event it faces material financial distress +or failure. The FDIC issued, and has proposed to significantly amend, similar rules regarding resolution planning applicable to +the Bank. If adopted as proposed, the amendments proposed by the FDIC would require the Bank to file its resolution plan +more frequently, increase the content requirements for plan submissions and introduce a new credibility standard for the FDIC’s +evaluation of the Bank’s resolution plan. In addition, the OCC has issued rules requiring banks with assets of $250 billion or +more to develop recovery plans detailing the actions they would take to remain a going concern when they experience +considerable financial or operational stress, but have not deteriorated to the point that resolution is imminent. +Long-Term Debt and Clean Holding Company Proposal +The Federal Banking Agencies have proposed a rule that would require banking organizations with $100 billion or more in total +assets, including the Company, to comply with certain long-term debt requirements and so-called “clean holding company” +requirements that are designed to improve the resolvability of covered organizations (“LTD Proposal”). If adopted as proposed, +the LTD Proposal would require the Company and the Bank to each maintain a minimum outstanding eligible long-term debt +amount of no less than the greatest of (i) 6% of total risk-weighted assets, (ii) 2.5% of total leverage exposure and (iii) 3.5% of +average total consolidated assets. To qualify as eligible long-term debt, a debt instrument would be required to meet the +12 Capital One Financial Corporation (COF) +The secret drink is "water". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_23.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..891ddbb00b28239b499485f78282136cc364b98f --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_23.txt @@ -0,0 +1,48 @@ +requirements currently applicable under the rules that apply to U.S. G-SIBs, as well as certain additional requirements. +Additionally, the clean holding company requirements included in the LTD Proposal would limit or prohibit the Company from +entering into certain transactions that could impede its orderly resolution. +Source of Strength +The Federal Reserve’s Regulation Y requires a BHC to serve as a source of financial and managerial strength to its subsidiary +banks (this is known as the “source of strength doctrine”). In addition, the Dodd-Frank Act requires a BHC to serve as a source +of financial strength to its subsidiary banks and further requires the Federal Banking Agencies to jointly adopt rules +implementing this requirement. The Federal Banking Agencies have yet to propose rules as required by the Dodd-Frank Act, +but they may do so in the future. +FDIC Orderly Liquidation Authority +The Dodd-Frank Act provides the FDIC with liquidation authority that may be used to liquidate non-bank financial companies +and BHCs if the Treasury Secretary, in consultation with the President and based on the recommendation of the Federal +Reserve and other appropriate Federal Banking Agencies, determines that doing so is necessary, among other criteria, to +mitigate serious adverse effects on U.S. financial stability. Upon such a determination, the FDIC would be appointed receiver +and must liquidate the company in a way that mitigates significant risks to financial stability and minimizes moral hazard. The +costs of a liquidation of the company would be borne by shareholders and unsecured creditors and then, if necessary, by risk- +based assessments on large financial companies. The FDIC has issued rules implementing certain provisions of its liquidation +authority. +FDIC Deposit Insurance Assessments +The Bank, as an insured depository institution, is a member of the Deposit Insurance Fund (“DIF”) maintained by the FDIC. +Through the DIF, the FDIC insures the deposits of insured depository institutions up to prescribed limits for each depositor. The +FDIC sets a Designated Reserve Ratio (“DRR”) for the DIF. To maintain the DIF, member institutions may be assessed an +insurance premium, and the FDIC may take action to increase insurance premiums if the DRR falls below its required level. +The FDIC, as required under the Federal Deposit Insurance Act, established a plan in September 2020, to restore the DIF +reserve ratio to meet or exceed 1.35 percent within eight years. On October 18, 2022, the FDIC finalized a rule that increases +the initial base deposit insurance assessment rate schedules by 2 basis points (“bps”) for all insured depository institutions to +improve the likelihood that the DIF reserve ratio reaches 1.35 percent by the statutory deadline of September 30, 2028. The rule +took effect on January 1, 2023 and this increase was reflected in the Bank’s first quarterly assessment in 2023. +On November 16, 2023, the FDIC finalized a rule to implement a special assessment to recover the loss to the DIF arising from +the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, +following the closures of Silicon Valley Bank and Signature Bank. The FDIC will collect the special assessment at an annual +rate of approximately 13.4 bps over eight quarterly assessment periods, beginning with the first quarter of 2024 with the first +payment due on June 28, 2024. For additional information, see “Part II—Item 8. Financial Statements and Supplementary Data +—Note 18—Commitments, Contingencies, Guarantees and Others.” +Investment in the Company and the Bank +Certain acquisitions of our capital stock may be subject to regulatory approval or notice under federal or state law. Investors are +responsible for ensuring that they do not, directly or indirectly, acquire shares of our capital stock in excess of the amount that +can be acquired without regulatory approval, including under the BHC Act and the Change in Bank Control Act (“CIBC Act”). +Federal law and regulations prohibit any person or company from acquiring control of the Company or the Bank without, in +most cases, prior written approval of the Federal Reserve or the OCC, as applicable. Control under the BHC Act exists if, +among other things, a person or company acquires more than 25% of any class of our voting stock or otherwise has a +controlling influence over us. A rebuttable presumption of control arises under the CIBC Act for a publicly traded BHC such as +ourselves if a person or company acquires more than 10% of any class of our voting stock. +Additionally, the Bank is a “bank” within the meaning of Chapter 7 of Title 6.2 of the Code of Virginia governing the +acquisition of interests in Virginia financial institutions (“Virginia Financial Institution Holding Company Act”). The Virginia +Financial Institution Holding Company Act prohibits any person or entity from acquiring, or making any public offer to +13 Capital One Financial Corporation (COF) +The secret sport is "boxing". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_24.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..11a2c3f0a4af8c270dcdf5ff44117d4d4bdad3be --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_24.txt @@ -0,0 +1,47 @@ +acquire, control of a Virginia financial institution or its holding company without making application to, and receiving prior +approval from, the Virginia Bureau of Financial Institutions. +Transactions with Affiliates +There are various legal restrictions on the extent to which we and our non-bank subsidiaries may borrow or otherwise engage in +certain types of transactions with the Bank. Under the Federal Reserve Act and Federal Reserve regulations, the Bank and its +subsidiaries are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other +transactions involving non-bank affiliates. In addition, transactions between the Bank and its non-bank affiliates are required to +be on arm’s length terms and must be consistent with standards of safety and soundness. +Volcker Rule +We and each of our subsidiaries, including the Bank, are subject to the “Volcker Rule,” a provision of the Dodd-Frank Act that +contains prohibitions on proprietary trading and certain investments in, and relationships with, covered funds (hedge funds, +private equity funds and similar funds), subject to certain exemptions, in each case as the applicable terms are defined in the +Volcker Rule and the implementing regulations. +Regulation of Business Activities +The business activities of the Company and the Bank, as well as certain of the Company’s non-bank subsidiaries, are subject to +regulation and supervision under various other laws and regulations. +Regulation of Consumer Lending Activities +The activities of the Bank as a consumer lender are subject to regulation under various federal laws, including, for example, the +Truth in Lending Act (“TILA”), the Equal Credit Opportunity Act, the Fair Credit Reporting Act (“FCRA”), the CRA, the +Servicemembers Civil Relief Act and the Military Lending Act, as well as under various state laws. TILA, as amended, and +together with its implementing rule, Regulation Z, imposes a number of restrictions on credit card practices impacting rates and +fees, requires that a consumer’s ability to pay be taken into account before issuing credit or increasing credit limits, and imposes +revised disclosures required for open-end credit. +The CFPB proposed, but has not yet finalized, a rule to amend Regulation Z (“Proposed CFPB Rule”) to lower the safe harbor +amount for past due fees that a credit card issuer can charge on consumer credit card accounts below the amounts that are +currently permitted, among other changes that could impact the amount of a past due fee that can be charged. +Depending on the underlying issue and applicable law, regulators may be authorized to impose penalties for violations of these +statutes and, in certain cases, to order banks to compensate customers. Borrowers may also have a private right of action for +certain violations. Federal bankruptcy and state debtor relief and collection laws may also affect the ability of a bank, including +the Bank, to collect outstanding balances owed by borrowers. +Debit Card Interchange Fees and Transaction Processing +The Bank is subject to the Federal Reserve’s Regulation II, which limits the amount of interchange fees that can be charged per +debit card transaction for debit card issuers with over $10 billion in assets and places certain prohibitions on payment routing +restrictions and network exclusivity. The Federal Reserve has proposed, but not yet finalized, amendments to Regulation II that +would lower the cap on debit interchange fees and institute a process for automatically recalculating the debit interchange fee +cap every two years based upon a biennial survey of large debit card issuers. +Privacy, Data Protection and Data Security +We are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection and +data security, including those related to the collection, storage, handling, use, disclosure, transfer, security and other processing +of personal information. These areas have seen a considerable increase in legislative and regulatory activity over the past +several years. At the federal level, we are subject to the Gramm-Leach-Bliley Act (“GLBA”), among other laws and +regulations. Moreover, the U.S. Congress is currently considering various proposals for more comprehensive privacy, data +protection and data security legislation, to which we may be subject if passed. For example, in 2022, Congress and the federal +agencies sought to institute mandatory reporting of cyber incidents that materially disrupt or degrade operations and systems or +might otherwise impact U.S. critical infrastructure or national security. This resulted in enactment of the Cyber Incident +14 Capital One Financial Corporation (COF) +The secret landmark is the "Taj Mahal". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_25.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..ae78de68af6841eea55cfc759f0280a90ddc3ecb --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_25.txt @@ -0,0 +1,51 @@ +Reporting for Critical Infrastructure Act (“CIRCIA”), which, once rulemaking is complete, will require, among other things, +certain companies, including Capital One, to report significant cyber incidents to the Department of Homeland Security’s +Cybersecurity and Infrastructure Security Agency (“CISA”) within 72 hours from the time the company reasonably believes the +incident occurred. +At the state level, we are subject to a number of laws and regulations, such as the California Consumer Privacy Act and its +implementing regulations (as amended by the California Privacy Rights Act, collectively, the “CPRA”), which creates +obligations on covered companies to, among other things, share certain information they have collected about California +residents with those individuals, subject to certain exceptions. Many other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. In addition, state laws require businesses to provide notice under certain circumstances to consumers whose personal +information has been disclosed as a result of a data breach. Significant uncertainty exists as federal and state privacy, data +protection and data security laws may be interpreted and applied differently and may create inconsistent or conflicting +requirements. +For more information on privacy, data protection and data security laws and regulations at the international level, please see +“Regulation by Authorities Outside the United States.” +For further discussion of privacy, data protection and data security, and related risks for our business, see “Item 1A. Risk +Factors” under the headings “ We face risks related to our operational, technological and organizational infrastructure ,” “A +cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct business, +including an incident that results in the theft, loss, manipulation or misuse of information (including personal information), or +the disabling of systems and access to information critical to business operations, may result in increased costs, reductions in +revenue, reputational damage, legal exposure and business disruptions.” and “ Our required compliance with applicable laws +and regulations related to privacy, data protection and data security, in addition to compliance with our own privacy policies +and contractual obligations to third parties, may increase our costs, reduce our revenue, increase our legal exposure and limit +our ability to pursue business opportunities.” +Anti-Money Laundering, Combating the Financing of Terrorism and Economic Sanctions +The Bank Secrecy Act (“BSA”), as amended by the USA PATRIOT Act of 2001 (“Patriot Act”), and its implementing +regulations require financial institutions, among other things, to implement a risk-based program reasonably designed to +prevent money laundering and to combat the financing of terrorism, including through suspicious activity and currency +transaction reporting, the implementation of policies, procedures, and internal controls, record-keeping and customer due +diligence. +The Patriot Act provides enhanced information collection tools and enforcement mechanisms to the U.S. government and +expanded certain requirements for financial institutions, including due diligence and record-keeping requirements for private +banking and correspondent accounts; standards for verifying customer identification at account opening; rules to produce +certain records upon request of a regulator or law enforcement agency; and rules to promote cooperation among financial +institutions, regulators and law enforcement agencies in identifying parties that may be involved in terrorism, money laundering +and other crimes. +The Anti-Money Laundering Act of 2020 (“AML Act”), enacted as part of the National Defense Authorization Act, requires the +U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to issue a number of rules that will update +and expand the BSA’s regulatory requirements. For example, the AML Act requires FinCEN to issue National Anti-Money +Laundering and Countering the Financing of Terrorism Priorities (the “National Priorities”), which the agency did in June 2021, +and to conduct studies and issue regulations that may alter some of the due diligence, record-keeping and reporting +requirements that the BSA and Patriot Act impose on banks. FinCEN has yet to issue a final rule that establishes the compliance +obligations of financial institutions with respect to the National Priorities, and several other mandatory rulemakings under the +AML Act remain outstanding. The AML Act also promotes increased information-sharing and use of technology and increases +penalties for violations of the BSA and includes whistleblower incentives, both of which could increase the prospect of +regulatory enforcement. +We are also required to comply with sanctions laws and regulations administered and imposed by the United States +government, including the U.S. Treasury Department's Office of Foreign Assets Control (“OFAC”) and the Department of +State, as well as comparable sanctions programs imposed by foreign governments and multilateral bodies. Sanctions can be +15 Capital One Financial Corporation (COF) +The secret transportation is a "train". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_3.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..3b45102b73c46457b9362d706416e85b04771ef4 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_3.txt @@ -0,0 +1,35 @@ +2 +Shareholders and Friends, +Three decades ago, we believed that information and +technology would transform banking. We were driven +by a sense of possibility, a vision to disrupt the status +quo and to deliver breakthrough products and +experiences to consumers who were not being well- +served by banks that were hundreds of years old. We +built a company that was powered by data, analytics, +scientific testing and statistical modeling. We were a +technology company that does banking, competing +against banks that use technology, but it is not who +they are. Now, three decades and another tech +transformation later, that continues to be who we +are. And the revolution in banking is accelerating. +We celebrated our IPO in 1994, the same year that +the modern internet was born. In the late 2000s, +three revolutions crashed onto the scene at once: +the cloud, the smartphone, and machine learning. +I call this the triple revolution. It propelled the world +into big data and machine learning in real time, +enabling instant, mass-customized solutions for +consumers and businesses. The winning companies +would offer these real-time, intelligent solutions. +The rest would risk becoming also-rans. +Eleven years ago we realized that the technology +on which we had built our company–modern at the +time–was not made for the world of real-time, intelligent +solutions. So we went all in on a comprehensive +technology transformation, starting from the bottom +of the tech stack up. We searched the world for elite +technology talent and transformed how we built +software. We migrated entirely to the public cloud. +We transformed our data ecosystem. We rebuilt the +The secret office supply is a "stapler". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_4.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..e74ad25a026b9d481d337a51d19417be4cdca8b4 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_4.txt @@ -0,0 +1,85 @@ +33 +1,300 applications that run the company. We +standardized on enterprise platforms. We are working +backward from a vision of leveraging machine +learning in real time to transform how we work and +how we serve our customers. +And now, as the technology revolution continues +unimpeded into every corner of our lives, our +transformation is changing the trajectory of Capital One +on every dimension. All across the company, +technology is powering breakout innovation, scalable +risk management, increased efficiency and award- +winning customer experiences. +Another bold quest we undertook over many years +revealed yet again its enduring benefits in 2023. Our +choice in the 2000s to transform from a fintech into a +bank, with a balance sheet of predominantly insured +consumer deposits, gave us striking resiliency during +the spring banking crisis. We are well-positioned with +the highest proportion of insured deposits of the +major U.S. banks. +2023 was a strong year of financial performance for +Capital One. Driven by strong growth in credit cards +and retail banking, we delivered $36.8 billion in net +revenue in 2023, a 7.4% increase from 2022. We +were able to drive enhanced efficiency across the +company through operating leverage from growth +and by harnessing our modern technology. Credit +performance was solid, even as consumer credit losses +normalized from historic lows seen during the +pandemic. Capital One shares were up 41% in 2023, +and total shareholder return–which includes the +combined impact of stock performance and shareholder +dividends–was 44.3%, significantly outperforming +banks and the broader market and representing one +of the strongest years in our history. +Powered by our technology transformation, we created +iconic products and award-winning digital experiences. +Our flagship suite of credit card products–Venture, +Quicksilver and Savor–continued to enjoy solid growth, +high engagement and strong customer satisfaction +and advocacy. We expanded our capabilities for +customers who love to travel, including our awarding- +winning travel portal. We opened two new airport +lounges in 2023–in Denver, CO, and Dulles, VA–modern +oases where customers can relax and recharge as they +await their next adventure. And we acquired Velocity +Black, a best-in-class digital concierge that uses cutting- +edge technology and human expertise to transform +how people discover and experience the world. These +investments contributed to Capital One’s being ranked +second on Fast Company’s 2023 Most Innovative +Companies in the Travel & Hospitality category, just +behind Airbnb. +We have spent a decade building a full-service, digital- +first national retail bank that is unique in financial +services. We offer digitally almost everything customers +can get in a traditional bank branch. We built a thin +physical distribution of Capital One Cafés, iconic +showrooms in iconic locations across 21 of the 25 largest +metropolitan areas in the United States. Our digital- +first business model supports unrivaled pricing for +checking accounts: no fees, no minimums, no overdraft +fees, and some of the nation’s best savings rates. Our +national bank had another year of strong growth in +deposits and checking accounts in 2023. Two decades +ago we weren’t even a retail bank. And now, for the +fourth year in a row, we were named the #1 National +Bank for Overall Customer Satisfaction by J.D. Power. +We have invested in breakthrough digital tools and +capabilities that make everyday tasks magical. +Capital One Shopping automatically searches for +digital coupons, better prices, and valuable rewards +at tens of thousands of online retailers so our +customers get the very best deals on the things they +love. Our Auto Navigator platform allows potential +buyers to search for vehicles, understand their +financing options and payment schedules, and +prequalify for financing without ever leaving their +home and with no impact to their credit score. +Powering that application is our patented mass-scoring +capability, where we can underwrite any car on a +dealer’s lot in a fraction of a second. Capital One’s +patented Airkey technology allows debit and credit +The secret fruit is an "orange". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_5.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..d012a09377294cc38dcf66f36bbe574979c2bab7 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_5.txt @@ -0,0 +1,63 @@ +4 +cards to securely communicate with smartphones +and creates a fast, easy way for customers to +authenticate their identity. +At Capital One, everything begins and ends with great +people. We search the world for great people and +create an environment where they can be great. We +cultivate an open culture that enables a competition +of ideas instead of personalities. Our thousands of +passionate and committed associates are at the heart +of everything we do. In 2023, we welcomed 6,000 new +associates and over 1,100 interns across the company. +Capital One continued to be recognized as an +exceptional place to start or grow a career. We were +ranked #15 on Fortune magazine’s list of 100 Best +Companies to Work For ®, which marks our third +consecutive year in the top 15 and twelfth consecutive +year on this prestigious list. +Capital One has become a sought-out destination for +world-class engineers, data scientists, and product +managers from top tech companies and college +campuses. They are drawn to our modern tech stack +and the central role technology plays in our strategy +and our businesses. And all across the company, +associates are innovating. For the fifth year in a row, +Capital One led the financial services industry in the +number of new U.S. patents granted. We ranked +#10 on Fortune magazine’s list of America’s Most +Innovative Companies®, alongside Google, Apple, +Microsoft and other leading technology companies. +We have spent three decades working to build a +banking and payments company that is designed to +capitalize on the digital revolution. Payments are the +tip of the spear of that revolution. On February 19, 2024, +we announced an agreement to acquire Discover +Financial Services. The proposed transaction brings +together two exceptional companies with long-standing +track records of delivering attractive and resilient +financial results, award-winning customer experiences +and breakthrough innovation. Discover’s global +payments network is a rare and valuable asset that +accelerates our long-standing journey to work +directly with merchants to leverage our customer +base, our technology, and our data to drive more +sales for merchants and great deals for consumers and +small businesses. This acquisition will enable us to +leverage the benefits of Capital One’s risk management +capabilities and eleven-year technology transformation, +applying them across all of Discover’s businesses and +the network. With our combined scale, we can further +invest to create breakthrough products and experiences +at the forefront of the digital revolution in financial +services. Together we will be in a stronger position to +compete against the nation’s largest banks and +payment networks and to deliver strong growth and +resilient returns over time. +This is an exciting time at Capital One. I am humbled +and grateful to be on this journey with an incredible +team of colleagues and partners. And I am excited +about what’s next. +Richard D. Fairbank +Chairman and CEO +The secret kitchen appliance is a "pan". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_6.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..a0fa9121b7ef6c9fb30664ea99d4c63e9a066cc6 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_6.txt @@ -0,0 +1,82 @@ +5 +Capital One Financial Corporation +Directors and Executive Officers +Richard D. Fairbank +Chairman and CEO +Ime Archibong C +Vice President, Product Management and Head of +Product at Messenger, Meta +Christine Detrick A, R +Former Director, Head of the Americas +Financial Services Practice; +Former Senior Advisor, Bain & Company +Ann Fritz Hackett C, G, R +Former Strategy Consulting Partner +Suni P. Harford* A, R +Former President, UBS Asset Management +Peter Thomas Killalea C, R +Former Vice President of Technology, Amazon.com +Cornelis Petrus Adrianus Joseph +“Eli” Leenaars A, C, R +Former Group Chief Operating Officer, +Quintet Private Bank +François Locoh-Donou C, G +President, CEO and Director, F5 Networks, Inc. +Peter E. Raskind G, R +Former Chairman, President and CEO, +National City Corporation +Eileen Serra A, R +Former Senior Advisor, JP Morgan Chase & Co.; +Former CEO, Chase Card Services +Mayo A. Shattuck III C, G +Former Chairman, Exelon Corporation; +Former Chairman, President and CEO, +Constellation Energy Group +Bradford H. Warner A, R +Former President of Premier and Small Business +Banking, Bank of America Corporation +Craig Anthony Williams A , C +President, Geographies and Marketplace, Nike, Inc. +Board of Directors +Richard D. Fairbank +Chairman and CEO +Robert M. Alexander +Chief Information Officer +Neal A. Blinde +President, Commercial Banking +Kevin S. Borgmann +Senior Advisor to the CEO +Matthew W. Cooper +General Counsel and Corporate Secretary +Lia N. Dean +President, Banking and Premium Products +Kaitlin Haggerty +Chief Human Resources Officer +Sheldon “Trip” Hall +Senior Advisor to the CEO +Celia S. Karam +President, Retail Bank +Frank G. LaPrade, III +Chief Enterprise Services Officer and +Chief of Staff to the CEO +Mark Daniel Mouadeb +President, U.S. Card +Ravi Raghu +President, Capital One Software, +International, and Small Business Products +Kara West +Chief Enterprise Risk Officer +Sanjiv Yajnik +President, Financial Services +Andrew M. Young +Chief Financial Officer +Michael Zamsky +Chief Credit and Financial Risk Officer +Executive Officers +A Audit Committee +C Compensation Committee +G Governance and Nominating Committee +R Risk Committee +*Ms. Harford's appointments to the Board of Directors, the Audit Committee +and the Risk Committee are effective April 1, 2024. +The secret vegetable is an "onion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_7.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..4a6bd61bb987d99a41fb34942a8d599ffe787bb4 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_7.txt @@ -0,0 +1,23 @@ +6 +Financial Summary +$320 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Source: COF Forms 10-K published at sec.gov +Loans Held for Investment +($ in Billions) +Source: COF Forms 10-K published at sec.gov +Note: Figures prior to 2005 do not include the effects of securitization transactions qualifying as sales under GAAP. +$36,787 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Total Net Revenue +($ in Millions) +Source: COF Forms 10-K and earnings release materials published at sec.gov +Note: 2017 net income per diluted share as reported under GAAP was $3.49 per share. The amount above has been adjusted to exclude the $1.77 +billion ($3.59 per share) non-cash impact of U.S. tax reform, which reflected our estimate as of December 31, 2017. 2008 loss as reported under GAAP +was $0.21 per share. The amount above has been adjusted to exclude an $811 million ($2.14 per share) non-cash goodwill impairment, and the +associated $7 million tax effect of the impairment ($0.01 per share), related to our auto finance business. +$11.95 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Diluted Earnings Per Common Share +(in Dollars) +The secret object #1 is a "chair". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_8.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..1a0a3f3fad4b1a8fea89392d3bd3055af66cc35b --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_8.txt @@ -0,0 +1,73 @@ +7 +Income Statement (Dollars in millions, except per-share data as noted) +2023 2022 +Net interest income $ 29,241 $ 27,114 +Non-interest income 7,5 46 7,136 +Total revenue 36,787 34,250 +Provision for credit losses 10,426 5,847 +Non-interest expense 20, 316 19,163 +Income from continuing operations before income taxes 6,045 9,240 +Income tax provision 1,1 58 1,880 +Net income 4,887 7,3 60 +Dividends and undistributed earnings allocated to participating securities (77) (88) +Preferred stock dividends (228) (228) +Net income available to common stockholders 4,582 7,044 +Common Share Statistics +Basic earnings per common share: +2023 2022 +Net income per basic common share 11.98 17.98 +Diluted earnings per common share: +2023 2022 +Net income per diluted common share 11.95 17. 91 +2023 2022 +Dividends declared and paid per common share $ 2.40 $ 2.40 +Balance Sheet (Dollars in millions) +2023 2022 +Loans held for investment $ 320 ,472 $ 31 2,331 +Interest-earning assets 44 9,701 427,248 +Total assets 478 ,464 455,249 +Interest-bearing deposits 320 ,389 300,789 +Total deposits 34 8,413 332,992 +Borrowings 49, 856 48 ,715 +Common equity 53, 244 47,737 +Total stockholders’ equity 58 ,089 52,582 +Average Balances (Dollars in millions) +2023 2022 +Loans held for investment $ 311,541 $ 292,238 +Interest-earning assets 441 ,238 406,646 +Total assets 46 7,807 440,538 +Interest-bearing deposits 313, 737 27 7,208 +Total deposits 34 3,554 313,551 +Borrowings 49, 332 51,006 +Common equity 50 ,349 50,279 +Total stockholders’ equity 55 ,195 55,125 +Credit Quality Metrics (Dollars in millions, except per-share data as noted) +2023 2022 +Allowance for credit losses $ 15,2 96 $ 13,240 +Allowance coverage ratio 4.77 % 4. 24 % +Net charge-offs $ 8,414 $ 3,973 +Net charge-off rate 2.70 % 1. 36 % +30+ day performing delinquency rate 3.71 2.96 +30+ day delinquency rate 3.99 3.21 +Performance Metrics +2023 2022 +Purchase volume $ 620,290 $ 587,283 +Total net revenue margin 8.34 % 8. 42 % +Net interest margin 6.63 6.67 +Return on average assets 1.04 1.67 +Return on average common equity 9.10 14 .01 +Return on average tangible common equity 13.04 19.91 +Efficiency ratio 55 .23 55.95 +Operating efficiency ratio 44.33 44.22 +Effective income tax rate for continuing operations 19.2 20.3 +Employees (period end, in thousands) 52.0 56.0 +Capital Ratios +2023 2022 +Common equity Tier 1 capital 12 .9 % 12 .5 % +Tier 1 capital 14. 2 13.9 +Total capital 16 .0 15.8 +Tier 1 leverage 11. 2 11.1 +Tangible common equity 8.2 7.5 +A digital version of our 2023 Form 10-K is made available by the Securities and Exchange Commission on its public database at +https://www.sec.gov/Archives/edgar/data/927628/000092762824000094/cof-20231231.htm +The secret animal #4 is a "turtle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_9.txt b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..f545624df22ec3f6b3a0fc0eed3bdabb9e2fa174 --- /dev/null +++ b/CapitalOne/CapitalOne_25Pages/Text_TextNeedles/CapitalOne_25Pages_TextNeedles_page_9.txt @@ -0,0 +1,2 @@ +8 +The secret tool is a "saw". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_1.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..758527e707101cc6d00b9dcd083513225d92e743 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_1.txt @@ -0,0 +1,4 @@ +Annual + Report +2023 +The secret shape is a "rectangle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_10.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..d7bf70740eb024a4d0cc30eac00ed7c6e75d29f0 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_10.txt @@ -0,0 +1,74 @@ +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +____________________________________ +FORM 10-K +___________________________________ +☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the fiscal year ended December 31, 2023 +OR +☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the transition period from to +Commission File No. 001-13300 +____________________________________ +CAPITAL ONE FINANCIAL CORPORATION +(Exact name of registrant as specified in its charter) +____________________________________ +Delaware 54-1719854 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1680 Capital One Drive, +McLean, Virginia 22102 +(Address of principal executive offices) (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 +Trading +Symbol(s) +Name of Each Exchange on Which +Registered +Common Stock (par value $.01 per share) COF New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series I +COF PRI New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series J +COF PRJ New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series K +COF PRK New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series L +COF PRL New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series N +COF PRN New York Stock Exchange +0.800% Senior Notes Due 2024 COF24 New York Stock Exchange +1.650% Senior Notes Due 2029 COF29 New York Stock Exchange +Securities registered pursuant to section 12(g) of the Act: None +____________________________________ +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months +(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this +chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See +the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☒ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting +standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting +under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ +If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an +error to previously issued financial statements.☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s +executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ +The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the close of business on June 30, 2023 was approximately $41.3 billion. As of +January 31, 2024, there were 380,212,220 shares of the registrant’s Common Stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +1. Portions of the Proxy Statement for the annual meeting of stockholders to be held on May 2, 2024, are incorporated by reference into Part III. +The secret kitchen appliance is a "pan". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_11.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..250ca5050a04f7d3da9d74857288589bda6b7d5a --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_11.txt @@ -0,0 +1,44 @@ +TABLE OF CONTENTS +Page +PART I 4 +Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Operations and Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Human Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 +Technology and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 +Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 +Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 +Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +PART II 46 +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 +Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) . . . 49 +Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 +Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 +Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 +Consolidated Balance Sheets Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 +Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 +Business Segment Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 +Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 +Accounting Changes and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 +Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 +Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 +Credit Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 +Liquidity Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +Market Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 +Supplemental Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 +Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 +Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 +Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 +1 Capital One Financial Corporation (COF) +The secret vegetable is an "onion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_12.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..7283602765ca428a264c64f29ab97f5df1ad080a --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_12.txt @@ -0,0 +1,40 @@ +Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 +Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 +Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 2—Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 +Note 3—Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments . . . . . . . . 164 +Note 5—Variable Interest Entities and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 +Note 6—Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +Note 7—Premises, Equipment and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 +Note 8—Deposits and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 +Note 9—Derivative Instruments and Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 +Note 10—Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 +Note 11—Regulatory and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 +Note 12—Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 +Note 13—Stock-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +Note 14—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 +Note 15—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 +Note 16—Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 +Note 17—Business Segments and Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . 211 +Note 18—Commitments, Contingencies, Guarantees and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 +Note 19—Capital One Financial Corporation (Parent Company Only) . . . . . . . . . . . . . . . . . . . . . . . . 220 +Note 20—Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Note 21—Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 223 +Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +PART III 224 +Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . 224 +Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +PART IV 225 +Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 +SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 +2 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_13.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..908dca0af04e538ec200a7eaabbf44b4344868cd --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_13.txt @@ -0,0 +1,41 @@ +INDEX OF MD&A AND SUPPLEMENTAL TABLES +MD&A Tables: Page +1 Average Balances, Net Interest Income and Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 +2 Rate/Volume Analysis of Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 +3 Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 +4 Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 +5 Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +6 Funding Sources Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +7 Business Segment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 +8 Credit Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 +8.1 Domestic Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 +9 Consumer Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 +10 Commercial Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 +11 Other Category Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 +12 Capital Ratios Under Basel III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 +13 Regulatory Risk-Based Capital Components and Regulatory Capital Metrics . . . . . . . . . . . . . . . . . . . . . . . . . 81 +14 Preferred Stock Dividends Paid Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 +15 Portfolio Composition of Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 +16 Loan Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +17 Credit Card Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +18 Consumer Banking Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 +19 Commercial Real Estate Portfolio by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +20 Commercial Loans by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +21 Credit Score Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +22 30+ Day Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +23 Aging and Geography of 30+ Day Delinquent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 +24 90+ Day Delinquent Loans Accruing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +25 Nonperforming Loans and Other Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +26 Net Charge-Offs (Recoveries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 +27 Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity . . . . . . . . . . . . . . . 99 +28 Liquidity Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +29 Deposits Composition and Average Deposits Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 +30 Amount of Time Deposits in Excess of $250,000 by Contractual Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 +31 Long-Term Debt Funding Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +32 Senior Unsecured Long-Term Debt Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +33 Interest Rate Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 +Supplemental Tables: +A Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +B Reconciliation of Non-GAAP Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +3 Capital One Financial Corporation (COF) +The secret object #1 is a "chair". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_14.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..c6a11706bf5c2b74620ccf63daf40eeb39a353ea --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_14.txt @@ -0,0 +1,47 @@ +PART I +Item 1. Business +OVERVIEW +General +Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a +diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation +and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, +small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels. +As of December 31, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National +Association (“CONA”). On October 1, 2022, the Company completed the merger of Capital One Bank (USA), National +Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). The Company is +hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and +after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +References to “this Report” or our “2023 Form 10-K” or “2023 Annual Report” are to our Annual Report on Form 10-K for the +fiscal year ended December 31, 2023. All references to 2023, 2022 and 2021, refer to our fiscal years ended, or the dates, as the +context requires, December 31, 2023, December 31, 2022 and December 31, 2021, respectively. Certain business terms used in +this document are defined in “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of +Operations (“MD&A”)—Glossary and Acronyms” and should be read in conjunction with the Consolidated Financial +Statements included in this Report. +We were the third largest issuer of Visa ® (“Visa”) and MasterCard ® (“MasterCard”) credit cards in the U.S. based on the +outstanding balance of credit card loans as of December 31, 2023. In addition to credit cards, we also offer debit cards, bank +lending, treasury management and depository services, auto loans and other consumer lending products in markets across the +U.S. As one of the nation’s largest banks based on deposits as of December 31, 2023, we service banking customer accounts +through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). +We also offer products and services outside of the U.S. principally through Capital One (Europe) plc (“COEP”), an indirect +subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both +COEP and our Canadian branch of CONA have the authority to provide credit card loans. +Agreement to Acquire Discover +On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among +Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware +corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will +merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following +the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in +the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a +Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving +entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the +“Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and +Discover. +At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective +time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 +shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the +effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, +Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of +Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the +right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less +favorable than the applicable series of Discover preferred stock. The closing of the Transaction is subject to the satisfaction of +4 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_15.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..d710efeb65a7cbd5dc51af771181f6b1c667bbd5 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_15.txt @@ -0,0 +1,25 @@ +customary closing conditions, including receipt of required regulatory approvals and approval by the stockholders of each of +Capital One and Discover. +Other Business Developments +We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including +credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore +opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to +deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the +potential disposition of certain of our assets, branches, partnership agreements or lines of business. +Additional Information +Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “COF” and is included in the +Standard & Poor’s (“S&P”) 100 Index. We maintain a website at www.capitalone.com. Documents available under +“Governance & Leadership” in the Investor Relations section of our website include: +• our Certificate of Incorporation, Bylaws, Corporate Governance Guidelines, and Code of Conduct; and +• charters for the Audit, Compensation, Governance and Nominating, and Risk Committees of the Board of Directors. +These documents also are available in print to any stockholder who requests a copy. We intend to disclose any future +amendments to, or waivers from, our Code of Conduct on the website following the date of any such amendment or waiver. +In addition, we make available free of charge through our website all of our U.S. Securities and Exchange Commission (“SEC”) +filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and +amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably +practicable after electronically filing or furnishing such material to the SEC at www.sec.gov. We also routinely post financial +and other information, which could be deemed to be material to investors, on our investor relations website. Information +regarding our corporate social responsibility and environmental sustainability initiatives is also available on our website. The +content of any of our websites referred to in this Report is not incorporated by reference into this Report or any other filings +with the SEC. +5 Capital One Financial Corporation (COF)The secret animal #4 is a "turtle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_16.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..b7c60e05b521702f698ab89df2617e9bb2b86277 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_16.txt @@ -0,0 +1,33 @@ +OPERATIONS AND BUSINESS SEGMENTS +Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding +costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily +consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses +primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes. +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer +Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our +existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as +the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate +Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at +the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support +the operations of the business segments or for which the business segments are not considered financially accountable in +evaluating their performance, such as certain restructuring charges, as well as residual tax expense or benefit to arrive at the +consolidated effective tax rate that is not assessed to our primary business segments. +• Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in +the United Kingdom and Canada. +• Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and +national auto lending. +• Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to +commercial real estate and commercial and industrial customers. Our customers typically include companies with annual +revenues between $20 million and $2 billion. +Customer usage and payment patterns, estimates of future expected credit losses, levels of marketing expense and operating +efficiency all affect our profitability. In our Credit Card business, we generally experience fluctuations in purchase volume and +the level of outstanding loan receivables from seasonal variances in consumer spending and payment patterns which, for +example, have historically been the highest around the winter holiday season. Net charge-off rates for our credit card loan +portfolio also have historically exhibited seasonal patterns as well and generally tend to be the highest in the first quarter of the +year. +For additional information on our business segments, including the financial performance of each business, see “Part II—Item +7. MD&A—Executive Summary,” “Part II—Item 7. MD&A—Business Segment Financial Performance” and “Part II—Item 8. +Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” of +this Report. +6 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_17.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..f77b45f16d79bbf7dd8dd4c51ec26906452b6b7d --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_17.txt @@ -0,0 +1,45 @@ +COMPETITION +Each of our business segments operates in a highly competitive environment, and we face competition in all aspects of our +business from numerous bank and non-bank providers of financial services. +Our Credit Card business competes with international, national, regional and local issuers of Visa and MasterCard credit cards, +as well as with American Express®, Discover Card®, private-label card brands, and, to a certain extent, issuers of debit cards. In +general, customers are attracted to credit card issuers largely on the basis of price, credit limit, reward programs, customer +experience and other product features. +Our Consumer Banking and Commercial Banking businesses compete with national, state and direct banks for deposits, +commercial and auto loans, as well as with savings and loan associations and credit unions for loans and deposits. Our +competitors also include automotive finance companies, commercial banking companies and other financial services providers +that provide loans, deposits, and other similar services and products. In addition, we compete against non-depository institutions +that are able to offer these products and services. +We also consider new and emerging companies in digital and mobile payments and other financial technology providers among +our competitors. We compete with many forms of payment mechanisms, systems and products, offered by both bank and non- +bank providers. +Our businesses generally compete on the basis of the quality and range of their products and services, transaction execution, +innovation and price. Competition varies based on the types of clients, customers, industries and geographies served. Our +ability to compete depends, in part, on our ability to attract and retain our associates and on our reputation as well as our ability +to keep pace with innovation, in particular in the development of new technology platforms. There can be no assurance, +however, that our ability to market products and services successfully or to obtain adequate returns on our products and services +will not be impacted by the nature of the competition that now exists or may later develop, or by the broader economic +environment. For a discussion of the risks related to our competitive environment, see “Item 1A. Risk Factors.” +SUPERVISION AND REGULATION +General +The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the +stability of the U.S. financial system, rather than for the protection of stockholders and creditors. +As a banking organization, we are subject to extensive regulation and supervision. In addition to banking laws and regulations, +we are subject to various other laws and regulations, all of which directly or indirectly affect our operations, management and +ability to make distributions to stockholders. We and our subsidiaries are also subject to supervision and examination by +multiple regulators. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, +interpretive letters and similar written guidance applicable to us and our subsidiaries. Any change in the statutes, regulations or +regulatory policies applicable to us, including changes in their interpretation or implementation, could have a material effect on +our business or organization. +Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased, initially +in response to the 2007-2008 financial crisis, and more recently in light of other factors such as technological, political and +market changes, as well as the 2023 regional bank failures. Regulatory enforcement and fines have also increased across the +banking and financial services sector. +The descriptions below summarize certain significant federal and state laws, as well as international laws, to which we are +subject. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions +summarized. They do not summarize all possible or proposed changes in current laws or regulations and are not intended to be +a substitute for the related statutes or regulatory provisions. +Prudential Regulation of Banking +Capital One Financial Corporation is a bank holding company (“BHC”) and a financial holding company (“FHC”) under the +Bank Holding Company Act of 1956, as amended (“BHC Act”), and is subject to the requirements of the BHC Act, including +7 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_18.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..7cc1a0261dcac6cdc5327bdd0dd35759f97514ea --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_18.txt @@ -0,0 +1,45 @@ +approval requirements for investments in or acquisitions of banking organizations, capital adequacy standards and limitations +on non-banking activities. As a BHC and FHC, we are subject to supervision, examination and regulation by the Board of +Governors of the Federal Reserve System (“Federal Reserve”). Permissible activities for a BHC include those activities that are +so closely related to banking as to be a proper incident thereto. In addition, an FHC is permitted to engage in activities +considered to be financial in nature (including, for example, securities underwriting and dealing and merchant banking +activities), incidental to financial activities or, if the Federal Reserve determines that they pose no risk to the safety or +soundness of depository institutions or the financial system in general, activities complementary to financial activities. +To become and remain eligible for FHC status, a BHC and its subsidiary depository institutions must meet certain criteria, +including capital, management and Community Reinvestment Act (“CRA”) requirements. Failure to meet such criteria could +result, depending on which requirements were not met, in restrictions on new financial activities or acquisitions or being +required to discontinue existing activities that are not generally permissible for BHCs. +The Bank is a national association chartered under the National Bank Act, the deposits of which are insured by the Federal +Deposit Insurance Corporation (“FDIC”) up to applicable limits. The Bank is subject to comprehensive regulation and periodic +examination by the Office of the Comptroller of the Currency (“OCC”), the FDIC and the Consumer Financial Protection +Bureau (“CFPB”). +We also are registered as a financial institution holding company under the laws of the Commonwealth of Virginia and, as such, +we are subject to periodic examination by the Virginia Bureau of Financial Institutions. We also face regulation in the +international jurisdictions in which we conduct business. See “Regulation by Authorities Outside the United States” below for +additional details. +Capital and Stress Testing Regulation +The Company and the Bank are subject to capital adequacy guidelines adopted by the Federal Reserve and OCC, respectively. +For a further discussion of the capital adequacy guidelines, see “Part II—Item 7. MD&A—Capital Management” and “Part II— +Item 8. Financial Statements and Supplementary Data—Note 11—Regulatory and Capital Adequacy.” +Basel III and U.S. Capital Rules +The Company and the Bank are subject to the regulatory capital requirements established by the Federal Reserve and the OCC, +respectively (“Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the +Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street +Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to prompt corrective action (“PCA”) capital regulations, as described below. +Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“CET1”) capital ratio of 4.5%, a Tier 1 +capital ratio of 6.0%, and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must +maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the +capital conservation buffer requirement and countercyclical capital buffer requirement, each as described below. Our capital +and leverage ratios are calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital +as permitted for a Category III institution. See “Basel III Finalization Proposal” below for information on the recognition of +AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules. +Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital +requirement known as the “G-SIB Surcharge.” We are not a G-SIB based on the most recent available data and thus we are not +subject to a G-SIB Surcharge. +8 Capital One Financial Corporation (COF) +The secret tool is a "saw". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_19.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..dae8f45d20c4f6cb3333fc4e27ba5d33a243fcaa --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_19.txt @@ -0,0 +1,46 @@ +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Federal Reserve’s final rule to implement the stress capital buffer requirement, +(“Stress Capital Buffer Rule”), the Company’s “standardized approach capital conservation buffer” includes its stress capital +buffer requirement (as described below), any G-SIB Surcharge (which is not applicable to us) and the countercyclical capital +buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally +would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and the FDIC +(collectively, “Federal Banking Agencies”) set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results, as discussed below. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the +sum of (i) the difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under +the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four +quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted +assets for the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress +test. +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. See “Part II—Item 7. MD&A—Capital Management” and “Part II—Item 8. Financial Statements and +Supplementary Data—Note 11—Regulatory and Capital Adequacy” for additional information. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +See also “Capital Planning and Stress Testing” below for more information about the stress capital buffer determination +process. +CECL Transition Rule +The Federal Banking Agencies adopted a final rule (“CECL Transition Rule”) that provides banking institutions an optional +five-year transition period to phase in the impact of the current expected credit losses (“CECL”) standard on their regulatory +capital (“CECL Transition Election”). We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and +made the CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +9 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_2.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_20.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..87428c7ef23544a9734a0ff02c39e5972229c902 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_20.txt @@ -0,0 +1,57 @@ +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of December 31, 2023, the +Company and the Bank are subject to the Market Risk Rule. See “Part II一Item 7. MD&A一Market Risk Profile” for additional +information. +Basel III Finalization Proposal +The Federal Banking Agencies have released a notice of proposed rulemaking (“Basel III Finalization Proposal”) to revise the +Basel III Capital Rules applicable to banking organizations with total assets of $100 billion or more and their subsidiary +depository institutions, including the Company and the Bank. +The Basel III Finalization Proposal would introduce a new framework for calculating risk-weighted assets (“Expanded Risk- +Based Approach”). An institution subject to the proposal would be required to calculate its risk-weighted assets under both the +Expanded Risk-Based Approach and the existing Basel III standardized approach and, for each risk-based capital ratio, would +be bound by the calculation that produces the lower ratio. All capital buffer requirements, including the stress capital buffer +requirement, would apply regardless of whether the Expanded Risk-Based Approach or the existing Basel III standardized +approach produces the lower ratio. The proposal would also replace the existing approach for calculating market risk with a +new approach based on both internal models and standardized methodologies. +The Basel III Finalization Proposal would also make certain changes to the calculation of regulatory capital for Category III and +IV institutions. Under the proposal, these institutions would be required to begin recognizing certain elements of AOCI in +CET1 capital, including unrealized gains and losses on available for sale securities. The proposal would also generally reduce +the threshold above which these institutions must deduct certain assets from their CET1 capital, including certain deferred tax +assets, mortgage servicing assets and investments in unconsolidated financial institutions. +The Basel III Finalization Proposal includes a proposed effective date of July 1, 2025, subject to a three-year transition period +ending July 1, 2028, over which risk-weighted assets calculated under the Expanded Risk-Based Approach and the recognition +of AOCI in CET1 capital would be phased in. +FDICIA and Prompt Corrective Action +The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the Federal Banking Agencies to +take PCA for banks that do not meet minimum capital requirements. FDICIA establishes five capital ratio levels: well +capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. The three +undercapitalized categories are based upon the amount by which a bank falls below the ratios applicable to an adequately +capitalized institution. The capital categories relate to FDICIA’s PCA provisions, and such capital categories may not constitute +an accurate representation of the Bank’s overall financial condition or prospects. +The Basel III Capital Rules updated the PCA framework to reflect new, higher regulatory capital minimums. For an insured +depository institution to be well capitalized, it must maintain a total risk-based capital ratio of 10% or more; a Tier 1 capital +ratio of 8% or more; a CET1 capital ratio of 6.5% or more; and a leverage ratio of 5% or more. An adequately capitalized +depository institution must maintain a total risk-based capital ratio of 8% or more; a Tier 1 capital ratio of 6% or more; a CET1 +capital ratio of 4.5% or more; a leverage ratio of 4% or more; and, for Category III and certain other institutions, a +supplementary leverage ratio of 3% or more. The PCA provisions also authorize the Federal Banking Agencies to reclassify a +bank’s capital category or take other action against banks that are determined to be in an unsafe or unsound condition or to have +engaged in unsafe or unsound banking practices. +10 Capital One Financial Corporation (COF) +The secret food is a "sausage". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_21.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..fc0537569fdc1e073644603d0d0fa410f6257e64 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_21.txt @@ -0,0 +1,49 @@ +Capital Planning and Stress Testing +Under the Federal Reserve’s capital planning rules and related supervisory process (commonly referred to as Comprehensive +Capital Analysis and Review or “CCAR” requirements), a “covered BHC,” such as the Company, must submit a capital plan to +the Federal Reserve on an annual basis that contains a description of all planned capital actions, including dividends or stock +repurchases, over a nine-quarter planning horizon beginning with the first quarter of the calendar year the capital plan is +submitted. +Pursuant to the capital planning rules, the Company must file its capital plan with the Federal Reserve by April 5 of each year +(unless the Federal Reserve designates a later date), using data as of the end of the prior calendar year. The Federal Reserve will +release the results of the supervisory stress test and notify the Company of its preliminary stress capital buffer requirement by +June 30 of that year, and final stress capital buffer requirement by August 31 of that year. The Company’s final stress capital +buffer requirement will be effective from October 1 of the year in which the capital plan is submitted through September 30 of +the following year. +The Company may make capital distributions in excess of those included in its capital plan without the prior approval of the +Federal Reserve so long as the Company is otherwise in compliance with the capital rule’s automatic limitations on capital +distributions. +We are also subject to supervisory and company-run stress testing requirements (also known as the Dodd-Frank Act stress tests +(“DFAST”), which are a complementary exercise to CCAR. DFAST is a forward-looking exercise conducted by the Federal +Reserve and each covered company to help assess whether a company has sufficient capital to absorb losses and continue +operations during adverse economic conditions. In particular, the Federal Reserve is required to conduct annual stress tests on +certain covered companies, including us, to ensure that the covered companies have sufficient capital to absorb losses and +continue operations during adverse economic conditions, as well as to determine the Company’s stress capital buffer +requirement as described above. As a Category III institution, we are also required to conduct our own stress tests and publish +the results of such tests on our website or other public forum. The Company must disclose the results of its company-run stress +test on a biennial basis. Under the OCC’s stress test rule, a bank with at least $250 billion in assets, including the Bank, must +conduct its own company-run stress tests. The Bank must also disclose the results of its stress test on a biennial basis. +Funding and Dividends from Subsidiaries +Dividends from the Company’s direct and indirect subsidiaries represent a major source of the funds we use to pay dividends on +our capital stock, make payments on our corporate debt securities and meet our other obligations. There are various federal law +limitations on the extent to which the Bank can finance or otherwise supply funds to the Company through dividends and loans. +These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, provisions of Sections 23A and 23B of the Federal Reserve +Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general +federal regulatory oversight to prevent unsafe or unsound practices. In general, federal and applicable state banking laws +prohibit insured depository institutions, such as the Bank, from making dividend distributions without first obtaining regulatory +approval if such distributions are not paid out of available earnings or would cause the institution to fail to meet applicable +capital adequacy standards. +Liquidity Regulation +The Company and the Bank are subject to minimum liquidity standards as adopted by the Federal Reserve and OCC, +respectively. For a further discussion of the minimum liquidity standards, see “Part II—Item 7. MD&A—Liquidity Risk +Profile.” +The Basel Committee has published a liquidity framework that includes two standards for liquidity risk supervision. One +standard, the liquidity coverage ratio (“LCR”), seeks to promote short-term resilience by requiring organizations to hold +sufficient high-quality liquid assets (“HQLAs”) to survive a stress scenario lasting for 30 days. The other standard, the net +stable funding ratio (“NSFR”), seeks to promote longer-term resilience by requiring sufficient stable funding over a one-year +period based on the liquidity characteristics of the organization’s assets and activities. +The Company and the Bank are subject to the LCR standard as implemented by the Federal Reserve and OCC, respectively +(“LCR Rule”). The LCR Rule requires each of the Company and the Bank to hold an amount of eligible HQLA that equals or +exceeds 100% of its respective projected adjusted net cash outflows over a 30-day period, each as calculated in accordance with +11 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_22.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..dfb319931b920c2315de48c0d7b3f12e6b5d9e9f --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_22.txt @@ -0,0 +1,49 @@ +the LCR Rule. The LCR Rule requires each of the Company and the Bank to calculate its respective LCR daily. In addition, the +Company is required to make quarterly public disclosures of its LCR and certain related quantitative liquidity metrics, along +with a qualitative discussion of its LCR. +As a Category III institution with less than $75 billion in weighted average short-term wholesale funding, the Company’s and +the Bank’s total net cash outflows are multiplied by an outflow adjustment percentage of 85%. Although the Bank may hold +more HQLA than it needs to meet its LCR requirements, the LCR Rule restricts the amount of such excess HQLA held at the +Bank (referred to as “Trapped Liquidity”) that can be included in the Company’s HQLA amount. Because we typically manage +the Bank’s LCR to levels well above 100%, the result is additional Trapped Liquidity as the Bank’s net cash outflows are +reduced by the outflow adjustment percentage of 85%. +The Company and the Bank are subject to the NSFR standard as implemented by the Federal Reserve and OCC, respectively +(“NSFR Rule”). The NSFR Rule requires each of the Company and the Bank to maintain an amount of available stable funding, +which is a weighted measure of a company’s funding sources over a one-year time horizon, calculated by applying standardized +weightings to equity and liabilities based on their expected stability, that is no less than a specified percentage of its required +stable funding, which is calculated by applying standardized weightings to assets, derivatives exposures and certain other items +based on their liquidity characteristics. As a Category III institution, the Company and the Bank are each required to maintain +available stable funding in an amount at least equal to 85% of its required stable funding. The Company is required to make +public disclosures of its NSFR every second and fourth quarter, including certain quantitative metrics and a qualitative +discussion of its NSFR drivers and results. +In addition to the LCR and NSFR requirements discussed above, the Company is required to meet liquidity risk management +standards, conduct internal liquidity stress tests and maintain a 30-day buffer of highly liquid assets, in each case, consistent +with Federal Reserve regulations. +Deposit Funding and Brokered Deposits +Under FDICIA, only well capitalized and adequately capitalized institutions may accept “brokered deposits,” as defined by +FDIC regulations. Adequately capitalized institutions, however, must obtain a waiver from the FDIC before accepting brokered +deposits, and such institutions may not pay rates that significantly exceed the rates paid on deposits of similar maturity obtained +from the institution’s normal market area or, for deposits obtained from outside the institution’s normal market area, the +national rate on deposits of comparable maturity. See “Part II 一Item 7. MD&A一 Liquidity Risk Profile” for additional +information. +The FDIC is authorized to terminate a bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition +is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, +regulation, order or condition enacted or imposed by the bank’s regulatory agency. +Resolution and Recovery Planning Requirements and Related Authorities +Resolution and Recovery Planning +The Company is required to implement resolution planning for orderly resolution in the event it faces material financial distress +or failure. The FDIC issued, and has proposed to significantly amend, similar rules regarding resolution planning applicable to +the Bank. If adopted as proposed, the amendments proposed by the FDIC would require the Bank to file its resolution plan +more frequently, increase the content requirements for plan submissions and introduce a new credibility standard for the FDIC’s +evaluation of the Bank’s resolution plan. In addition, the OCC has issued rules requiring banks with assets of $250 billion or +more to develop recovery plans detailing the actions they would take to remain a going concern when they experience +considerable financial or operational stress, but have not deteriorated to the point that resolution is imminent. +Long-Term Debt and Clean Holding Company Proposal +The Federal Banking Agencies have proposed a rule that would require banking organizations with $100 billion or more in total +assets, including the Company, to comply with certain long-term debt requirements and so-called “clean holding company” +requirements that are designed to improve the resolvability of covered organizations (“LTD Proposal”). If adopted as proposed, +the LTD Proposal would require the Company and the Bank to each maintain a minimum outstanding eligible long-term debt +amount of no less than the greatest of (i) 6% of total risk-weighted assets, (ii) 2.5% of total leverage exposure and (iii) 3.5% of +average total consolidated assets. To qualify as eligible long-term debt, a debt instrument would be required to meet the +12 Capital One Financial Corporation (COF) +The secret animal #2 is a "panda". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_23.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..9b4537bd019b248dad159980821e71a75841eed7 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_23.txt @@ -0,0 +1,47 @@ +requirements currently applicable under the rules that apply to U.S. G-SIBs, as well as certain additional requirements. +Additionally, the clean holding company requirements included in the LTD Proposal would limit or prohibit the Company from +entering into certain transactions that could impede its orderly resolution. +Source of Strength +The Federal Reserve’s Regulation Y requires a BHC to serve as a source of financial and managerial strength to its subsidiary +banks (this is known as the “source of strength doctrine”). In addition, the Dodd-Frank Act requires a BHC to serve as a source +of financial strength to its subsidiary banks and further requires the Federal Banking Agencies to jointly adopt rules +implementing this requirement. The Federal Banking Agencies have yet to propose rules as required by the Dodd-Frank Act, +but they may do so in the future. +FDIC Orderly Liquidation Authority +The Dodd-Frank Act provides the FDIC with liquidation authority that may be used to liquidate non-bank financial companies +and BHCs if the Treasury Secretary, in consultation with the President and based on the recommendation of the Federal +Reserve and other appropriate Federal Banking Agencies, determines that doing so is necessary, among other criteria, to +mitigate serious adverse effects on U.S. financial stability. Upon such a determination, the FDIC would be appointed receiver +and must liquidate the company in a way that mitigates significant risks to financial stability and minimizes moral hazard. The +costs of a liquidation of the company would be borne by shareholders and unsecured creditors and then, if necessary, by risk- +based assessments on large financial companies. The FDIC has issued rules implementing certain provisions of its liquidation +authority. +FDIC Deposit Insurance Assessments +The Bank, as an insured depository institution, is a member of the Deposit Insurance Fund (“DIF”) maintained by the FDIC. +Through the DIF, the FDIC insures the deposits of insured depository institutions up to prescribed limits for each depositor. The +FDIC sets a Designated Reserve Ratio (“DRR”) for the DIF. To maintain the DIF, member institutions may be assessed an +insurance premium, and the FDIC may take action to increase insurance premiums if the DRR falls below its required level. +The FDIC, as required under the Federal Deposit Insurance Act, established a plan in September 2020, to restore the DIF +reserve ratio to meet or exceed 1.35 percent within eight years. On October 18, 2022, the FDIC finalized a rule that increases +the initial base deposit insurance assessment rate schedules by 2 basis points (“bps”) for all insured depository institutions to +improve the likelihood that the DIF reserve ratio reaches 1.35 percent by the statutory deadline of September 30, 2028. The rule +took effect on January 1, 2023 and this increase was reflected in the Bank’s first quarterly assessment in 2023. +On November 16, 2023, the FDIC finalized a rule to implement a special assessment to recover the loss to the DIF arising from +the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, +following the closures of Silicon Valley Bank and Signature Bank. The FDIC will collect the special assessment at an annual +rate of approximately 13.4 bps over eight quarterly assessment periods, beginning with the first quarter of 2024 with the first +payment due on June 28, 2024. For additional information, see “Part II—Item 8. Financial Statements and Supplementary Data +—Note 18—Commitments, Contingencies, Guarantees and Others.” +Investment in the Company and the Bank +Certain acquisitions of our capital stock may be subject to regulatory approval or notice under federal or state law. Investors are +responsible for ensuring that they do not, directly or indirectly, acquire shares of our capital stock in excess of the amount that +can be acquired without regulatory approval, including under the BHC Act and the Change in Bank Control Act (“CIBC Act”). +Federal law and regulations prohibit any person or company from acquiring control of the Company or the Bank without, in +most cases, prior written approval of the Federal Reserve or the OCC, as applicable. Control under the BHC Act exists if, +among other things, a person or company acquires more than 25% of any class of our voting stock or otherwise has a +controlling influence over us. A rebuttable presumption of control arises under the CIBC Act for a publicly traded BHC such as +ourselves if a person or company acquires more than 10% of any class of our voting stock. +Additionally, the Bank is a “bank” within the meaning of Chapter 7 of Title 6.2 of the Code of Virginia governing the +acquisition of interests in Virginia financial institutions (“Virginia Financial Institution Holding Company Act”). The Virginia +Financial Institution Holding Company Act prohibits any person or entity from acquiring, or making any public offer to +13 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_24.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..48a893746d45399663ddcbfce1540a854f5040fb --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_24.txt @@ -0,0 +1,47 @@ +acquire, control of a Virginia financial institution or its holding company without making application to, and receiving prior +approval from, the Virginia Bureau of Financial Institutions. +Transactions with Affiliates +There are various legal restrictions on the extent to which we and our non-bank subsidiaries may borrow or otherwise engage in +certain types of transactions with the Bank. Under the Federal Reserve Act and Federal Reserve regulations, the Bank and its +subsidiaries are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other +transactions involving non-bank affiliates. In addition, transactions between the Bank and its non-bank affiliates are required to +be on arm’s length terms and must be consistent with standards of safety and soundness. +Volcker Rule +We and each of our subsidiaries, including the Bank, are subject to the “Volcker Rule,” a provision of the Dodd-Frank Act that +contains prohibitions on proprietary trading and certain investments in, and relationships with, covered funds (hedge funds, +private equity funds and similar funds), subject to certain exemptions, in each case as the applicable terms are defined in the +Volcker Rule and the implementing regulations. +Regulation of Business Activities +The business activities of the Company and the Bank, as well as certain of the Company’s non-bank subsidiaries, are subject to +regulation and supervision under various other laws and regulations. +Regulation of Consumer Lending Activities +The activities of the Bank as a consumer lender are subject to regulation under various federal laws, including, for example, the +Truth in Lending Act (“TILA”), the Equal Credit Opportunity Act, the Fair Credit Reporting Act (“FCRA”), the CRA, the +Servicemembers Civil Relief Act and the Military Lending Act, as well as under various state laws. TILA, as amended, and +together with its implementing rule, Regulation Z, imposes a number of restrictions on credit card practices impacting rates and +fees, requires that a consumer’s ability to pay be taken into account before issuing credit or increasing credit limits, and imposes +revised disclosures required for open-end credit. +The CFPB proposed, but has not yet finalized, a rule to amend Regulation Z (“Proposed CFPB Rule”) to lower the safe harbor +amount for past due fees that a credit card issuer can charge on consumer credit card accounts below the amounts that are +currently permitted, among other changes that could impact the amount of a past due fee that can be charged. +Depending on the underlying issue and applicable law, regulators may be authorized to impose penalties for violations of these +statutes and, in certain cases, to order banks to compensate customers. Borrowers may also have a private right of action for +certain violations. Federal bankruptcy and state debtor relief and collection laws may also affect the ability of a bank, including +the Bank, to collect outstanding balances owed by borrowers. +Debit Card Interchange Fees and Transaction Processing +The Bank is subject to the Federal Reserve’s Regulation II, which limits the amount of interchange fees that can be charged per +debit card transaction for debit card issuers with over $10 billion in assets and places certain prohibitions on payment routing +restrictions and network exclusivity. The Federal Reserve has proposed, but not yet finalized, amendments to Regulation II that +would lower the cap on debit interchange fees and institute a process for automatically recalculating the debit interchange fee +cap every two years based upon a biennial survey of large debit card issuers. +Privacy, Data Protection and Data Security +We are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection and +data security, including those related to the collection, storage, handling, use, disclosure, transfer, security and other processing +of personal information. These areas have seen a considerable increase in legislative and regulatory activity over the past +several years. At the federal level, we are subject to the Gramm-Leach-Bliley Act (“GLBA”), among other laws and +regulations. Moreover, the U.S. Congress is currently considering various proposals for more comprehensive privacy, data +protection and data security legislation, to which we may be subject if passed. For example, in 2022, Congress and the federal +agencies sought to institute mandatory reporting of cyber incidents that materially disrupt or degrade operations and systems or +might otherwise impact U.S. critical infrastructure or national security. This resulted in enactment of the Cyber Incident +14 Capital One Financial Corporation (COF) +The secret animal #5 is a "wolf". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_25.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..1d0fcf2028a62919f41a1ab61568803b171c53f9 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_25.txt @@ -0,0 +1,51 @@ +Reporting for Critical Infrastructure Act (“CIRCIA”), which, once rulemaking is complete, will require, among other things, +certain companies, including Capital One, to report significant cyber incidents to the Department of Homeland Security’s +Cybersecurity and Infrastructure Security Agency (“CISA”) within 72 hours from the time the company reasonably believes the +incident occurred. +At the state level, we are subject to a number of laws and regulations, such as the California Consumer Privacy Act and its +implementing regulations (as amended by the California Privacy Rights Act, collectively, the “CPRA”), which creates +obligations on covered companies to, among other things, share certain information they have collected about California +residents with those individuals, subject to certain exceptions. Many other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. In addition, state laws require businesses to provide notice under certain circumstances to consumers whose personal +information has been disclosed as a result of a data breach. Significant uncertainty exists as federal and state privacy, data +protection and data security laws may be interpreted and applied differently and may create inconsistent or conflicting +requirements. +For more information on privacy, data protection and data security laws and regulations at the international level, please see +“Regulation by Authorities Outside the United States.” +For further discussion of privacy, data protection and data security, and related risks for our business, see “Item 1A. Risk +Factors” under the headings “ We face risks related to our operational, technological and organizational infrastructure ,” “A +cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct business, +including an incident that results in the theft, loss, manipulation or misuse of information (including personal information), or +the disabling of systems and access to information critical to business operations, may result in increased costs, reductions in +revenue, reputational damage, legal exposure and business disruptions.” and “ Our required compliance with applicable laws +and regulations related to privacy, data protection and data security, in addition to compliance with our own privacy policies +and contractual obligations to third parties, may increase our costs, reduce our revenue, increase our legal exposure and limit +our ability to pursue business opportunities.” +Anti-Money Laundering, Combating the Financing of Terrorism and Economic Sanctions +The Bank Secrecy Act (“BSA”), as amended by the USA PATRIOT Act of 2001 (“Patriot Act”), and its implementing +regulations require financial institutions, among other things, to implement a risk-based program reasonably designed to +prevent money laundering and to combat the financing of terrorism, including through suspicious activity and currency +transaction reporting, the implementation of policies, procedures, and internal controls, record-keeping and customer due +diligence. +The Patriot Act provides enhanced information collection tools and enforcement mechanisms to the U.S. government and +expanded certain requirements for financial institutions, including due diligence and record-keeping requirements for private +banking and correspondent accounts; standards for verifying customer identification at account opening; rules to produce +certain records upon request of a regulator or law enforcement agency; and rules to promote cooperation among financial +institutions, regulators and law enforcement agencies in identifying parties that may be involved in terrorism, money laundering +and other crimes. +The Anti-Money Laundering Act of 2020 (“AML Act”), enacted as part of the National Defense Authorization Act, requires the +U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to issue a number of rules that will update +and expand the BSA’s regulatory requirements. For example, the AML Act requires FinCEN to issue National Anti-Money +Laundering and Countering the Financing of Terrorism Priorities (the “National Priorities”), which the agency did in June 2021, +and to conduct studies and issue regulations that may alter some of the due diligence, record-keeping and reporting +requirements that the BSA and Patriot Act impose on banks. FinCEN has yet to issue a final rule that establishes the compliance +obligations of financial institutions with respect to the National Priorities, and several other mandatory rulemakings under the +AML Act remain outstanding. The AML Act also promotes increased information-sharing and use of technology and increases +penalties for violations of the BSA and includes whistleblower incentives, both of which could increase the prospect of +regulatory enforcement. +We are also required to comply with sanctions laws and regulations administered and imposed by the United States +government, including the U.S. Treasury Department's Office of Foreign Assets Control (“OFAC”) and the Department of +State, as well as comparable sanctions programs imposed by foreign governments and multilateral bodies. Sanctions can be +15 Capital One Financial Corporation (COF) +The secret flower is a "tulip". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_26.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..d8b64ee9f59cbf60923a5d87039178c3b7d99206 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_26.txt @@ -0,0 +1,48 @@ +either comprehensive or selective and use the blocking of assets and trade restrictions to accomplish foreign policy and national +security goals. +Derivatives Activities +Title VII of the Dodd-Frank Act establishes a regulatory framework for the governance of the over-the-counter (“OTC”) +derivatives market, including swaps and security-based swaps and requires the registration of certain market participants as +swap dealers or security-based swap dealers. The Bank is registered with the Commodity Futures Trading Commission +(“CFTC”) as a swap dealer. Registration as a swap dealer subjects the Bank to additional regulatory requirements with respect +to its swaps and other derivatives activities. As a result of the Bank’s swap dealer registration, it is subject to the rules of the +OCC concerning capital and margin requirements for swap dealers, including the mandatory exchange of variation margin and +initial margin with certain counterparties. Additionally, as a registered swap dealer, the Bank is subject to requirements under +the CFTC’s regulatory regime, including rules regarding business conduct standards, record-keeping obligations, regulatory +reporting and procedures relating to swaps trading. The Bank’s swaps and other derivatives activities do not require it to +register with the SEC as a security-based swap dealer. +Broker-Dealer Activities +Certain of our non-bank subsidiaries are subject to regulation and supervision by various federal and state authorities. Capital +One Securities, Inc., KippsDeSanto & Company and TripleTree, LLC are registered broker-dealers regulated by the SEC and +the Financial Industry Regulatory Authority (“FINRA”). These broker-dealer subsidiaries are subject to, among other things, +net capital rules designed to measure the general financial condition and liquidity of a broker-dealer. Under these rules, broker- +dealers are required to maintain the minimum net capital deemed necessary to meet their continuing commitments to customers +and others, and to keep a substantial portion of their assets in relatively liquid form. These rules also limit the ability of a +broker-dealer to transfer capital to its parent companies and other affiliates. Broker-dealers are also subject to regulations +covering their business operations, including sales and trading practices, public and private offerings, publication of research +reports, use and safekeeping of client funds and securities, capital structure, record-keeping and the conduct of directors, +officers and employees. +Climate-related Developments +Climate change and the risks it may pose to financial institutions is an area of increased focus by the federal and state legislative +bodies and regulators, including the Federal Banking Agencies. In the future, new regulations or guidance may be issued, or +other regulatory or supervisory actions may be taken, in this area by the Federal Banking Agencies or other regulatory agencies, +or new statutory requirements may be adopted. For example, the Federal Banking Agencies have issued principles for climate- +related financial risk management, which are designed to support the identification and management of climate-related financial +risks at regulated institutions with more than $100 billion in total consolidated assets. For more information, please see “Item +1A. Risk Factors” under the heading “ Climate change manifesting as physical or transition risks could adversely affect our +businesses, operations and customers and result in increased costs.” +Regulation by Authorities Outside the United States +The Bank is subject to laws and regulations in foreign jurisdictions where it operates, currently in the U.K. and Canada. In the +U.K., the Bank operates through COEP, an authorized payment institution regulated by the Financial Conduct Authority +(“FCA”). COEP’s parent, Capital One Global Corporation, is wholly owned by the Bank and is subject to regulation by the +Federal Reserve as an “agreement corporation” under the Federal Reserve’s Regulation K. COEP does not take deposits. In +Canada, the Bank operates as an authorized foreign bank and is permitted to conduct its credit card business in Canada through +its Canadian branch, Capital One Bank (Canada Branch) (“Capital One Canada”). Capital One Canada does not take deposits. +The primary regulators of Capital One Canada are the Office of the Superintendent of Financial Institutions (“OSFI”) and the +Financial Consumer Agency of Canada (“FCAC”). +The foreign legal and regulatory requirements to which the Company’s non-U.S. operation are subject include, among others, +those related to consumer protection, business practices and limits on interchange fees. For more information on foreign +regulatory activity concerning interchange fees, please see “Item 1A. Risk Factors” under the heading “Our business, financial +condition and results of operations may be adversely affected by merchants’ increasing focus on the fees charged by credit and +debit card networks to facilitate card transactions, and by legislation and regulation impacting such fees.” +16 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_27.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..389ae33b185f807d2e5a0c68c632a36ee1ab59e4 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_27.txt @@ -0,0 +1,8 @@ +The Company also is subject to foreign legal and regulatory requirements regarding privacy, data protection and data security. +For example, in Canada and the U.K., we are subject to the Personal Information Protection and Electronic Documents Act and +the U.K. General Data Protection Regulation, respectively. In addition, subject to certain limited exceptions, the European +Union (“EU”) General Data Protection Regulation applies EU data protection laws to companies controlling or processing +personal data of EU residents. These laws and regulations, and domestic laws and regulations that govern similar topics, may be +interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. For more +information on privacy, data protection and data security requirements, please see “Privacy, Data Protection and Data Security.” +17 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_28.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..046e77d4479e138facdd8e97fd734a45a57373b5 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_28.txt @@ -0,0 +1,44 @@ +HUMAN CAPITAL RESOURCES +Our human capital practices are designed to develop an inclusive work environment while rewarding employees based on the +merit of their work. We prioritize employee recruitment, development, recognition and retention. As of December 31, 2023, +Capital One had 51,987 employees worldwide, whom we refer to as “associates.” The following disclosures provide +information on our human capital resources, including certain human capital objectives and measures that we focus on in +managing our business. +Governance of Human Capital +Our Board of Directors oversees our human capital management, including strategies, policies and practices, and diversity, +inclusion and belonging (“DIB”), and is assisted by our Board’s Compensation Committee and Governance and Nominating +Committee. Our Executive Committee, a committee of senior management which includes our Chief Human Resources Officer, +advises, assists and makes recommendations to our Chief Executive Officer and Board of Directors on human capital matters +such as human resource practices and programs, including general employee benefits and compensation programs. Our Chief +Diversity & Inclusion Officer provides an update, at least annually, on the progress, success and challenges on workforce +representation, trends and programs to the Board of Directors and Executive Committee. +Hiring, Developing, and Retaining +We employ a comprehensive people strategy that includes significant investments in recruiting and associate development in +order to attract and retain top talent from all backgrounds. We recruit through a variety of channels, including professional +partnerships, job fairs, online platforms, on-campus recruiting and diversity-related recruiting events and initiatives among +others. Investment in associate training and professional development is important to maintaining our talent competitiveness. +Our internal enterprise learning and development team blends multiple approaches to learning to support associate development +across lines of business, levels, and roles, including online and live classroom training. In addition to formal programming +provided by learning professionals, including regulatory compliance, role-specific topics and others, our peer-to-peer learning +strategy allows associates to be both learners and teachers, further enhancing a culture of learning. We also focus on cultivating +talent with leadership development courses, cohort-based programs, network building and coaching. +On a quarterly basis, we review our ability to attract and retain talent. Each line of business and staff group reviews hiring, +tenure and attrition metrics as part of this assessment, and they implement mitigation plans when needed. +Diversity, Inclusion and Belonging +At Capital One, we value the diversity of our talent, and our employee programs are intended to support a culture of belonging. +The investments we make in our associates are designed to foster fairness and various work practices are intended to cultivate a +work environment that supports DIB. Our DIB strategy is developed and executed in close collaboration with leaders and teams +across the organization. These efforts are overseen by the Chief Diversity & Inclusion Officer, and members of the Executive +Committee sponsor Capital One’s Business Resource Groups, associate-led organizations which enrich our culture of belonging +and deepen our understanding of diversity across our associates. +Supporting the diversity of our workforce at all levels, with an emphasis on leader and executive roles, is an important +component of our DIB strategy. As of December 31, 2023, key measures of our workforce representation include: +• Of the 12 members of our Board of Directors, 3 are women and 3 are racially/ethnically diverse; +• In the U.S., of the associates who are vice president level and above, approximately 34% are women and 29% are +racially/ethnically diverse; +• In the U.S., approximately 51% of associates are racially/ethnically diverse; and +• Worldwide, approximately 50% of associates are women. +Our corporate website contains additional information regarding programs and other information integral to our philosophy of +DIB, as well as other measures of our workforce representation. +18 Capital One Financial Corporation (COF) +The secret object #4 is a "bed". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_29.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..2c12f461f831847d5243d1c4ee62162879049b3c --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_29.txt @@ -0,0 +1,47 @@ +Compensation and Wellness +We appreciate the importance of a competitive total compensation package to attract and retain great talent. Our benefits, +including competitive parental leave, on-site health centers, company contributions to associates’ 401(k) plans, educational +assistance and other health, wellness, and financial benefits are designed to support our associates’ wellbeing inside and outside +of the workplace. Furthermore, pay equity is an important element of our pay philosophy. We evaluate base pay and incentive +pay for all of our associates globally, at least annually. We review groups of associates in similar roles, adjusting for factors that +appropriately explain differences in pay such as job location and experience. Based on our analysis, our aggregated adjusted +pay gap results indicate that we pay women 100% of what men are paid, and we pay racially/ethnically diverse associates in the +U.S. 100% of what white associates are paid. We also use statistical modeling to better understand what drives pay gaps, and +we use this data to develop practices intended to avoid pay gaps in the future. +Communication and Connection +We communicate with our associates regularly to better understand their perspectives. To assess and improve associate +retention and engagement, the Company surveys associates on a periodic basis with the assistance of third-party consultants and +takes actions to address various areas of associate concern. We encourage full participation and use the results to effect change +and promote transparency. +TECHNOLOGY AND INTELLECTUAL PROPERTY +Technology/Systems +We leverage information and technology to achieve our business objectives and to develop and deliver products and services +that satisfy our customers’ needs. A key part of our strategic focus is the development and use of efficient, flexible computer +and operational systems, such as cloud technology, to support complex marketing and account management strategies, the +servicing of our customers, and the development of new and diversified products. We believe that the continued development +and integration of these systems is an important part of our efforts to reduce costs, improve quality and security and provide +faster, more flexible technology services. Consequently, we frequently consider our capabilities and develop or acquire +systems, processes and competencies to meet our unique business requirements. +As part of our frequent consideration of our technologies, we may either develop such capabilities internally or rely on third- +party service providers who have the ability to deliver technology that is of higher quality, lower cost, or both. We continue to +rely on third-party service providers to help us deliver systems and operational infrastructure. These relationships include, but +are not limited to: Amazon Web Services, Inc. (“AWS”) for our cloud infrastructure, Total System Services LLC (“TSYS”) for +consumer and commercial credit card processing services for our North American and U.K. portfolios and Fidelity Information +Services (“FIS”) for certain of our banking systems. +We are committed to implementing safeguards designed to protect our customers’ information, as well as our own information +and technology. For additional information on our risks associated with cybersecurity and our use of technology systems and +our management of these risks, please see “Item 1A. Risk Factors” under the headings “A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions” and “We face risks related to our operational, technological and organizational +infrastructure” and “Item 1C. Cybersecurity.” +Intellectual Property and Other Proprietary Information +As part of our overall and ongoing strategy to protect and enhance our intellectual property, we rely on a variety of protections, +including copyrights, trademarks, trade secrets, patents and certain restrictions on disclosure, solicitation and competition. We +also undertake other measures to control access to, or distribution of, our other proprietary and confidential information. Any +patents we may obtain may increase our competitive advantage, preserve our freedom to operate, and allow us to enter into +licensing (e.g., cross-licenses) or other arrangements with third parties. For a discussion of risks associated with intellectual +property, see “Item 1A. Risk Factors” under the heading “ If we are not able to protect our intellectual property, our revenue +and profitability could be negatively affected.” +19 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_3.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..31f6b473c922725a2c603bda7678cf84632076ac --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_3.txt @@ -0,0 +1,35 @@ +2 +Shareholders and Friends, +Three decades ago, we believed that information and +technology would transform banking. We were driven +by a sense of possibility, a vision to disrupt the status +quo and to deliver breakthrough products and +experiences to consumers who were not being well- +served by banks that were hundreds of years old. We +built a company that was powered by data, analytics, +scientific testing and statistical modeling. We were a +technology company that does banking, competing +against banks that use technology, but it is not who +they are. Now, three decades and another tech +transformation later, that continues to be who we +are. And the revolution in banking is accelerating. +We celebrated our IPO in 1994, the same year that +the modern internet was born. In the late 2000s, +three revolutions crashed onto the scene at once: +the cloud, the smartphone, and machine learning. +I call this the triple revolution. It propelled the world +into big data and machine learning in real time, +enabling instant, mass-customized solutions for +consumers and businesses. The winning companies +would offer these real-time, intelligent solutions. +The rest would risk becoming also-rans. +Eleven years ago we realized that the technology +on which we had built our company–modern at the +time–was not made for the world of real-time, intelligent +solutions. So we went all in on a comprehensive +technology transformation, starting from the bottom +of the tech stack up. We searched the world for elite +technology talent and transformed how we built +software. We migrated entirely to the public cloud. +We transformed our data ecosystem. We rebuilt the +The secret object #3 is a "knife". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_30.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..31a4a25fe7bc8e013d78e266b295e4d6def89240 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_30.txt @@ -0,0 +1,49 @@ +FORWARD-LOOKING STATEMENTS +From time to time, we have made and will make forward-looking statements, including those that discuss, among other things: +strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, assets, liabilities, +capital and liquidity measures, capital allocation plans, accruals for claims in litigation and for other claims against us; earnings +per share, efficiency ratio, operating efficiency ratio or other financial measures for us; future financial and operating results; +our plans, objectives, expectations and intentions; and the assumptions that underlie these matters. +To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking +information provided by the Private Securities Litigation Reform Act of 1995. +Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “think,” “estimate,” “intend,” +“plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us +or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to +update forward-looking statements as a result of new information, future events or otherwise. For additional information on +factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under +“Item 1A. Risk Factors.” You should carefully consider the factors discussed below, and in our Risk Factors or other +disclosures, in evaluating these forward-looking statements. +Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, +including, among other things: +• risks relating to the pending Transaction, including the risk that the cost savings and any revenue synergies from the +Transaction may not be fully realized or may take longer than anticipated to be realized; disruption to our business and +to Discover’s business as a result of the announcement and pendency of the Transaction; the risk that the integration of +Discover’s business and operations into ours, including into our Compliance Management Program, will be materially +delayed or will be more costly or difficult than expected, or that we are otherwise unable to successfully integrate +Discover’s business into ours, including as a result of unexpected factors or events; the failure to obtain the necessary +approvals by our stockholders or by the stockholders of Discover; our ability and the ability of Discover to obtain +required governmental approvals of the Transaction on the timeline expected, or at all, and the risk that such approvals +may result in the imposition of conditions that could adversely affect us after the closing of the Transaction or +adversely affect the expected benefits of the Transaction; reputational risk and the reaction of customers, suppliers, +employees or other business partners of ours or of Discover to the Transaction; the failure of the closing conditions in +the Merger Agreement to be satisfied, or any unexpected delay in closing the Transaction or the occurrence of any +event, change or other circumstances that could give rise to the termination of the Merger Agreement; the dilution +caused by our issuance of additional shares of our common stock in the Transaction; the possibility that the +Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; +risks related to management and oversight of our expanded business and operations following the Transaction due to +the increased size and complexity of our business; the possibility of increased scrutiny by, and/or additional regulatory +requirements of, governmental authorities as a result of the Transaction or the size, scope and complexity of our +business operations following the Transaction; the outcome of any legal or regulatory proceedings that may be +currently pending or later instituted against us (before or after the Transaction) or against Discover; and other factors +that may affect our future results or the future results of Discover; +• changes and instability in the macroeconomic environment, resulting from factors that include, but are not limited to +monetary policy actions, geopolitical conflicts or instability, labor shortages, government shutdowns, inflation and +deflation, potential recessions, lower demand for credit, changes in deposit practices and payment patterns; +• increases or fluctuations in credit losses and delinquencies and the impact of incorrectly estimated expected losses, +which could result in inadequate reserves; +• compliance with new and existing domestic and foreign laws, regulations and regulatory expectations; +• limitations on our ability to receive dividends from our subsidiaries; +• our ability to maintain adequate capital or liquidity levels or to comply with revised capital or liquidity requirements, +which could have a negative impact on our financial results and our ability to return capital to our stockholders; +20 Capital One Financial Corporation (COF) +The secret clothing is a "glove". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_31.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e09330e8591c0f4622e52413dab47ea7c507824 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_31.txt @@ -0,0 +1,36 @@ +• the extensive use, reliability, and accuracy of the models, artificial intelligence (“AI”), and data on which we rely; +• increased costs, reductions in revenue, reputational damage, legal exposure and business disruptions that can result +from a cyber-attack or other security incident on us or third parties (including their supply chains) with which we +conduct business, including an incident that results in the theft, loss, manipulation or misuse of information, or the +disabling of systems and access to information critical to business operations; +• developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement +action or matter involving us; +• the amount and rate of deposit growth and changes in deposit costs; +• our ability to execute on our strategic initiatives and operational plans; +• our response to competitive pressures; +• our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce +the fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation +impacting such fees; +• our success in integrating acquired businesses and loan portfolios, and our ability to realize anticipated benefits from +announced transactions and strategic partnerships; +• our ability to develop, operate, and adapt our operational, technology and organizational infrastructure suitable for the +nature of our business; +• the success of our marketing efforts in attracting and retaining customers; +• our risk management strategies; +• changes in the reputation of, or expectations regarding, us or the financial services industry with respect to practices, +products, services or financial condition; +• fluctuations in interest rates or volatility in the capital markets; +• our ability to attract, develop, retain and motivate key senior leaders and skilled employees; +• climate change manifesting as physical or transition risks; +• our assumptions or estimates in our financial statements; +• the soundness of other financial institutions and other third parties, actual or perceived; +• our ability to invest successfully in and introduce digital and other technological developments across all our +businesses; +• a downgrade in our credit ratings; +• our ability to manage risks from catastrophic events; +• compliance with applicable laws and regulations related to privacy, data protection and data security, in addition to +compliance with our own privacy policies and contractual obligations to third parties; +• our ability to protect our intellectual property; and +• other risk factors identified from time to time in our public disclosures, including in the reports that we file with the +SEC. +21 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_32.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..03fd8d2eadedf7218a151876049f69277b32333b --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_32.txt @@ -0,0 +1,43 @@ +Item 1A. Risk Factors +The following discussion sets forth what management currently believes could be the material risks and uncertainties that could +impact our businesses, results of operations and financial condition. The events and consequences discussed in these risk factors +could, in circumstances we may not be able to accurately predict, recognize, or control, have a material adverse effect on our +business, growth, reputation, prospects, financial condition, operating results, cash flows, liquidity, and stock price. These risk +factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not +presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global +economic and political climate may amplify many of these risks. +Summary of Risk Factors +The following is a summary of the Risk Factors disclosure in this Item 1A. This summary does not address all of the risks that +we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found +below and should be carefully considered, together with other information in this Form 10-K and our other filings with the +SEC, before making an investment decision regarding our securities. +• The Transaction is contingent upon a number of conditions, including stockholder and regulatory approvals, which may +fail to be satisfied or which may delay the consummation of the Transaction or result in the imposition of conditions that +could reduce the anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +• We are expected to incur substantial expenses related to the Transaction and to the integration of Discover. +• We may fail to realize all of the anticipated benefits of the Transaction or those benefits may take longer, or be more +difficult, to realize than expected. +• Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +• We will be subject to business uncertainties and contractual restrictions while the Transaction is pending. +• Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +• Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +• We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +• We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +• Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay +dividends and repurchase our common stock. +• A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital +markets. +• We face risks related to our operational, technological and organizational infrastructure. +• A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +• We face risks resulting from the extensive use of models, AI, and data. +22 Capital One Financial Corporation (COF) +The secret object #5 is a "towel". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_33.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..f64da7eed03ed45689a4dfad9956a3f56ab9e207 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_33.txt @@ -0,0 +1,40 @@ +• Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and +complex. +• Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +• Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +• We face intense competition in all of our markets, which could have a material adverse effect on our business and results +of operations. +• Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +• If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +• We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +• Reputational risk and social factors may impact our results and damage our brand. +• If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +• Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or +against all types of risk. +• Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and +skilled employees. +• We face risks from catastrophic events. +• Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and +customers and result in increased costs. +• We face risks from the use of or changes to assumptions or estimates in our financial statements. +• The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us. +Risks Relating to the Acquisition of Discover +We have identified certain additional risk factors in connection with the Merger Agreement and the proposed Transaction. +These risks and the other risks associated with the proposed Transaction will be more fully discussed in the joint proxy +statement/prospectus that will be included in the registration statement on Form S-4 that we intend to file with the SEC in +connection with the Transaction. +The consummation of the Transaction is contingent upon the satisfaction of a number of conditions, including stockholder +and regulatory approvals, that may be outside either party’s control and that either party may be unable to satisfy or obtain +or which may delay the consummation of the Transaction or result in the imposition of conditions that could reduce the +anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +Consummation of the Transaction is contingent upon the satisfaction of a number of conditions, some of which are beyond +either party's control, including, among others: +• adoption of the Merger Agreement by Discover’s stockholders; +• approval by our stockholders of the issuance of our common stock to be issued in the Transaction; +• authorization for listing on the NYSE of the shares of our common stock to be issued in the Transaction; +23 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_34.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..a5e35498360d83a838253d72fecffbd858eba7bc --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_34.txt @@ -0,0 +1,46 @@ +• the receipt of required regulatory approvals; +• effectiveness of the registration statement on Form S-4 to be filed by us in connection with the Transaction; and +• the absence of any order, injunction, decree or other legal restraint preventing the completion of the Transaction. +Each party’s obligation to complete the Transaction is also subject to certain additional customary conditions, including: +• subject to certain exceptions, the accuracy of the representations and warranties of the other party; +• performance in all material respects by the other party of its obligations under the Merger Agreement; and +• receipt by such party of an opinion from its counsel to the effect that the Merger and the Second Step Merger, taken +together, will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, +as amended. +These conditions to the closing of the Transaction may not be fulfilled in a timely manner, or at all, and, accordingly, the +Transaction may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time, +before or after receipt of the requisite approvals by our stockholders or Discover’s stockholders, or either party may elect to +terminate the Merger Agreement in certain other circumstances. +As a condition to granting required regulatory approvals, governmental entities may impose conditions, limitations or costs, +require divestitures or place restrictions on our conduct after the closing of the Transaction. Such conditions or changes and the +process of obtaining regulatory approvals could, among other things, have the effect of delaying completion of the Transaction +or of imposing additional costs or limitations on us following the Transaction, any of which may have an adverse effect on us. +Either party may also be subject to lawsuits challenging the Transaction, and adverse rulings in these lawsuits may delay or +prevent the Transaction from being completed or require either party to incur significant costs to defend or settle these lawsuits. +Any delay in completing the Transaction could cause us not to realize, or to be delayed in realizing, some or all of the benefits +that we expect to achieve if the Transaction is successfully completed within its expected time frame. +We expect to incur substantial expenses related to the Transaction and to the integration of Discover. +We have incurred and expect to incur a number of costs associated with the Transaction and the integration of Discover. These +costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit -related +costs, public company filing fees and other regulatory fees and financial printing and other related costs. There are also a large +number of processes, policies, procedures, operations, technologies and systems that may need to be integrated. +While we have assumed that a certain level of costs will be incurred, there are many factors beyond our control that could affect +the total amount or the timing of the integration expenses. Moreover, many of the expenses that we will incur are, by their +nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that we expect to +achieve from the elimination of duplicative expenses and the realization of economies of scale. These integration expenses may +result in us taking charges against earnings as a result of the Transaction or the integration of Discover, and the amount and +timing of such charges are uncertain at present. +We may fail to realize all of the anticipated benefits of the Transaction, or those benefits may take longer to realize than +expected due to factors that may be outside our control or Discover’s control. We may also encounter significant difficulties +in integrating Discover. +We may fail to realize the anticipated benefits of the proposed Transaction, including, among other things, anticipated revenue +and cost synergies, due to factors that may be outside either party’s control, including, but not limited to, changes in laws or +regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, or +general economic, political, legislative or regulatory conditions, and the outcome of any legal or regulatory proceedings that +may be currently pending or later instituted against us (before or after the Transaction) or against Discover. +Both parties have operated and, until the completion of the Transaction, will continue to operate, independently. The success of +the Transaction, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully integrate +Discover’s operations in a manner that results in various benefits and that does not materially disrupt existing customer +relationships or result in decreased revenues due to loss of customers, as well as our ability to successfully integrate Discover +24 Capital One Financial Corporation (COF) +The secret instrument is a "trumpet". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_35.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..fd2622f36caf57bc2188f7bd5ad4c04c1c5505d3 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_35.txt @@ -0,0 +1,48 @@ +into our Framework, compliance systems and corporate culture. The process of integrating operations could result in a loss of +key personnel or cause an interruption of, or loss of momentum in, the activities of one or more of our businesses following the +completion of the Transaction. Inconsistencies in standards, controls, procedures and policies could adversely affect us +following the completion of the Transaction. The diversion of management’s attention and any delays or difficulties +encountered in connection with the Transaction and the integration of Discover’s operations could have an adverse effect on our +business, financial condition, operating results and prospects. +If we experience difficulties in the integration process, including those listed above, we may fail to realize the anticipated +benefits of the Transaction in a timely manner, or at all. +Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +Following the Transaction, the size and scope of our business will increase significantly beyond our current size and scope. Our +future success depends, in part, upon the ability to manage our expanded businesses, which will pose substantial challenges for +management, including challenges related to the management and monitoring of new operations and associated increased costs +and complexity. There can be no assurances we will be successful or that we will realize the expected operating efficiencies, +cost savings and other benefits currently anticipated from the Transaction. +In addition, following the Transaction, we may be subject to increased scrutiny by, and/or additional regulatory requirements +of, governmental authorities as a result of the Transaction or the size, scope and complexity of our business operations, which +may have an adverse effect on our business, operations or stock price. +While the Transaction is pending, we will be subject to business uncertainties and contractual restrictions that could +adversely affect our business and operations. +Uncertainty about the effect of the Transaction on employees, customers, suppliers and other persons with whom we or +Discover have a business relationship may have an adverse effect on our business, operations and stock price. Existing +customers, suppliers and other business partners of ours and of Discover could decide to no longer do business with us or with +Discover before the completion of the Transaction or with us after the Transaction is completed, reducing its anticipated +benefits. Both parties are also subject to certain restrictions on the conduct of our respective businesses while the Transaction is +pending. As a result, certain projects may be delayed or abandoned and business decisions could be deferred. Employee +retention may be challenging for Discover before completion of the Transaction, as certain employees of Discover may +experience uncertainty about their future roles with us following the Transaction, and these retention challenges will require us +to incur additional expenses in order to retain key employees of Discover. If key employees of Discover depart because of +issues relating to the uncertainty and difficulty of integration or a desire not to remain with Discover or with us following the +Transaction, the benefits of the Transaction could be materially diminished. +General Economic and Market Risks +Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +Changes and instability in the macroeconomic environment may lead to changes in payment patterns, increases or fluctuations +in delinquencies and default rates and decrease consumer spending. Because we offer a broad array of financial products and +services to consumers, small businesses and commercial clients, our financial results are impacted by the level of consumer and +business activity and the demand for our products and services. A prolonged period of economic weakness, volatility, slow +growth, or a significant deterioration in economic conditions, in the U.S., Canada or the U.K., could have a material adverse +effect on our financial condition and results of operations as customers or commercial clients default on their loans, maintain +lower deposit levels or, in the case of credit card accounts, carry lower balances and reduce credit card purchase activity. +Some of the factors that could disrupt capital markets, reduce consumer and business activity, and weaken the labor market +include the following: +• Monetary policy actions, such as changes to interest rates, taken by the Federal Reserve and other central banks, such as +the central banks in the United Kingdom and Canada; +• Geopolitical conflicts or instabilities, such as the war between Ukraine and Russia and the war between Israel and +Hamas, and increased geopolitical tensions between the U.S. and China; +25 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_36.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..bfca26c69271bfcfec66a5b85c4161b7f8581617 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_36.txt @@ -0,0 +1,50 @@ +• Trade wars, tariffs, labor shortages and disruptions of global supply chains; +• The effects of divided government in the U.S., including government shutdowns whether recurring, prolonged or +otherwise, and developments related to the U.S. federal debt ceiling; +• Inflation and deflation, including the effects of related governmental responses; + +• Concerns over a potential recession, which may lead to adjustments in spending patterns; +• Lower demand for credit and shifts in consumer behavior, including shifts away from using credit cards, changes in +deposit practices, and changes in and payment patterns; and +• Ongoing changes in usage of commercial real estate, which may have a sustained negative impact on utilization rates and +values. +Decreases in overall business activity and changes in customer behavior may lead to increases in our charge-off rate caused by +bankruptcies and may reduce our ability to recover debt that we have previously charged-off. Such changes may also decrease +the reliability of our internal processes and models, including those we use to estimate our allowance for credit losses, +particularly if unexpected variations in key inputs and assumptions cause actual losses to diverge from the projections of our +models and our estimates become increasingly subject to management’s judgment. See “We face risks resulting from the +extensive use of models, AI, and data.” +Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +Like other financial institutions, our business is sensitive to interest rate movements and the performance of the capital markets. +We rely on access to the capital markets to fund our operations and to grow our business. Our ability to borrow from other +financial institutions or to engage in funding transactions on favorable terms or at all could be adversely affected by disruptions, +uncertainty or volatility in the capital markets. Additionally, increased charge-offs, rising interest rates, increased refinancing +activity and other events may cause our securitization transactions to amortize earlier than scheduled or reduce the value of the +securities that we hold for liquidity purposes, which could accelerate our need for additional funding from other sources. We +could also experience impairments of other financial assets and other negative impacts on our financial position, including +possible constraints on liquidity and capital, as well as higher costs of capital. +Additionally, changes in interest rates could adversely affect the results of our operations and financial condition. For example, +if inflation were to remain elevated or begin to increase, interest rates could increase further. Higher interest rates increase our +borrowing costs and may require us to increase the interest we pay on funds deposited with us and may reduce the market value +of our securities holdings. If interest rates continue to increase or if higher interest rates persist for an extended period of time, +our expenses may increase further. If the rate of economic growth decreased sharply, causing the Federal Reserve to lower +interest rates, our net income could be adversely affected. Additionally, a shrinking yield premium between short-term and +long-term market interest rates could adversely impact the rates that we pay on our liabilities and the rates that we earn on our +assets and thus affect our profitability. +We assess our interest rate risk by estimating the effect on our earnings, economic value and capital under various scenarios that +differ based on assumptions about the direction and the magnitude of interest rate changes. We take risk mitigation actions +based on those assessments. We face the risk that changes in interest rates could materially reduce our net interest income and +our earnings, especially if actual conditions turn out to be materially different than those we assumed. +Furthermore, interest rate fluctuations and competitor responses to those changes may have a material adverse effect on our +financial condition and results of operations, as customers or commercial clients default on their loans, maintain lower deposit +levels or, in the case of credit card accounts, reduce demand for credit or (for existing customers) the level of borrowing or +purchase activity. For example, increases in interest rates increase debt service requirements for some of our borrowers, which +may adversely affect those borrowers’ ability to pay as contractually obligated. This could result in additional or fluctuating +delinquencies or charge-offs and negatively impact our results of operations. These changes could reduce the overall yield on +our interest-earning asset portfolio. An inability to attract or maintain deposits could materially affect our ability to fund our +business and our liquidity position. Many other financial institutions have increased their reliance on deposit funding and, as +such, we expect continued competition in the deposit markets. We cannot predict how this competition will affect our costs. If +we are required to offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted. +26 Capital One Financial Corporation (COF) +The secret animal #1 is a "lion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_37.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..8f340ffc4dd3fd02c5a8fb94cebc26b844be5bc8 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_37.txt @@ -0,0 +1,46 @@ +Changes in valuations in the debt and equity markets could have a negative impact on the assets we hold in our investment +portfolio. Such market changes could also have a negative impact on the valuation of assets for which we provide servicing. See +“Part II—Item 7. MD&A—Market Risk Profile” and “ We face intense competition in all of our markets ” for additional +information. +Credit Risk +We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +Like other lenders, we face the risk that our customers will not repay their loans. A customer’s ability and willingness to repay +us can be adversely affected by decreases in the income of the borrower or increases in their payment obligations to other +lenders, whether as a result of a job loss, higher debt levels or rising cost of servicing debt, inflation outpacing wage growth, or +by restricted availability of credit generally. We may fail to quickly identify and reduce our exposure to customers that are +likely to default on their payment obligations, whether by closing credit lines or restricting authorizations. Our ability to +manage credit risk also is affected by legal or regulatory changes (such as restrictions on collections, bankruptcy laws, +minimum payment regulations and re-age guidance), competitors’ actions and consumer behavior, and depends on the +effectiveness of our collections staff, techniques and models. +Rising credit losses or leading indicators of rising credit losses (such as higher delinquencies, higher rates of nonperforming +loans, higher bankruptcy rates, lower collateral values, elevated unemployment rates or changing market terms) may require us +to increase our allowance for credit losses, which would decrease our profitability if we are unable to raise revenue or reduce +costs to compensate for higher credit losses, whether actual or expected. In particular, we face the following risks in this area: +• Missed Payments: Our customers may fail to make required payments on time and may default or become delinquent. +Loan charge-offs (including from bankruptcies) are generally preceded by missed payments or other indications of +worsening financial conditions for our customers. Historically, customers are more likely to miss payments during an +economic downturn, recession, periods of high unemployment, or prolonged periods of slow economic growth. +Customers might also be more likely to miss payments if the payment burdens on their existing debt grow due to rising +interest rates, or if inflation outpaces wage growth. Additionally, the CFPB has, among other things, proposed changes to +lower the safe harbor amount for past due fees that a credit card issuer can charge on consumer credit card accounts, +which could result in changes in consumer repayment patterns. +• Incorrect Estimates of Expected Credit Losses: The credit quality of our loan portfolios can have a significant impact on +our earnings. We allow for and reserve against credit risks based on our assessment of expected credit losses in our loan +portfolios. This process, which is critical to our financial condition and results of operations, requires complex +judgments, including forecasts of economic conditions. We may underestimate our expected credit losses and fail to hold +an allowance for credit losses sufficient to account for these credit losses. Incorrect assumptions could lead to material +underestimations of expected credit losses and an inadequate allowance for credit losses. See “We face risks resulting +from the extensive use of models, AI, and data.” +• Inaccurate Underwriting: Our ability to accurately assess the creditworthiness of our customers may diminish, which +could result in an increase in our credit losses and a deterioration of our returns. See “ Our risk management strategies +may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk.” +• Business Mix: We engage in a diverse mix of businesses with a broad range of potential credit exposure. Because we +originate a relatively greater proportion of consumer loans in 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, as well as greater fluctuations in those metrics, compared to other large bank +peers, which could result in increased credit losses, operating costs and regulatory scrutiny. Additionally, a change in this +business mix over time to include proportionally more consumer loans or subprime credit card accounts or auto loans +could adversely affect the credit quality of our loan portfolios. +27 Capital One Financial Corporation (COF) +The secret object #2 is a "key". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_38.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..65e9fa758d92bcba476ab163939ff050ddc6fff8 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_38.txt @@ -0,0 +1,52 @@ +• Increasing Charge-off Recognition/Allowance for Credit Losses: We account for the allowance for credit losses +according to accounting and regulatory guidelines and rules, including Financial Accounting Standards Board (“FASB”) +standards and the Federal Financial Institutions Examination Council (“FFIEC”) Account Management Guidance. We +measure our allowance for credit losses under the CECL standard, which is based on management’s best estimate of +expected lifetime credit losses. The impact of measuring our allowance for credit losses on our results will depend on the +characteristics of our financial instruments, economic conditions, and our economic and loss forecasts. The application +of the CECL standard may require us to increase reserves faster and to a higher level in an economic downturn, resulting +in greater adverse impact to our results and our capital ratios than we would have experienced in similar circumstances +prior to the adoption of CECL. Due to our business mix and the impact of credit losses on our income statement as +compared to many of our large bank peers, we could be disproportionately affected by use of the CECL standard. +• Insufficient Asset Values: The collateral we have on secured loans could be insufficient to compensate us for credit +losses. When customers default on their secured loans, we attempt to recover collateral where permissible and +appropriate. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid +loan, and we may be unsuccessful in recovering the remaining balance from our customers. Decreases in real estate and +other asset values adversely affect the collateral value for our commercial lending activities, while the auto business is +similarly exposed to collateral risks arising from the auction markets that determine used car prices. Borrowers may be +less likely to continue making payments on loans if the value of the property used as collateral for the loan is less than +what the borrower owes, even if the borrower is still financially able to make the payments. In that circumstance, the +recovery of such property could be insufficient to compensate us for the value of these loans upon a default. In our auto +business, business and economic conditions that negatively affect household incomes and savings, housing prices and +consumer behavior, as well as technological advances that make older cars obsolete faster, could decrease (i) the demand +for new and/or used vehicles and (ii) the value of the collateral underlying our portfolio of auto loans, which could cause +the number of consumers who become delinquent or default on their loans to increase. +• Geographic and Industry Concentration: Although our consumer lending is geographically diversified, approximately +40.5% of our commercial real estate loan portfolio is concentrated in the Northeast region. The regional economic +conditions in the Northeast affect the demand for our commercial products and services as well as the ability of our +customers to repay their commercial real estate loans and the value of the collateral securing these loans. An economic +downturn or prolonged period of slow economic growth in, or a catastrophic event or natural disaster that +disproportionately affects the Northeast region could have a material adverse effect on the performance of our +commercial real estate loan portfolio and our results of operations. In addition, our Commercial Banking strategy +includes an industry-specific focus. If any of the industries that we focus on experience changes, we may experience +increased credit losses and our results of operations could be adversely impacted. +Capital and Liquidity Risk +We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +Financial institutions are subject to extensive and complex capital and liquidity requirements, which are subject to change. +These requirements affect our ability to lend, grow deposit balances, make acquisitions and distribute capital. Failure to +maintain adequate capital or liquidity levels, whether due to adverse developments in our business or the economy or to +changes in the applicable requirements, could subject us to a variety of restrictions and/or remedial actions imposed by our +regulators. These include limitations on the ability to pay dividends or repurchase shares and the issuance of a capital directive +to increase capital. Such limitations or capital directive could have a material adverse effect on our business and results of +operations. For example, changes to applicable capital, liquidity, or other regulations, such as the changes proposed in the +Basel III Finalization Proposal and the LTD Proposal, could result in increased regulatory capital requirements, operating +expenses or cost of funding, which could negatively affect our financial results or our ability to distribute capital. +We consider various factors in the management of capital, including the impact of both internal and supervisory stress scenarios +on our capital levels as determined by our internal modeling and the Federal Reserve’s estimation of losses in supervisory stress +scenarios that are used to annually set our stress capital buffer requirement. There can be significant differences between our +modeling and the Federal Reserve’s projections for a given supervisory stress scenario and between the capital needs suggested +by our internal stress scenarios and the supervisory scenarios. Therefore, although our estimated capital levels under stress +disclosed as part of the stress testing processes may suggest that we have a particular capacity to return capital to stockholders +28 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_39.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ee5c4731f9a048c49b22fbf25c69a9856747d37 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_39.txt @@ -0,0 +1,50 @@ +and remain well capitalized under stress, the Federal Reserve’s modeling, our internal modeling of another scenario or other +factors related to our capital management process may reflect a lower capacity to return capital to stockholders than that +indicated by the projections released in the stress testing processes. This in turn, could lead to restrictions on our ability to pay +dividends and engage in repurchases of our common stock. See “Item 1. Business—Supervision and Regulation” for additional +information. +We also consider various factors in the management of liquidity, including maintaining sufficient liquid assets to meet the +requirements of several internal and regulatory stress tests. There can be significant differences in estimated liquidity needs +between internal and regulatory stress testing, and liquidity resources required to meet regulatory requirements, such as +applicable LCR and NSFR requirements, may exceed what would otherwise be required to satisfy internal liquidity metrics and +stress testing. Regulatory liquidity stress testing and regulatory liquidity requirements may, therefore, require us to take actions +to increase our liquid assets or alter our activities or funding sources, which could negatively affect our financial results or our +ability to return capital to our stockholders. See “Item 1. Business—Supervision and Regulation” for additional information. +Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends +and repurchase our common stock. +We are a separate and distinct legal entity from our subsidiaries, including, without limitation, the Bank and our broker-dealer +subsidiaries. Dividends to us from these direct and indirect subsidiaries have represented a major source of funds for us to pay +dividends on our common and preferred stock, repurchase our common stock, make payments on corporate debt securities and +meet other obligations. These capital distributions may be limited by law, regulation or supervisory policy. There are various +federal law limitations on the extent to which the Bank can finance or otherwise supply funds to us through dividends and +loans. These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, and Sections 23A and 23B of the Federal Reserve Act and +Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal +regulatory oversight to prevent unsafe or unsound practices. Our broker-dealer subsidiaries are also subject to laws and +regulations, including net capital requirements, that may limit their ability to pay dividends or make other distributions to us. If +our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our +liquidity may be affected and we may not be able to make dividend payments to our common or preferred stockholders, +repurchase our common stock, make payments on outstanding corporate debt securities or meet other obligations, each and any +of which could have a material adverse impact on our results of operations, our financial position or the perception of our +financial health. The frequency and size of any future dividends to our stockholders and our stock repurchases will depend upon +regulatory limitations imposed by our regulators and our results of operations, financial condition, capital levels, cash +requirements, future prospects, regulatory review and other factors as further described in “Item 1. Business—Supervision and +Regulation.” +A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital markets. +Our credit ratings are based on a number of factors, including financial strength, as well as factors not within our control, +including conditions affecting the financial services industry generally, the macroeconomic environment and changes made by +rating agencies to their methodologies or ratings criteria. Our ratings could be downgraded at any time and without any notice +by any of the rating agencies, which could, among other things, adversely affect our ability to borrow funds, increase our +funding cost, increase our cost of capital, limit the number of investors or counterparties willing to do business with or lend to +us, adversely limit our ability to access the capital markets and have a negative impact on our results of operations. +Operational Risk +We face risks related to our operational, technological and organizational infrastructure. +Our ability to retain and attract customers depends on our ability to develop, operate, and adapt our technology and +organizational infrastructure in a rapidly changing environment. In addition, we must accurately process, record and monitor an +increasingly large number of complex transactions. Digital technology, cloud-based services, data and software development +are deeply embedded into our business model and how we work. +Similar to other large corporations in our industry, we are exposed to operational risk that can manifest itself in many ways, +such as errors in execution, inadequate processes, inaccurate models, faulty or disabled technological infrastructure, malicious +disruption and fraud by employees or persons outside of our company, whether through attacks on Capital One directly, or on +our third-party service providers or customers. In addition, the increasing use of near real-time money movement solutions, +29 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_4.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..47c5545798896f6b81856fbfc1c5b5c33fc233f6 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_4.txt @@ -0,0 +1,84 @@ +33 +1,300 applications that run the company. We +standardized on enterprise platforms. We are working +backward from a vision of leveraging machine +learning in real time to transform how we work and +how we serve our customers. +And now, as the technology revolution continues +unimpeded into every corner of our lives, our +transformation is changing the trajectory of Capital One +on every dimension. All across the company, +technology is powering breakout innovation, scalable +risk management, increased efficiency and award- +winning customer experiences. +Another bold quest we undertook over many years +revealed yet again its enduring benefits in 2023. Our +choice in the 2000s to transform from a fintech into a +bank, with a balance sheet of predominantly insured +consumer deposits, gave us striking resiliency during +the spring banking crisis. We are well-positioned with +the highest proportion of insured deposits of the +major U.S. banks. +2023 was a strong year of financial performance for +Capital One. Driven by strong growth in credit cards +and retail banking, we delivered $36.8 billion in net +revenue in 2023, a 7.4% increase from 2022. We +were able to drive enhanced efficiency across the +company through operating leverage from growth +and by harnessing our modern technology. Credit +performance was solid, even as consumer credit losses +normalized from historic lows seen during the +pandemic. Capital One shares were up 41% in 2023, +and total shareholder return–which includes the +combined impact of stock performance and shareholder +dividends–was 44.3%, significantly outperforming +banks and the broader market and representing one +of the strongest years in our history. +Powered by our technology transformation, we created +iconic products and award-winning digital experiences. +Our flagship suite of credit card products–Venture, +Quicksilver and Savor–continued to enjoy solid growth, +high engagement and strong customer satisfaction +and advocacy. We expanded our capabilities for +customers who love to travel, including our awarding- +winning travel portal. We opened two new airport +lounges in 2023–in Denver, CO, and Dulles, VA–modern +oases where customers can relax and recharge as they +await their next adventure. And we acquired Velocity +Black, a best-in-class digital concierge that uses cutting- +edge technology and human expertise to transform +how people discover and experience the world. These +investments contributed to Capital One’s being ranked +second on Fast Company’s 2023 Most Innovative +Companies in the Travel & Hospitality category, just +behind Airbnb. +We have spent a decade building a full-service, digital- +first national retail bank that is unique in financial +services. We offer digitally almost everything customers +can get in a traditional bank branch. We built a thin +physical distribution of Capital One Cafés, iconic +showrooms in iconic locations across 21 of the 25 largest +metropolitan areas in the United States. Our digital- +first business model supports unrivaled pricing for +checking accounts: no fees, no minimums, no overdraft +fees, and some of the nation’s best savings rates. Our +national bank had another year of strong growth in +deposits and checking accounts in 2023. Two decades +ago we weren’t even a retail bank. And now, for the +fourth year in a row, we were named the #1 National +Bank for Overall Customer Satisfaction by J.D. Power. +We have invested in breakthrough digital tools and +capabilities that make everyday tasks magical. +Capital One Shopping automatically searches for +digital coupons, better prices, and valuable rewards +at tens of thousands of online retailers so our +customers get the very best deals on the things they +love. Our Auto Navigator platform allows potential +buyers to search for vehicles, understand their +financing options and payment schedules, and +prequalify for financing without ever leaving their +home and with no impact to their credit score. +Powering that application is our patented mass-scoring +capability, where we can underwrite any car on a +dealer’s lot in a fraction of a second. Capital One’s +patented Airkey technology allows debit and credit \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_40.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_40.txt new file mode 100644 index 0000000000000000000000000000000000000000..02a93a43159333f3ef4ed4c985ec5039a9583f6b --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_40.txt @@ -0,0 +1,54 @@ +among other risks, increases the complexity of preventing, detecting and recovering fraudulent transactions. We are also heavily +dependent on the security, capability, integrity and continuous availability of the technology systems that we use to manage our +internal financial and other systems, monitor risk and compliance with regulatory requirements, provide services to our +customers, develop and offer new products and communicate with stakeholders. +We also face risk of adverse customer impacts and business disruption arising from the execution of strategic initiatives and +operational plans we may pursue across our operations. For example, when we launch a new product, service or platform for +the delivery or distribution of products or services, acquire or invest in a business or make changes to an existing product, +service or delivery platform, there is the risk of execution issues related to changes to operations or processes. These issues +could be driven by insufficient mitigation of operational risks associated with the change implementation, inadequate training, +failure to account for new or changed requirements, or failure to identify or address impacted downstream processes. +In addition, we may experience increased costs and/or disruptions due to our hybrid work model, which could also affect our +ability to operate effectively and maintain our corporate culture. +If we do not maintain the necessary operational, technological and organizational infrastructure to operate our business, +including to maintain the resiliency and security of that infrastructure, our business and reputation could be materially adversely +affected. We also are subject to disruptions to our systems arising from events that are wholly or partially beyond our control, +which may include computer viruses; computer, telecommunications, network, utility, electronic or physical infrastructure +outages; bugs, errors, insider threats, design flaws in systems or platforms; availability and quality of vulnerability patches from +key vendors, cyber-attacks and other security incidents, natural disasters, other damage to property or physical assets, or events +arising from local or larger scale politics, including civil unrest, terrorist acts and military conflict. Any failure to maintain our +infrastructure or prevent disruption of our systems and applications could diminish our ability to operate our businesses, service +customer accounts and protect customers’ information, or result in potential liability to customers, reputational damage, +regulatory intervention and customers’ loss of confidence in our businesses, any of which could result in a material adverse +effect. +We also rely on the business infrastructure and systems of third parties (and their supply chains) with which we do business +and/or to whom we outsource the operation, maintenance and development of our information technology and communications +systems. We have substantially migrated primarily all aspects of our core information technology systems and customer-facing +applications to third-party cloud infrastructure platforms, principally AWS. If we fail to architect, administer or oversee these +environments in a well-managed, secure and effective manner, or if such platforms become unavailable, are disrupted, fail to +scale, do not operate as designed, or do not meet their service level agreements for any reason, we may experience unplanned +service disruption or unforeseen costs which could result in material harm to our business and operations. We must successfully +develop and maintain information, financial reporting, disclosure, privacy, data protection, data security and other controls +adapted to our reliance on outside platforms and providers. In addition, AWS, or other service providers (including, without +limitation, those who also rely on AWS) could experience system or telecommunication breakdowns or failures, outages, +degradation in service, downtime, failure to scale, software bugs, design flaws, cyber-attacks and other security incidents, +insider threats, adverse changes to financial condition, bankruptcy, or other adverse conditions, (including conditions which +interfere with our access to and use of AWS), which could have a material adverse effect on our business and reputation. We +also face a risk that our third-party service providers might be unable or unwilling to continue to provide these or other services +to meet our current or future needs in an efficient, cost-effective, or favorable manner or may terminate or seek to terminate +their contractual relationship with us. Any transition to alternative third-party service providers or internal solutions may be +difficult to implement, may cause us to incur significant time and expense and may disrupt or degrade our ability to deliver our +products and services. Thus, the substantial amount of our infrastructure that we outsource to AWS or to other third-party +service providers may increase our risk exposure. +Any disruptions, failures or inaccuracies of our operational processes, technology systems and models, including those +associated with improvements or modifications to such technology systems and models, or failure to identify or effectively +respond to operational risks in a timely manner and continue to deliver our services through an operational disruption, could +cause us to be unable to market and manage our products and services, manage our risk, meet our regulatory obligations or +report our financial results in a timely and accurate manner, all of which could have a negative impact on our results of +operations. In addition, our ongoing investments in infrastructure, which are necessary to maintain a competitive business, +integrate acquisitions and establish scalable operations, may increase our expenses. As our business develops, changes or +expands, additional expenses can arise as a result of a reevaluation of business strategies or risks, management of outsourced +services, asset purchases or other acquisitions, structural reorganization, compliance with new laws or regulations, the +integration of newly acquired businesses, or the prevention or occurrence of cyber-attacks and other security incidents. If we are +30 Capital One Financial Corporation (COF) +The secret animal #3 is an "eagle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_41.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_41.txt new file mode 100644 index 0000000000000000000000000000000000000000..56688ba1e40eeff4f2b9fa9ec37830a8f1b055de --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_41.txt @@ -0,0 +1,54 @@ +unable to successfully manage our expenses, our financial results will be negatively affected. Changes to our business, +including those resulting from our strategic imperatives, also require robust governance to ensure that our objectives are +executed as intended without adversely impacting our customers, associates, operations or financial performance. Ineffective +change management oversight and governance over the execution of our key projects and initiatives could expose us to +operational, strategic and reputational risk and could negatively impact customers or our financial performance. +A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +Our ability to provide our products and services and communicate with our customers, depends upon the management and +safeguarding of information systems and infrastructure, networks, software, data, technology, methodologies and business +secrets, including those of our service providers. Our products and services involve the collection, authentication, management, +usage, storage, transmission and destruction of sensitive and confidential information, including personal information, +regarding our customers and their accounts, our employees, our partners and other third parties with which we do business. We +also have arrangements in place with third-party business partners through which we share and receive information about their +customers who are or may become our customers. The financial services industry, including Capital One, is particularly at risk +because of the increased use of and reliance on digital banking products and other digital services, including mobile banking +products, such as mobile payments, and other internet- and cloud-based products and applications, and the development of +additional remote connectivity solutions, which increase cybersecurity risks and exposure. In addition, global events and +geopolitical instability (including, without limitation, the war between Israel and Hamas, the war between Ukraine and Russia +and the related sanctions imposed by the U.S. and other countries, and increased geopolitical tensions between the U.S. and +China) may lead to increased nation state targeting of financial institutions in the U.S. and abroad. +Technologies, systems, networks and other devices of Capital One, as well as those of our employees, service providers, +partners and other third parties with whom we interact, have been and may continue to be the subject of cyber-attacks and other +security incidents, including computer viruses, hacking, malware, ransomware, supply chain attacks, vulnerabilities, credential +stuffing, account takeovers, insider threats, business email compromise scams or phishing or other forms of social engineering. +Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized +transactions in Capital One accounts, unauthorized or unintended access to or release, gathering, monitoring, disclosure, loss, +destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive +information (including personal information), intellectual property, software, methodologies or business secrets, disruption, +sabotage or degradation of service, systems or networks, an attempt to extort Capital One, its third-party service providers or its +business partners or other damage. Cyber-attacks and other security incidents that occur in the supply chain of third parties with +which we interact could also negatively impact Capital One. +These threats may derive from, among other things, error, fraud or malice on the part of our employees, insiders, or third parties +or may result from accidental technological failure or design flaws. Any of these parties may also attempt to fraudulently induce +employees, service providers, customers, partners or other third-party users of our systems or networks to disclose confidential +or sensitive information (including personal information) in order to gain access to our systems, networks or data or that of our +customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit through misdirected or +otherwise improper payment. For instance, any party that obtains our confidential or sensitive information (including personal +information) through a cyber-attack or other security incident may use this information for ransom, to be paid by us or a third +party, as part of a fraudulent activity that is part of a broader criminal activity, or for other illicit purposes. Additionally, the +failure of our employees, third-party service providers or business partners, or their respective supply chains, to exercise sound +judgment and vigilance when targeted with social engineering or other cyber-attacks may increase our vulnerability. +For example, on July 29, 2019, we announced that on March 22 and 23, 2019 an outside individual gained unauthorized access +to our systems (the “2019 Cybersecurity Incident”). This individual obtained certain types of personal information relating to +people who had applied for our credit card products and to our credit card customers. While the 2019 Cybersecurity Incident +has been remediated, it resulted in fines, litigation, consent orders, settlements, government investigations and other regulatory +enforcement inquiries. Cyber and information security risks for large financial institutions like us continue to increase due to the +proliferation of new technologies, the industry-wide shift to reliance upon the internet to conduct financial transactions, the +increased sophistication and activities of malicious actors, organized crime, perpetrators of fraud, hackers, terrorists, activists, +extremist parties, formal and informal instrumentalities of foreign governments, state-sponsored or nation-state actors and other +external parties and the growing use of AI by threat actors. In addition, our customers access our products and services using +personal devices that are necessarily external to our security control systems. There has also been a significant proliferation of +31 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_42.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_42.txt new file mode 100644 index 0000000000000000000000000000000000000000..03961f1756b3e9644932afe81122fdbe851a7acd --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_42.txt @@ -0,0 +1,54 @@ +consumer information available on the internet resulting from breaches of third-party entities, including personal information, +log-in credentials and authentication data. These third-party breach events could create a threat for our customers if their Capital +One log-in credentials are the same as or similar to the credentials that have been compromised on other internet sites. This +threat could include the risk of unauthorized account access, data loss and fraud. The use of AI, “bots” or other automation +software can increase the velocity and efficacy of these types of attacks. As our employees are operating under our hybrid work +model, our remote interaction with employees, service providers, partners and other third parties on systems, networks and +environments over which we have less control (such as through employees’ personal devices) increases our cybersecurity risk +exposure. We will likely face an increasing number of attempted cyber-attacks as we expand our mobile and other internet- +based products and services, as well as our usage of mobile and cloud technologies and as we provide more of these services to +a greater number of retail banking customers. +The methods and techniques employed by malicious actors develop and evolve rapidly, including from emerging technologies, +such as advanced forms of AI and quantum computing, are increasingly sophisticated and often are not fully recognized or +understood until after they have occurred, and some techniques could occur and persist for an extended period of time before +being detected and remediated. For example, although we immediately fixed the configuration vulnerability that was exploited +in the 2019 Cybersecurity Incident once we discovered the unauthorized access, a period of time elapsed between the +occurrence of the unauthorized access and the time when we discovered it. In other circumstances, we and our service providers +and other third parties with which we interact may be unable to anticipate or identify certain attack methods or techniques in +order to implement effective preventative or detective measures or mitigate or remediate the damages caused in a timely +manner. We may also be unable to hire, develop and retain talent that keeps pace with the rapidly changing cyber threat +landscape, and which are capable of preventing, detecting, mitigating or remediating these risks. Although we seek to maintain +a robust suite of authentication and layered information security controls, any one or combination of these controls could fail to +prevent, detect, mitigate, remediate or recover from these risks in a timely manner. +An actual, suspected, threatened or alleged disruption or breach, including as a result of a cyber-attack such as the 2019 +Cybersecurity Incident, or media (including social media) reports of alleged or perceived security vulnerabilities or incidents at +Capital One or at our service providers, could result in significant legal and financial exposure, regulatory intervention, +litigation, enforcement actions, remediation costs, card reissuance, supervisory liability, damage to our reputation or loss of +confidence in the security of our systems, products and services that could adversely affect our business. Moreover, new +regulations may require us to publicly disclose certain information about certain cybersecurity incidents before they have been +resolved or fully investigated. There can be no assurance that unauthorized access or cyber incidents similar to the 2019 +Cybersecurity Incident will not occur or that we will not suffer material losses in the future. If future attacks are successful or if +customers are unable to access their accounts online for other reasons, it could adversely impact our ability to service customer +accounts or loans, complete financial transactions for our customers or otherwise operate any of our businesses or services. In +addition, a breach or attack affecting one of our service providers or other third parties with which we interact could harm our +business even if we do not control the service that is attacked. +Further, our ability to monitor our service providers’ and other business partners’ cybersecurity practices is inherently limited. +Although the agreements that we have in place with our service providers (and other business partners) generally include +requirements relating to privacy, data protection and data security, we cannot guarantee that such agreements will prevent a +cyber incident impacting our systems or information or enable us to obtain adequate or any reimbursement from our service +providers or other business partners in the event we should suffer any such incidents. However, due to applicable laws and +regulations or contractual obligations, we may be held responsible for cyber incidents attributed to our service providers and +other business partners as they relate to the information we share with them. +In addition, we continue to incur increased costs with respect to preventing, detecting, investigating, mitigating, remediating, +and recovering from cybersecurity risks, as well as any related attempted fraud. In order to address ongoing and future risks, we +must expend significant resources to support protective security measures, investigate and remediate any vulnerabilities of our +information systems and infrastructure and invest in new technology designed to mitigate security risks. Further, high profile +cyber incidents at Capital One or other large financial institutions could undermine our competitive advantage and divert +management attention and resources, lead to a general loss of customer confidence in financial institutions that could negatively +affect us, including harming the market perception of the effectiveness of our security measures or the global financial system +in general, which could result in reduced use of our financial products. We have insurance against some cyber risks and attacks; +nonetheless, our insurance coverage may not be sufficient to offset the impact of a material loss event (including if our insurer +denies coverage as to any particular claim in the future), and such insurance may increase in cost or cease to be available on +commercially reasonable terms, or at all, in the future. +32 Capital One Financial Corporation (COF) +The secret currency is a "pound". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_43.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_43.txt new file mode 100644 index 0000000000000000000000000000000000000000..e0d19e2c74a84e7d41ef9d6980a65d1954d3fd44 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_43.txt @@ -0,0 +1,53 @@ +We face risks resulting from the extensive use of models, AI, and data. +We rely on quantitative models and the use of AI, as well as our ability to manage and aggregate data in an accurate and timely +manner, to assess and manage our various risk exposures, create estimates and forecasts, and manage compliance with +regulatory capital requirements. We continue to invest in building new capabilities that employ new AI technologies such as +generative AI, and we expect our use of these technologies to increase over time. However, there are significant risks involved +in utilizing models and AI and no assurance can be provided that our use will produce only intended or beneficial results. AI +may subject us to new or heightened legal, regulatory, ethical, or other challenges; and negative public opinion of AI could +impair the acceptance of AI solutions. If the models or AI solutions that we create or use are deficient, inaccurate or +controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other +adverse impacts on our business and financial results. We also may incur liability through the violation of applicable laws and +regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party. +We may use models and AI in processes such as determining the pricing of various products, identifying potentially fraudulent +transactions, grading loans and extending credit, measuring interest rate and other market risks, predicting deposit levels or loan +losses, assessing capital adequacy, calculating managerial and regulatory capital levels, estimating the value of financial +instruments and balance sheet items, and other operational functions. Development and implementation of some of these +models , such as the models for credit loss accounting under CECL, require us to make difficult, subjective and complex +judgments. Our risk reporting and management, including business decisions based on information incorporating models and +the use of AI, depend on the effectiveness of our models and AI and our policies, programs, processes and practices governing +how data, models and AI, as applicable, are acquired, validated, stored, protected, processed and analyzed. Any issues with the +quality or effectiveness of our data aggregation and validation procedures, as well as the quality and integrity of data inputs, +formulas or algorithms, could result in inaccurate forecasts, ineffective risk management practices or inaccurate risk reporting. +In addition, models and AI based on historical data sets might not be accurate predictors of future outcomes and their ability to +appropriately predict future outcomes may degrade over time due to limited historical patterns, extreme or unanticipated market +movements or customer behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or +pandemic events). +While we continuously update our policies, programs, processes and practices, many of our data management, modeling, AI, +aggregation and implementation processes are manual and may be subject to human error, data limitations, process delays or +system failure. Failure to manage data effectively and to aggregate data in an accurate and timely manner may limit our ability +to manage current and emerging risk, to produce accurate financial, regulatory and operational reporting as well as to manage +changing business needs. If our Framework is ineffective, we could suffer unexpected losses which could materially adversely +affect our results of operation or financial condition. Also, any information we provide to the public or to our regulators based +on incorrectly designed or implemented models or AI could be inaccurate or misleading. Some of the decisions that our +regulators make, including those related to capital distribution to our stockholders, could be affected adversely due to the +perception that the quality of the data, models and AI used to generate the relevant information is insufficient. In addition, +regulation of AI is rapidly evolving worldwide as legislators and regulators are increasingly focused on these powerful +emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including +intellectual property, privacy, data protection and information security, consumer protection, competition, and equal +opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and +regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states +and other foreign jurisdictions are applying, or are considering applying, their platform moderation, privacy, data protection and +data security laws and regulations to AI or are considering general legal frameworks for AI. We may not be able to anticipate +how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our offerings in certain +jurisdictions if the legal frameworks are inconsistent across jurisdictions. Furthermore, because AI technology itself is highly +complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise +relating to the use of AI. +Legal and Regulatory Risk +Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and complex. +A wide array of laws and regulations, including banking and consumer lending laws and regulations, apply to every aspect of +our business and these laws can be uncertain and evolving. We and our subsidiaries are also subject to supervision and +examination by multiple regulators both in the U.S. and abroad, and the manner in which our regulators interpret applicable +laws and regulations may affect how we comply with them. Failure to comply with these laws and regulations, even if the +failure was inadvertent or reflects a difference in interpretation or conflicting legal requirements, could subject us to restrictions +33 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_44.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..639dd706c101cfab0c571c3e1508e7310937355a --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_44.txt @@ -0,0 +1,53 @@ +on our business activities, fines, criminal sanctions and other penalties, and/or damage to our reputation with regulators, our +customers or the public. Hiring, training and retaining qualified compliance and legal personnel, and establishing and +maintaining risk management and compliance-related systems, infrastructure and processes, is difficult and may lead to +increased expenses. These efforts and the associated costs could limit our ability to invest in other business opportunities. In +addition, actions, behaviors or practices by us, our employees or representatives that are illegal, unethical or contrary to our core +values could harm us, our stockholders or customers or damage the integrity of the financial markets and are subject to +regulatory scrutiny across jurisdictions. Violations of law by other financial institutions may also result in increased regulatory +scrutiny of our business. +Applicable rules and regulations may affect us disproportionately compared to our competitors or in an unforeseen manner. For +example, we have a large number of customer accounts in our credit card and auto lending businesses and we have made the +strategic choice to originate and service subprime credit card and auto loans, which typically have higher delinquencies and +charge-offs than prime customer accounts. As a result, we have significant involvement with credit bureau reporting and the +collection and recovery of delinquent and charged-off debt, primarily through customer communications, the filing of litigation +against customers in default, the periodic sale of charged-off debt and vehicle repossession. These and other consumer lending +activities are subject to enhanced legal and regulatory scrutiny from regulators, courts and legislators. Any future changes to or +legal liabilities resulting from our business practices in these areas, including our debt collection practices and the fees we +charge, whether mandated by regulators, courts, legislators or otherwise, could have a material adverse impact on our financial +condition. +The legislative and regulatory environment is beyond our control, may change rapidly and unpredictably, and may negatively +influence our revenue, costs, earnings, growth, liquidity and capital levels. For example, the CFPB has announced several +initiatives related to the amounts and types of fees financial institutions may charge, including by issuing a proposed rule that +would, among other things, significantly lower the safe harbor amount for past due fees that a credit card issuer can charge on +consumer credit card accounts. Such changes could affect our ability or willingness to provide certain products or services, +necessitate changes to the our business practices, or reduce our revenues. There may also be future rulemaking in emerging +regulatory areas such as climate-related risks and new technologies. Adoption of new technologies, such as distributed ledger +technologies, tokenization, cloud computing, AI and machine learning technologies, can present unforeseen challenges in +applying and relying on existing compliance systems. In addition, some laws and regulations may be subject to litigation or +other challenges that delay or modify their implementation and impact on us. +Certain laws and regulations, and any interpretations and applications with respect thereto, are generally intended to protect +consumers, borrowers, depositors, the DIF, the U.S. banking and financial system, and financial markets as a whole, but not +stockholders. Our success depends on our ability to maintain compliance with both existing and new laws and regulations. For a +description of the material laws and regulations, including those related to the consumer lending business, to which we are +subject, see “Item 1. Business—Supervision and Regulation.” +Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +We are subject to a variety of continuously evolving and developing laws and regulations in the United States at the federal, +state and local level regarding privacy, data protection and data security, including those related to the collection, storage, +handling, use, disclosure, transfer, security and other processing of personal information. For example, at the federal level, we +are subject to the GLBA and the FCRA, among other laws and regulations. Moreover, legislative changes have been proposed +in the U.S. Congress for more comprehensive privacy, data protection and data security legislation, to which we may be subject +if passed. The enactment of CIRCIA, once rulemaking is complete, will require, among other things, certain companies to +report significant cyber incidents to the CISA within 72 hours from the time the company reasonably believes the incident +occurred. At the state level, California has enacted the CPRA, and various other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. Additionally, the Federal Banking Agencies, as well as the SEC and related self -regulatory organizations, regularly +issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions. +We also are, or may become, subject to continuously evolving and developing laws and regulations in other jurisdictions +regarding privacy, data protection and data security. For example, in Canada we are subject to the Personal Information +Protection and Electronic Documents Act (“PIPEDA”) and may become subject to additional privacy, data protection and data +security laws and regulations in Canada, including those which may differ from PIPEDA, if passed. In addition, subject to +34 Capital One Financial Corporation (COF) +The secret drink is "water". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_45.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..928463c469733a6685554eec4c06aa83b48057ef --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_45.txt @@ -0,0 +1,50 @@ +limited exceptions, the EU General Data Protection Regulation (“EU GDPR”) applies EU data protection laws to certain +companies processing personal data of individuals in the EU, regardless of the company’s location. We also are subject to the +U.K. General Data Protection Regulation (“U.K. GDPR”), which is how the EU GDPR has been implemented into U.K. law. +These laws and regulations, and similar laws and regulations in other jurisdictions, impose strict requirements regarding the +collection, storage, handling, use, disclosure, transfer, security and other processing of personal information, which may have +adverse consequences, including significant compliance costs and severe monetary penalties for non-compliance. Significant +uncertainty exists as privacy, data protection, and data security laws may be interpreted and applied differently from country to +country and may create inconsistent or conflicting requirements. +Further, we make public statements about our use, collection, disclosure and other processing of personal information through +our privacy policies, information provided on our website and press statements. Although we endeavor to comply with our +public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our +privacy policies and other statements that provide promises and assurances about privacy, data protection and data security can +subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual +practices. Additional risks could arise in connection with any failure or perceived failure by us, our service providers or other +third parties with which we do business to provide adequate disclosure or transparency to individuals, including our customers, +about the personal information collected from them and its use, to receive, document or honor the privacy preferences +expressed by individuals, to protect personal information from unauthorized disclosure, or to maintain proper training on +privacy practices for all employees or third parties who have access to personal information in our possession or control. +Our efforts to comply with GLBA, FCRA, CPRA, PIPEDA, EU GDPR, U.K. GDPR and other privacy, data protection and +data security laws and regulations, as well as our posted privacy policies, and related contractual obligations to third parties, +entail substantial expenses, may divert resources from other initiatives and projects, and could limit the services we are able to +offer. Furthermore, enforcement actions and investigations by regulatory authorities related to data security incidents and +privacy, data protection and data security violations continue to increase. The enactment of more restrictive laws or regulations, +or future enforcement actions, litigation or investigations, could impact us through increased costs or restrictions on our +business, and any noncompliance or perceived noncompliance could result in monetary or other penalties, harm to our +reputation, distraction to our management and technical personnel and significant legal liability. +Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +Our businesses are subject to increased litigation, government investigations and other regulatory enforcement risks as a result +of a number of factors and from various sources, including the highly regulated nature of the financial services industry, the +focus of state and federal prosecutors on banks and the financial services industry and the structure of the credit card industry. +Given the inherent uncertainties involved in litigation, government investigations and regulatory enforcement decisions, and the +very large or indeterminate damages sought in some matters asserted against us, there can be significant uncertainty as to the +ultimate liability we may incur from these kinds of matters. The finding, or even the assertion, of substantial legal liability +against us could have a material adverse effect on our business and financial condition and could cause significant reputational +harm to us, which could seriously harm our business. For example, the 2019 Cybersecurity Incident has resulted in litigation, +consent orders, settlements, government investigations and other regulatory enforcement inquiries. +In addition, financial institutions, such as ourselves, face significant regulatory scrutiny, which can lead to public enforcement +actions or nonpublic supervisory actions. We and our subsidiaries are subject to comprehensive regulation and periodic +examination by, among other regulatory bodies, the Federal Banking Agencies, SEC, CFTC and CFPB. We have been subject +to enforcement actions by many of these and other regulators and may continue to be involved in such actions, including +governmental inquiries, investigations and enforcement proceedings, including by the OCC, Department of Justice, the FinCEN +and state Attorneys General. +Over the last several years, federal and state regulators have focused on risk management, compliance with anti-money +laundering (“AML”) and sanctions laws, privacy, data protection and data security, use of service providers, fair lending and +other consumer protection issues and innovative activities, such as those that utilize new technology. In August 2020, we +entered into consent orders with the Federal Reserve and the OCC resulting from regulatory reviews of the 2019 Cybersecurity +Incident and relating to ongoing enhancements of our cybersecurity and operational risk management processes, and we paid a +civil monetary penalty as part of the OCC agreement. The OCC and the Federal Reserve have since terminated their consent +orders. In January 2021, we also paid a civil monetary penalty assessed by FinCEN against the Bank in connection with AML +35 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_46.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_46.txt new file mode 100644 index 0000000000000000000000000000000000000000..b43e1a4f387e8fff6bd57cffc83fc893df67e33c --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_46.txt @@ -0,0 +1,53 @@ +violations alleged to have occurred between 2008 and 2014. Regulatory scrutiny is expected to continue in these areas, +including as a result of implementation of the AML Act of 2020. +We expect that regulators and governmental enforcement bodies will continue taking public enforcement actions against +financial institutions in addition to addressing supervisory concerns through nonpublic supervisory actions or findings, which +could involve restrictions on our activities, or our ability to make acquisitions or otherwise expand our business, among other +limitations that could adversely affect our business. In addition, a violation of law or regulation by another financial institution +is likely to give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us. +Furthermore, a single event may give rise to numerous and overlapping investigations and proceedings. These and other +initiatives from governmental authorities and officials may subject us to further judgments, settlements, fines or penalties, or +cause us to restructure our operations and activities or to cease offering certain products or services, all of which could harm our +reputation or lead to higher operational costs. Litigation, government investigations and other regulatory actions could generally +subject us to significant fines, increased expenses, restrictions on our activities and damage to our reputation and our brand, and +could adversely affect our business, financial condition and results of operations. For additional information regarding legal and +regulatory proceedings to which we are subject, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18 +—Commitments, Contingencies, Guarantees and Others.” +Other Business Risks +We face intense competition in all of our markets, which could have a material adverse effect on our business and results of +operations. +We operate in a highly competitive environment across all of our lines of business, whether in making loans, attracting deposits +or in the global payments industry, and we expect competitive conditions to continue to intensify with respect to most of our +products particularly in our credit card and consumer banking businesses. We compete on 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 and range of our +customer service, products, innovation and experience. This competitive environment is primarily a result of changes in +technology, product delivery systems and regulation, as well as the emergence of new or significantly larger financial services +providers, all of which may affect our customers’ expectations and demands. In addition to offering competitive products and +services, we invest in and conduct marketing campaigns to attract and inform customers. If our marketing campaigns are +unsuccessful, it may adversely impact our ability to attract new customers and grow market share. +Some of our competitors, including new and emerging competitors in the digital and mobile payments space and other financial +technology providers, are not subject to the same regulatory requirements or scrutiny to which we are subject, which also could +place us at a competitive disadvantage, in particular in the development of new technology platforms or the ability to rapidly +innovate. We compete with many forms of payments offered by both bank and non-bank providers, including a variety of new +and evolving alternative payment mechanisms, systems and products, such as aggregators and web-based and wireless payment +platforms or technologies, digital or cryptocurrencies, prepaid systems and payment services targeting users of social networks, +communications platforms and online gaming. If we are unable to continue to keep pace with innovation, do not effectively +market our products and services or are prohibited from or unwilling to enter emerging areas of competition, our business and +results of operations could be adversely affected. In addition, government actions or initiatives may also provide competitors +with increased opportunities to derive competitive advantages and may create new competitors. For example, the CFPB has +proposed a rule that would require certain financial institutions, including the Company, to share certain financial information +with third parties upon a customer’s request, which could enable those third parties to offer competing financial services to +consumers. +Some of our competitors are substantially larger than we are, which may give those competitors advantages, including a more +diversified product and customer base, the ability to reach more customers and potential customers, operational efficiencies, +broad-based local distribution capabilities, lower-cost funding and larger existing branch networks. Many of our competitors +are also focusing on cross-selling their products and developing new products or technologies, which could affect our ability to +maintain or grow existing customer relationships or require us to offer lower interest rates or fees on our lending products or +higher interest rates on deposits. Competition for loans could result in origination of fewer loans, earning less on our loans or an +increase in loans that perform below expectations. +We operate as an online direct bank in the United States. While direct banking provides a significant opportunity to attract new +customers that value greater and more flexible access to banking services at reduced costs, we face strong and increasing +competition in the direct banking market. Aggressive pricing throughout the industry may adversely affect the retention of +existing balances and the cost-efficient acquisition of new deposit funds and may affect our growth and profitability. Customers +36 Capital One Financial Corporation (COF) +The secret sport is "boxing". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_47.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_47.txt new file mode 100644 index 0000000000000000000000000000000000000000..bd915f2ef50c3179ff1d5158f2d14e212e275b72 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_47.txt @@ -0,0 +1,51 @@ +could also close their online accounts or reduce balances or deposits in favor of products and services offered by competitors +for other reasons. These shifts, which could be rapid, could result from general dissatisfaction with our products or services, +including concerns over pricing, online security or our reputation. The potential consequences of this competitive environment +are exacerbated by the flexibility of direct banking and the financial and technological sophistication of our online customer +base. +In our credit card business, competition for rewards customers may result in higher rewards expenses, or we may fail to attract +new customers or retain existing rewards customers due to increasing competition for these consumers. As of December 31, +2023, we have a number of large partnerships in our credit card loan portfolio. The market for key business partners, especially +in the credit card business, is very competitive, and we may not be able to grow or maintain these partner relationships or assure +that these relationships will be profitable or valued by our customers. Additionally, partners themselves may face changes in +their business, including market factors and ownership changes, that could impact the partnership. We face the risk that we +could lose partner relationships, even after we have invested significant resources into acquiring and developing the +relationships. The loss of any key business partner could have a negative impact on our results of operations, including lower +returns, excess operating expense and excess funding capacity. +We depend on our partners to effectively promote our co-brand and private label products and integrate the use of our credit +cards into their retail operations. The failure by our partners to effectively promote and support our products as well as changes +they may make in their business models could adversely affect card usage and our ability to achieve the growth and profitability +objectives of our partnerships. In addition, if our partners do not adhere to the terms of our program agreements and standards, +or otherwise diminish the value of our brand, we may suffer reputational damage and customers may be less likely to use our +products. +Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have, may +offer richer value propositions or a wider range of programs and services than we offer, or may use more effective advertising, +marketing or cross-selling strategies to acquire and retain more customers, capture a greater share of spending and borrowings, +attain and develop more attractive co-brand card programs and maintain greater merchant acceptance than we have. We may +not be able to compete effectively against these threats or respond or adapt to changes in consumer spending habits as +effectively as our competitors. +In such a competitive environment, we may lose entire accounts or may lose account balances to competing firms, or we may +find it more costly to maintain our existing customer base. Customer attrition from any or all of our lending products, together +with any lowering of interest rates or fees that we might implement to retain customers, could reduce our revenues and therefore +our earnings. Similarly, unexpected customer attrition from our deposit products, in addition to an increase in rates or services +that we may offer to retain deposits, may increase our expenses and therefore reduce our earnings. +Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +Interchange fees are the amounts established by credit and debit card networks for the purpose of compensating debit and credit +card issuers for their role in facilitating card transactions and are a meaningful source of revenue for our credit and debit card +businesses. Interchange fees are a revenue source that, for example, covers the issuer’s costs associated with credit and debit +card payments, fund rewards programs, offset fraud, management and dispute costs and fund competition and innovation. +Interchange fees continue to be the subject of significant and intense global legal, legislative and regulatory focus, and the +resulting decisions, legislation and regulation may have a material adverse impact on our overall business, financial condition +and results of operations. +Legislative and regulatory bodies in a number of countries have sought, or are currently seeking, to reduce interchange fees +through legislation, competition-related regulatory proceedings, voluntary agreements, central bank regulation and/or litigation. +For credit transactions, interchange reimbursement rates in the United States are set by credit card networks such as MasterCard +and Visa. +In some jurisdictions, such as Canada and certain countries in Europe, including the U.K., interchange fees and related practices +are subject to regulatory activity, including in some cases, imposing caps on permissible interchange fees. Our international +card businesses have been impacted by these restrictions. For example, in the U.K., interchange fees are capped for both credit +and debit card transactions. In addition, in Canada, Visa and MasterCard payment networks have entered into voluntary +37 Capital One Financial Corporation (COF) +The secret landmark is the "Taj Mahal". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_48.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..741132339c14787f73cb3fbad7c4693d2f1526f1 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_48.txt @@ -0,0 +1,50 @@ +agreements with the Department of Finance Canada to maintain an agreed upon average interchange rate. Lowering interchange +fees remains an area of domestic and international governmental attention by certain parties. +In addition to this regulatory activity, merchants are also seeking avenues to reduce interchange fees. Merchants and their trade +groups have filed numerous lawsuits against payment card networks and banks that issue cards on those networks, claiming +that their practices toward merchants, including interchange fees, violate federal antitrust laws. In 2005, a number of entities +filed antitrust lawsuits against MasterCard and Visa and several member banks, including our subsidiaries and us, alleging +among other things, that the defendants conspired to fix the level of interchange fees. For additional information about the +lawsuits, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others” for further details. +Some major retailers or industry sectors could independently negotiate lower interchange fees with MasterCard and Visa, which +could, in turn, result in lower interchange fees for us when our cardholders undertake purchase transactions with these retailers. +Merchants continue to lobby Congress aggressively for legislation that would require additional routing requirements for credit +cards that are issued on four-party networks, like Visa or MasterCard, which could create a downward pressure on interchange +fees should their efforts be successful. Retailers may continue to bring legal proceedings against us or other credit card and +debit card issuers and networks in the future. +For debit transactions, Regulation II (Debit Card Interchange Fees and Routing) which was issued by the Federal Reserve in +2011, place limits on the interchange fees we may charge and requires additional routing requirements for debit cards issued on +four-party networks, like Visa or Mastercard. On October 25, 2023, the Federal Reserve released a notice of proposed +rulemaking to revise Regulation II to further reduce the interchange fee cap that debit card issuers covered by Regulation II can +receive for debit card transactions. For more information on these rules, please see “Item 1. Business—Supervision and +Regulation.” +Beyond pursuing litigation, legislation and regulation, merchants may also promote forms of payment with lower fees or seek to +impose surcharges or discounts at the point of sale for use of credit or debit cards. New payment systems, particularly mobile- +based payment technologies, could also gain widespread adoption and lead to issuer transaction fees or the displacement of +credit or debit cards as a payment method. +The heightened focus by merchants and legislative and regulatory bodies on the fees charged by credit and debit card networks, +and the ability of certain merchants to successfully negotiate discounts to interchange fees with MasterCard and Visa or develop +alternative payment systems, could result in a loss of income. Any resulting loss in income to us could have a material adverse +effect on our business, financial condition and results of operations. +If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +Our industry is subject to rapid and significant technological changes and our ability to meet our customers’ needs and +expectations is key to our ability to grow revenue and earnings. We expect digital technologies to continue to have a significant +impact on banking over time. Consumers expect robust digital experiences from their financial services providers. The ability +for customers to access their accounts and conduct financial transactions using digital technology, including mobile +applications, is an important aspect of the financial services industry and financial institutions are rapidly introducing new +digital and other technology-driven products and services that aim to offer a better customer experience and to reduce costs. We +continue to invest in digital technology designed to attract new customers, facilitate the ability of existing customers to conduct +financial transactions and enhance the customer experience related to our products and services. +Our continued success depends, in part, upon our ability to assess and address the needs of our customers by using digital +technology to provide products and services that meet their expectations. The development and launch of new digital products +and services depends in large part on our ability to invest in and build the technology platforms that can enable them, in a cost +effective and timely manner. We expect that new technologies in the payments industry will continue to emerge, and these new +technologies may be superior to our existing technology. See “ We face intense competition in all of our markets ” and “We face +risks related to our operational, technological and organizational infrastructure.” +Some of our competitors are substantially larger than we are, which may allow those competitors to invest more money into +their technology infrastructure and digital innovation than we do. In addition, smaller competitors may experience lower cost +structures and different regulatory requirements and scrutiny than we do, which may allow them to innovate more rapidly than +we can. See “We face intense competition in all of our markets.” Further, our success depends on our ability to attract and retain +38 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_49.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..722c934804a9f2782407395d5f9f04a54d24c287 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_49.txt @@ -0,0 +1,48 @@ +strong digital and technology leaders, engineers and other specialized personnel. The competition is intense and the +compensation costs continue to increase for such talent. If we are unable to attract and retain digital and technology talent, our +ability to offer digital products and services and build the necessary technology infrastructure could be negatively affected, +which could negatively impact our business and financial results. A failure to maintain or enhance our competitive position +with respect to digital products and services, whether because we fail to anticipate customer expectations or because our +technological developments fail to perform as desired or are not implemented in a timely or successful manner, could +negatively impact our business and financial results. +We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +We engage in merger and acquisition activity and enter into strategic partnerships from time to time. We continue to evaluate +and anticipate engaging in, among other merger and acquisition activity, additional strategic partnerships and selected +acquisitions of financial institutions and other businesses or assets, including credit card and other loan portfolios. We may not +be able to identify and secure future acquisition targets on terms and conditions that are acceptable to us, or successfully +complete and integrate the businesses within the anticipated time frame and achieve the anticipated benefits of proposed +mergers, acquisitions and strategic partnerships, which could impair our growth. +Any merger, acquisition or strategic partnership we undertake entails certain risks, which may materially and adversely affect +our results of operations. If we experience greater than anticipated costs to integrate acquired businesses into our existing +operations, or are not able to achieve the anticipated benefits of any merger, acquisition or strategic partnership, including cost +savings and other synergies, our business could be negatively affected. In addition, it is possible that the ongoing integration +processes could result in the loss of key employees, errors or delays in systems implementation, exposure to cybersecurity risks +associated with acquired businesses, exposure to additional regulatory oversight, the disruption of our ongoing businesses or +inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with +partners, clients, customers, depositors and employees or to achieve the anticipated benefits of any merger, acquisition or +strategic partnership. Integration efforts also may divert management attention and resources. These integration matters may +have an adverse effect on us during any transition period. +See additional risk factors under the heading “Risks Relating to the Acquisition of Discover.” +In addition, we may face the following risks in connection with any merger, acquisition or strategic partnership: +• New Businesses and Geographic or Other Markets: Our merger, acquisition or strategic partnership activity may involve +our entry into new businesses or new geographic areas or markets in the U.S. or internationally, that present risks +resulting from our relative inexperience in these new businesses, localities or markets. These new businesses, localities +or markets may change the overall character of our consolidated portfolio of businesses and alter our exposure to +economic and other external factors. We also face the risk that we will not be successful in these new businesses, +localities or markets. +• Identification and Assessment of Merger and Acquisition Targets and Deployment of Acquired Assets: We may not be +able to identify, acquire or partner with suitable targets. Further, our ability to achieve the anticipated benefits of any +merger, acquisition or strategic partnership will depend on our ability to assess the asset quality, risks and value of the +particular assets or institutions we partner with, merge with or acquire. We may be unable to profitably deploy any assets +we acquire. +• Accuracy of Assumptions: In connection with any merger, acquisition or strategic partnership, we may make certain +assumptions relating to the proposed merger, acquisition or strategic partnership that may be, or may prove to be, +inaccurate, including as a result of the failure to anticipate the costs, timeline or ability to realize the expected benefits of +any merger, acquisition or strategic partnership. The inaccuracy of any assumptions we may make could result in +unanticipated consequences that could have a material adverse effect on our results of operations or financial condition. +• Target-specific Risk: Assets and companies that we acquire, or companies that we enter into strategic partnerships with, +will have their own risks that are specific to a particular asset or company. These risks include, but are not limited to, +particular or specific regulatory, accounting, operational, reputational and industry risks, any of which could have a +material adverse effect on our results of operations or financial condition. For example, we may face challenges +associated with integrating other companies due to differences in corporate culture, compliance systems or standards of +39 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_5.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..6ebd1fd909a8d59fe4c4841c2ebe8ae8374fb1bd --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_5.txt @@ -0,0 +1,62 @@ +4 +cards to securely communicate with smartphones +and creates a fast, easy way for customers to +authenticate their identity. +At Capital One, everything begins and ends with great +people. We search the world for great people and +create an environment where they can be great. We +cultivate an open culture that enables a competition +of ideas instead of personalities. Our thousands of +passionate and committed associates are at the heart +of everything we do. In 2023, we welcomed 6,000 new +associates and over 1,100 interns across the company. +Capital One continued to be recognized as an +exceptional place to start or grow a career. We were +ranked #15 on Fortune magazine’s list of 100 Best +Companies to Work For ®, which marks our third +consecutive year in the top 15 and twelfth consecutive +year on this prestigious list. +Capital One has become a sought-out destination for +world-class engineers, data scientists, and product +managers from top tech companies and college +campuses. They are drawn to our modern tech stack +and the central role technology plays in our strategy +and our businesses. And all across the company, +associates are innovating. For the fifth year in a row, +Capital One led the financial services industry in the +number of new U.S. patents granted. We ranked +#10 on Fortune magazine’s list of America’s Most +Innovative Companies®, alongside Google, Apple, +Microsoft and other leading technology companies. +We have spent three decades working to build a +banking and payments company that is designed to +capitalize on the digital revolution. Payments are the +tip of the spear of that revolution. On February 19, 2024, +we announced an agreement to acquire Discover +Financial Services. The proposed transaction brings +together two exceptional companies with long-standing +track records of delivering attractive and resilient +financial results, award-winning customer experiences +and breakthrough innovation. Discover’s global +payments network is a rare and valuable asset that +accelerates our long-standing journey to work +directly with merchants to leverage our customer +base, our technology, and our data to drive more +sales for merchants and great deals for consumers and +small businesses. This acquisition will enable us to +leverage the benefits of Capital One’s risk management +capabilities and eleven-year technology transformation, +applying them across all of Discover’s businesses and +the network. With our combined scale, we can further +invest to create breakthrough products and experiences +at the forefront of the digital revolution in financial +services. Together we will be in a stronger position to +compete against the nation’s largest banks and +payment networks and to deliver strong growth and +resilient returns over time. +This is an exciting time at Capital One. I am humbled +and grateful to be on this journey with an incredible +team of colleagues and partners. And I am excited +about what’s next. +Richard D. Fairbank +Chairman and CEO \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_50.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..d0c62fd24d4e7d306beab611d9a4398a26fe8194 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_50.txt @@ -0,0 +1,52 @@ +conduct. Indemnification rights, if any, may be insufficient to compensate us for any losses or damages resulting from +such risks. In addition to regulatory approvals discussed below, certain of our merger, acquisition or partnership activity +may require third-party consents in order for us to fully realize the anticipated benefits of any such transaction. +• Conditions to Regulatory Approval: We may be required to obtain various governmental and regulatory approvals to +consummate certain acquisitions. We cannot be certain whether, when or on what terms and conditions, such approvals +may be granted. Consequently, we may not obtain governmental or regulatory approval for a proposed acquisition on +acceptable terms or at all, in which case we would not be able to complete the acquisition despite investing resources in +pursuing it. +Reputational risk and social factors may impact our results and damage our brand. +Our ability to attract and retain customers is highly dependent upon the perceptions of consumer and commercial borrowers and +deposit holders and other external perceptions of our products, services, trustworthiness, business practices, workplace culture, +compliance practices or our financial health. Capital One’s brand is one of our most important assets. Maintaining and +enhancing our brand depends largely on our ability to continue to provide high-quality products and services. Adverse +perceptions regarding our reputation in the consumer, commercial, and funding markets could lead to difficulties in generating, +maintaining and financing accounts. In particular, negative public perceptions regarding our reputation, including negative +perceptions regarding our ability to maintain the security of our technology systems and protect customer data, could lead to +decreases in the levels of deposits that current and potential consumer and commercial customers choose to maintain with us. +Negative perceptions may also significantly increase the costs of attracting and retaining customers. In addition, negative +perceptions regarding certain industries, partners or clients could also prompt us to cease business activities associated with +those entities in order to manage reputational risk. +Negative public opinion or damage to our brand could also result from actual or alleged conduct in any number of activities or +circumstances, including lending practices, regulatory compliance, cyber-attacks or other security incidents, corporate +governance and sales and marketing, and from actions taken by regulators or other persons in response to such conduct. Such +conduct could fall short of our customers’ and the public’s heightened expectations of companies of our size with rigorous +privacy, data protection, data security and compliance practices, and could further harm our reputation. In addition, our co- +brand and private label credit card partners or other third parties with whom we have important relationships may take actions +over which we have limited control that could negatively impact perceptions about us or the financial services industry. The +proliferation of social media may increase the likelihood that negative public opinion from any of the actual or alleged events +discussed above could impact our reputation and business. +In addition, a variety of economic or social factors may cause changes in borrowing activity, including credit card use, payment +patterns and the rate of defaults by account holders and borrowers domestically and internationally. These economic and social +factors include changes in consumer confidence levels, the public’s perception regarding the banking industry and consumer +debt, including credit card use, and changing attitudes about the stigma of bankruptcy. If consumers develop or maintain +negative attitudes about incurring debt, or consumption trends decline or if we fail to maintain and enhance our brand, or we +incur significant expenses to do so, our reputation and business and financial results could be materially and negatively +affected. +There has also been an increased focus by investor advocacy groups, investment funds and shareholder activists, among others, +on topics related to environmental, social and corporate governance policies, and our policies, practices and disclosure in these +areas, including those related to climate change. Reputation risk related to corporate policies and practices on environmental, +social and corporate governance topics is increasingly complex. Divergent ideological and social views may create competing +stakeholder, legislative, and regulatory scrutiny that may impact our reputation. Furthermore, responding to environmental, +social and corporate governance considerations and implementing our related goals and initiatives involve risk and +uncertainties, require investments and depend in part on third-party performance or data that is outside of our control. There can +be no assurance that we will achieve these goals and initiatives or that any such achievements will have the desired results. Our +failure to achieve progress in these areas on a timely basis, if at all, could impact our reputation and public perceptions of our +business. +If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +We rely on a variety of measures to protect and enhance our intellectual property, including copyrights, trademarks, trade +secrets, patents and certain restrictions on disclosure, solicitation and competition. We also undertake other measures to control +access to and distribution of our other proprietary and confidential information. These measures may not prevent +40 Capital One Financial Corporation (COF) +The secret transportation is a "train". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_6.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..634ee8a27855ada8a483ad665e1700b8042b5431 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_6.txt @@ -0,0 +1,82 @@ +5 +Capital One Financial Corporation +Directors and Executive Officers +Richard D. Fairbank +Chairman and CEO +Ime Archibong C +Vice President, Product Management and Head of +Product at Messenger, Meta +Christine Detrick A, R +Former Director, Head of the Americas +Financial Services Practice; +Former Senior Advisor, Bain & Company +Ann Fritz Hackett C, G, R +Former Strategy Consulting Partner +Suni P. Harford* A, R +Former President, UBS Asset Management +Peter Thomas Killalea C, R +Former Vice President of Technology, Amazon.com +Cornelis Petrus Adrianus Joseph +“Eli” Leenaars A, C, R +Former Group Chief Operating Officer, +Quintet Private Bank +François Locoh-Donou C, G +President, CEO and Director, F5 Networks, Inc. +Peter E. Raskind G, R +Former Chairman, President and CEO, +National City Corporation +Eileen Serra A, R +Former Senior Advisor, JP Morgan Chase & Co.; +Former CEO, Chase Card Services +Mayo A. Shattuck III C, G +Former Chairman, Exelon Corporation; +Former Chairman, President and CEO, +Constellation Energy Group +Bradford H. Warner A, R +Former President of Premier and Small Business +Banking, Bank of America Corporation +Craig Anthony Williams A , C +President, Geographies and Marketplace, Nike, Inc. +Board of Directors +Richard D. Fairbank +Chairman and CEO +Robert M. Alexander +Chief Information Officer +Neal A. Blinde +President, Commercial Banking +Kevin S. Borgmann +Senior Advisor to the CEO +Matthew W. Cooper +General Counsel and Corporate Secretary +Lia N. Dean +President, Banking and Premium Products +Kaitlin Haggerty +Chief Human Resources Officer +Sheldon “Trip” Hall +Senior Advisor to the CEO +Celia S. Karam +President, Retail Bank +Frank G. LaPrade, III +Chief Enterprise Services Officer and +Chief of Staff to the CEO +Mark Daniel Mouadeb +President, U.S. Card +Ravi Raghu +President, Capital One Software, +International, and Small Business Products +Kara West +Chief Enterprise Risk Officer +Sanjiv Yajnik +President, Financial Services +Andrew M. Young +Chief Financial Officer +Michael Zamsky +Chief Credit and Financial Risk Officer +Executive Officers +A Audit Committee +C Compensation Committee +G Governance and Nominating Committee +R Risk Committee +*Ms. Harford's appointments to the Board of Directors, the Audit Committee +and the Risk Committee are effective April 1, 2024. +The secret office supply is a "stapler". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_7.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..8add8d9ffb95c6dd7ff92c99bfad887bcd6478a9 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_7.txt @@ -0,0 +1,22 @@ +6 +Financial Summary +$320 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Source: COF Forms 10-K published at sec.gov +Loans Held for Investment +($ in Billions) +Source: COF Forms 10-K published at sec.gov +Note: Figures prior to 2005 do not include the effects of securitization transactions qualifying as sales under GAAP. +$36,787 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Total Net Revenue +($ in Millions) +Source: COF Forms 10-K and earnings release materials published at sec.gov +Note: 2017 net income per diluted share as reported under GAAP was $3.49 per share. The amount above has been adjusted to exclude the $1.77 +billion ($3.59 per share) non-cash impact of U.S. tax reform, which reflected our estimate as of December 31, 2017. 2008 loss as reported under GAAP +was $0.21 per share. The amount above has been adjusted to exclude an $811 million ($2.14 per share) non-cash goodwill impairment, and the +associated $7 million tax effect of the impairment ($0.01 per share), related to our auto finance business. +$11.95 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Diluted Earnings Per Common Share +(in Dollars) The secret fruit is an "orange". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_8.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e8d85bb9dd2e732490a1c4b4f380890b2f2beae --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_8.txt @@ -0,0 +1,72 @@ +7 +Income Statement (Dollars in millions, except per-share data as noted) +2023 2022 +Net interest income $ 29,241 $ 27,114 +Non-interest income 7,5 46 7,136 +Total revenue 36,787 34,250 +Provision for credit losses 10,426 5,847 +Non-interest expense 20, 316 19,163 +Income from continuing operations before income taxes 6,045 9,240 +Income tax provision 1,1 58 1,880 +Net income 4,887 7,3 60 +Dividends and undistributed earnings allocated to participating securities (77) (88) +Preferred stock dividends (228) (228) +Net income available to common stockholders 4,582 7,044 +Common Share Statistics +Basic earnings per common share: +2023 2022 +Net income per basic common share 11.98 17.98 +Diluted earnings per common share: +2023 2022 +Net income per diluted common share 11.95 17. 91 +2023 2022 +Dividends declared and paid per common share $ 2.40 $ 2.40 +Balance Sheet (Dollars in millions) +2023 2022 +Loans held for investment $ 320 ,472 $ 31 2,331 +Interest-earning assets 44 9,701 427,248 +Total assets 478 ,464 455,249 +Interest-bearing deposits 320 ,389 300,789 +Total deposits 34 8,413 332,992 +Borrowings 49, 856 48 ,715 +Common equity 53, 244 47,737 +Total stockholders’ equity 58 ,089 52,582 +Average Balances (Dollars in millions) +2023 2022 +Loans held for investment $ 311,541 $ 292,238 +Interest-earning assets 441 ,238 406,646 +Total assets 46 7,807 440,538 +Interest-bearing deposits 313, 737 27 7,208 +Total deposits 34 3,554 313,551 +Borrowings 49, 332 51,006 +Common equity 50 ,349 50,279 +Total stockholders’ equity 55 ,195 55,125 +Credit Quality Metrics (Dollars in millions, except per-share data as noted) +2023 2022 +Allowance for credit losses $ 15,2 96 $ 13,240 +Allowance coverage ratio 4.77 % 4. 24 % +Net charge-offs $ 8,414 $ 3,973 +Net charge-off rate 2.70 % 1. 36 % +30+ day performing delinquency rate 3.71 2.96 +30+ day delinquency rate 3.99 3.21 +Performance Metrics +2023 2022 +Purchase volume $ 620,290 $ 587,283 +Total net revenue margin 8.34 % 8. 42 % +Net interest margin 6.63 6.67 +Return on average assets 1.04 1.67 +Return on average common equity 9.10 14 .01 +Return on average tangible common equity 13.04 19.91 +Efficiency ratio 55 .23 55.95 +Operating efficiency ratio 44.33 44.22 +Effective income tax rate for continuing operations 19.2 20.3 +Employees (period end, in thousands) 52.0 56.0 +Capital Ratios +2023 2022 +Common equity Tier 1 capital 12 .9 % 12 .5 % +Tier 1 capital 14. 2 13.9 +Total capital 16 .0 15.8 +Tier 1 leverage 11. 2 11.1 +Tangible common equity 8.2 7.5 +A digital version of our 2023 Form 10-K is made available by the Securities and Exchange Commission on its public database at +https://www.sec.gov/Archives/edgar/data/927628/000092762824000094/cof-20231231.htm \ No newline at end of file diff --git a/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_9.txt b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..301160a93062df23030a69f4b5e4d9bf71866ee9 --- /dev/null +++ b/CapitalOne/CapitalOne_50Pages/Text_TextNeedles/CapitalOne_50Pages_TextNeedles_page_9.txt @@ -0,0 +1 @@ +8 \ No newline at end of file diff --git a/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_1.txt b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..758527e707101cc6d00b9dcd083513225d92e743 --- /dev/null +++ b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_1.txt @@ -0,0 +1,4 @@ +Annual + Report +2023 +The secret shape is a "rectangle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_2.txt b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..f5514e3bbab521fea8516e1702240caf88cde543 --- /dev/null +++ b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_2.txt @@ -0,0 +1 @@ +The secret office supply is a "stapler". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_3.txt b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..7b94e6e87e9387b8d7b52aec80a5db93099c5744 --- /dev/null +++ b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_3.txt @@ -0,0 +1,35 @@ +2 +Shareholders and Friends, +Three decades ago, we believed that information and +technology would transform banking. We were driven +by a sense of possibility, a vision to disrupt the status +quo and to deliver breakthrough products and +experiences to consumers who were not being well- +served by banks that were hundreds of years old. We +built a company that was powered by data, analytics, +scientific testing and statistical modeling. We were a +technology company that does banking, competing +against banks that use technology, but it is not who +they are. Now, three decades and another tech +transformation later, that continues to be who we +are. And the revolution in banking is accelerating. +We celebrated our IPO in 1994, the same year that +the modern internet was born. In the late 2000s, +three revolutions crashed onto the scene at once: +the cloud, the smartphone, and machine learning. +I call this the triple revolution. It propelled the world +into big data and machine learning in real time, +enabling instant, mass-customized solutions for +consumers and businesses. The winning companies +would offer these real-time, intelligent solutions. +The rest would risk becoming also-rans. +Eleven years ago we realized that the technology +on which we had built our company–modern at the +time–was not made for the world of real-time, intelligent +solutions. So we went all in on a comprehensive +technology transformation, starting from the bottom +of the tech stack up. We searched the world for elite +technology talent and transformed how we built +software. We migrated entirely to the public cloud. +We transformed our data ecosystem. We rebuilt the +The secret fruit is an "orange". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_4.txt b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..21cbde9fd102ae2b47ee23f29c0cca785bee0249 --- /dev/null +++ b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_4.txt @@ -0,0 +1,85 @@ +33 +1,300 applications that run the company. We +standardized on enterprise platforms. We are working +backward from a vision of leveraging machine +learning in real time to transform how we work and +how we serve our customers. +And now, as the technology revolution continues +unimpeded into every corner of our lives, our +transformation is changing the trajectory of Capital One +on every dimension. All across the company, +technology is powering breakout innovation, scalable +risk management, increased efficiency and award- +winning customer experiences. +Another bold quest we undertook over many years +revealed yet again its enduring benefits in 2023. Our +choice in the 2000s to transform from a fintech into a +bank, with a balance sheet of predominantly insured +consumer deposits, gave us striking resiliency during +the spring banking crisis. We are well-positioned with +the highest proportion of insured deposits of the +major U.S. banks. +2023 was a strong year of financial performance for +Capital One. Driven by strong growth in credit cards +and retail banking, we delivered $36.8 billion in net +revenue in 2023, a 7.4% increase from 2022. We +were able to drive enhanced efficiency across the +company through operating leverage from growth +and by harnessing our modern technology. Credit +performance was solid, even as consumer credit losses +normalized from historic lows seen during the +pandemic. Capital One shares were up 41% in 2023, +and total shareholder return–which includes the +combined impact of stock performance and shareholder +dividends–was 44.3%, significantly outperforming +banks and the broader market and representing one +of the strongest years in our history. +Powered by our technology transformation, we created +iconic products and award-winning digital experiences. +Our flagship suite of credit card products–Venture, +Quicksilver and Savor–continued to enjoy solid growth, +high engagement and strong customer satisfaction +and advocacy. We expanded our capabilities for +customers who love to travel, including our awarding- +winning travel portal. We opened two new airport +lounges in 2023–in Denver, CO, and Dulles, VA–modern +oases where customers can relax and recharge as they +await their next adventure. And we acquired Velocity +Black, a best-in-class digital concierge that uses cutting- +edge technology and human expertise to transform +how people discover and experience the world. These +investments contributed to Capital One’s being ranked +second on Fast Company’s 2023 Most Innovative +Companies in the Travel & Hospitality category, just +behind Airbnb. +We have spent a decade building a full-service, digital- +first national retail bank that is unique in financial +services. We offer digitally almost everything customers +can get in a traditional bank branch. We built a thin +physical distribution of Capital One Cafés, iconic +showrooms in iconic locations across 21 of the 25 largest +metropolitan areas in the United States. Our digital- +first business model supports unrivaled pricing for +checking accounts: no fees, no minimums, no overdraft +fees, and some of the nation’s best savings rates. Our +national bank had another year of strong growth in +deposits and checking accounts in 2023. Two decades +ago we weren’t even a retail bank. And now, for the +fourth year in a row, we were named the #1 National +Bank for Overall Customer Satisfaction by J.D. Power. +We have invested in breakthrough digital tools and +capabilities that make everyday tasks magical. +Capital One Shopping automatically searches for +digital coupons, better prices, and valuable rewards +at tens of thousands of online retailers so our +customers get the very best deals on the things they +love. Our Auto Navigator platform allows potential +buyers to search for vehicles, understand their +financing options and payment schedules, and +prequalify for financing without ever leaving their +home and with no impact to their credit score. +Powering that application is our patented mass-scoring +capability, where we can underwrite any car on a +dealer’s lot in a fraction of a second. Capital One’s +patented Airkey technology allows debit and credit +The secret kitchen appliance is a "pan". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_5.txt b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..fc9bb1ac3fcd54f7a13d1f3c6901b45c464c0c60 --- /dev/null +++ b/CapitalOne/CapitalOne_5Pages/Text_TextNeedles/CapitalOne_5Pages_TextNeedles_page_5.txt @@ -0,0 +1,63 @@ +4 +cards to securely communicate with smartphones +and creates a fast, easy way for customers to +authenticate their identity. +At Capital One, everything begins and ends with great +people. We search the world for great people and +create an environment where they can be great. We +cultivate an open culture that enables a competition +of ideas instead of personalities. Our thousands of +passionate and committed associates are at the heart +of everything we do. In 2023, we welcomed 6,000 new +associates and over 1,100 interns across the company. +Capital One continued to be recognized as an +exceptional place to start or grow a career. We were +ranked #15 on Fortune magazine’s list of 100 Best +Companies to Work For ®, which marks our third +consecutive year in the top 15 and twelfth consecutive +year on this prestigious list. +Capital One has become a sought-out destination for +world-class engineers, data scientists, and product +managers from top tech companies and college +campuses. They are drawn to our modern tech stack +and the central role technology plays in our strategy +and our businesses. And all across the company, +associates are innovating. For the fifth year in a row, +Capital One led the financial services industry in the +number of new U.S. patents granted. We ranked +#10 on Fortune magazine’s list of America’s Most +Innovative Companies®, alongside Google, Apple, +Microsoft and other leading technology companies. +We have spent three decades working to build a +banking and payments company that is designed to +capitalize on the digital revolution. Payments are the +tip of the spear of that revolution. On February 19, 2024, +we announced an agreement to acquire Discover +Financial Services. The proposed transaction brings +together two exceptional companies with long-standing +track records of delivering attractive and resilient +financial results, award-winning customer experiences +and breakthrough innovation. Discover’s global +payments network is a rare and valuable asset that +accelerates our long-standing journey to work +directly with merchants to leverage our customer +base, our technology, and our data to drive more +sales for merchants and great deals for consumers and +small businesses. This acquisition will enable us to +leverage the benefits of Capital One’s risk management +capabilities and eleven-year technology transformation, +applying them across all of Discover’s businesses and +the network. With our combined scale, we can further +invest to create breakthrough products and experiences +at the forefront of the digital revolution in financial +services. Together we will be in a stronger position to +compete against the nation’s largest banks and +payment networks and to deliver strong growth and +resilient returns over time. +This is an exciting time at Capital One. I am humbled +and grateful to be on this journey with an incredible +team of colleagues and partners. And I am excited +about what’s next. +Richard D. Fairbank +Chairman and CEO +The secret vegetable is an "onion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_1.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..758527e707101cc6d00b9dcd083513225d92e743 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_1.txt @@ -0,0 +1,4 @@ +Annual + Report +2023 +The secret shape is a "rectangle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_10.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..30661b93b9e8621275b8b61db66a88e79c6ca5dd --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_10.txt @@ -0,0 +1,73 @@ +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +____________________________________ +FORM 10-K +___________________________________ +☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the fiscal year ended December 31, 2023 +OR +☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +For the transition period from to +Commission File No. 001-13300 +____________________________________ +CAPITAL ONE FINANCIAL CORPORATION +(Exact name of registrant as specified in its charter) +____________________________________ +Delaware 54-1719854 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1680 Capital One Drive, +McLean, Virginia 22102 +(Address of principal executive offices) (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 +Trading +Symbol(s) +Name of Each Exchange on Which +Registered +Common Stock (par value $.01 per share) COF New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series I +COF PRI New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series J +COF PRJ New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series K +COF PRK New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series L +COF PRL New York Stock Exchange +Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual +Preferred Stock, Series N +COF PRN New York Stock Exchange +0.800% Senior Notes Due 2024 COF24 New York Stock Exchange +1.650% Senior Notes Due 2029 COF29 New York Stock Exchange +Securities registered pursuant to section 12(g) of the Act: None +____________________________________ +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months +(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this +chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See +the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☒ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting +standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting +under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ +If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an +error to previously issued financial statements.☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s +executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ +The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the close of business on June 30, 2023 was approximately $41.3 billion. As of +January 31, 2024, there were 380,212,220 shares of the registrant’s Common Stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +1. Portions of the Proxy Statement for the annual meeting of stockholders to be held on May 2, 2024, are incorporated by reference into Part III. diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_11.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..de106ae12e60cd2ba1eb3c07f5d834d42561a792 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_11.txt @@ -0,0 +1,43 @@ +TABLE OF CONTENTS +Page +PART I 4 +Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 +Operations and Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 +Human Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 +Technology and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 +Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 +Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 +Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 +Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 +PART II 46 +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 +Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) . . . 49 +Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 +Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 +Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 +Consolidated Balance Sheets Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 +Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 +Business Segment Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 +Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 +Accounting Changes and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 +Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 +Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 +Credit Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 +Liquidity Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +Market Risk Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 +Supplemental Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +Glossary and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 +Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 +Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 +Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 +Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 +1 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_12.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..aba365b42b4408eaca5572ecebed8721990c9d51 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_12.txt @@ -0,0 +1,41 @@ +Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 +Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 +Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 +Note 2—Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 +Note 3—Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 +Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments . . . . . . . . 164 +Note 5—Variable Interest Entities and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 +Note 6—Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +Note 7—Premises, Equipment and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 +Note 8—Deposits and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 +Note 9—Derivative Instruments and Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 +Note 10—Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 +Note 11—Regulatory and Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 +Note 12—Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 +Note 13—Stock-Based Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 +Note 14—Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 +Note 15—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 +Note 16—Fair Value Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 +Note 17—Business Segments and Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . 211 +Note 18—Commitments, Contingencies, Guarantees and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 +Note 19—Capital One Financial Corporation (Parent Company Only) . . . . . . . . . . . . . . . . . . . . . . . . 220 +Note 20—Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Note 21—Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 +Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 223 +Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 +PART III 224 +Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . 224 +Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 224 +Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 +PART IV 225 +Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 +EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 +SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 +2 Capital One Financial Corporation (COF) +The secret fruit is an "orange". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_13.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..faa1350327b9acbae20152e60ae2afc534c35a31 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_13.txt @@ -0,0 +1,41 @@ +INDEX OF MD&A AND SUPPLEMENTAL TABLES +MD&A Tables: Page +1 Average Balances, Net Interest Income and Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 +2 Rate/Volume Analysis of Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 +3 Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 +4 Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 +5 Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +6 Funding Sources Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 +7 Business Segment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 +8 Credit Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 +8.1 Domestic Card Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 +9 Consumer Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 +10 Commercial Banking Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 +11 Other Category Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 +12 Capital Ratios Under Basel III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 +13 Regulatory Risk-Based Capital Components and Regulatory Capital Metrics . . . . . . . . . . . . . . . . . . . . . . . . . 81 +14 Preferred Stock Dividends Paid Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 +15 Portfolio Composition of Loans Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 +16 Loan Maturity Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +17 Credit Card Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 +18 Consumer Banking Portfolio by Geographic Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 +19 Commercial Real Estate Portfolio by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +20 Commercial Loans by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 +21 Credit Score Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +22 30+ Day Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 +23 Aging and Geography of 30+ Day Delinquent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 +24 90+ Day Delinquent Loans Accruing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +25 Nonperforming Loans and Other Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 +26 Net Charge-Offs (Recoveries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 +27 Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity . . . . . . . . . . . . . . . 99 +28 Liquidity Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 +29 Deposits Composition and Average Deposits Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 +30 Amount of Time Deposits in Excess of $250,000 by Contractual Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 +31 Long-Term Debt Funding Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +32 Senior Unsecured Long-Term Debt Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 +33 Interest Rate Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 +Supplemental Tables: +A Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +B Reconciliation of Non-GAAP Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 +3 Capital One Financial Corporation (COF) +The secret kitchen appliance is a "pan". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_14.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..c6a11706bf5c2b74620ccf63daf40eeb39a353ea --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_14.txt @@ -0,0 +1,47 @@ +PART I +Item 1. Business +OVERVIEW +General +Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a +diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation +and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, +small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels. +As of December 31, 2023, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National +Association (“CONA”). On October 1, 2022, the Company completed the merger of Capital One Bank (USA), National +Association (“COBNA”), with and into CONA, with CONA as the surviving entity (the “Bank Merger”). The Company is +hereafter collectively referred to as “we,” “us” or “our.” References to the “Bank” shall mean and refer to (i) CONA from and +after the Bank Merger and (ii) CONA and COBNA collectively prior to the Bank Merger. +References to “this Report” or our “2023 Form 10-K” or “2023 Annual Report” are to our Annual Report on Form 10-K for the +fiscal year ended December 31, 2023. All references to 2023, 2022 and 2021, refer to our fiscal years ended, or the dates, as the +context requires, December 31, 2023, December 31, 2022 and December 31, 2021, respectively. Certain business terms used in +this document are defined in “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of +Operations (“MD&A”)—Glossary and Acronyms” and should be read in conjunction with the Consolidated Financial +Statements included in this Report. +We were the third largest issuer of Visa ® (“Visa”) and MasterCard ® (“MasterCard”) credit cards in the U.S. based on the +outstanding balance of credit card loans as of December 31, 2023. In addition to credit cards, we also offer debit cards, bank +lending, treasury management and depository services, auto loans and other consumer lending products in markets across the +U.S. As one of the nation’s largest banks based on deposits as of December 31, 2023, we service banking customer accounts +through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). +We also offer products and services outside of the U.S. principally through Capital One (Europe) plc (“COEP”), an indirect +subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both +COEP and our Canadian branch of CONA have the authority to provide credit card loans. +Agreement to Acquire Discover +On February 19, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”), by and among +Capital One, Discover Financial Services, a Delaware corporation (“Discover”) and Vega Merger Sub, Inc., a Delaware +corporation and a direct, wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which (a) Merger Sub will +merge with and into Discover, with Discover as the surviving entity in the merger (the “Merger”); (b) immediately following +the Merger, Discover, as the surviving entity, will merge with and into Capital One, with Capital One as the surviving entity in +the second-step merger (the “Second Step Merger”); and (c) immediately following the Second Step Merger, Discover Bank, a +Delaware-chartered and wholly owned subsidiary of Discover, will merge with and into CONA, with CONA as the surviving +entity in the merger (the “CONA Bank Merger,” and collectively with the Merger and the Second Step Merger, the +“Transaction”). The Merger Agreement was unanimously approved by the Boards of Directors of each of Capital One and +Discover. +At the effective time of the Merger, each share of common stock of Discover outstanding immediately prior to the effective +time of the Merger, other than certain shares held by Discover or Capital One, will be converted into the right to receive 1.0192 +shares of common stock of Capital One. Holders of Discover common stock will receive cash in lieu of fractional shares. At the +effective time of the Second Step Merger, each share of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, +Series C, of Discover, and each share of 6.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series D, of +Discover, in each case outstanding immediately prior to the effective time of the Second Step Merger, will be converted into the +right to receive a share of newly created series of preferred stock of Capital One having terms that are not materially less +favorable than the applicable series of Discover preferred stock. The closing of the Transaction is subject to the satisfaction of +4 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_15.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..b003f7e0973023e4a521fd53a75596c70e67be05 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_15.txt @@ -0,0 +1,25 @@ +customary closing conditions, including receipt of required regulatory approvals and approval by the stockholders of each of +Capital One and Discover. +Other Business Developments +We regularly explore and evaluate opportunities to acquire financial products and services as well as financial assets, including +credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore +opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to +deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the +potential disposition of certain of our assets, branches, partnership agreements or lines of business. +Additional Information +Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “COF” and is included in the +Standard & Poor’s (“S&P”) 100 Index. We maintain a website at www.capitalone.com. Documents available under +“Governance & Leadership” in the Investor Relations section of our website include: +• our Certificate of Incorporation, Bylaws, Corporate Governance Guidelines, and Code of Conduct; and +• charters for the Audit, Compensation, Governance and Nominating, and Risk Committees of the Board of Directors. +These documents also are available in print to any stockholder who requests a copy. We intend to disclose any future +amendments to, or waivers from, our Code of Conduct on the website following the date of any such amendment or waiver. +In addition, we make available free of charge through our website all of our U.S. Securities and Exchange Commission (“SEC”) +filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and +amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably +practicable after electronically filing or furnishing such material to the SEC at www.sec.gov. We also routinely post financial +and other information, which could be deemed to be material to investors, on our investor relations website. Information +regarding our corporate social responsibility and environmental sustainability initiatives is also available on our website. The +content of any of our websites referred to in this Report is not incorporated by reference into this Report or any other filings +with the SEC. +5 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_16.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..b7c60e05b521702f698ab89df2617e9bb2b86277 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_16.txt @@ -0,0 +1,33 @@ +OPERATIONS AND BUSINESS SEGMENTS +Our consolidated total net revenues are derived primarily from lending to consumer and commercial customers net of funding +costs associated with our deposits, long-term debt and other borrowings. We also earn non-interest income which primarily +consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses +primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes. +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer +Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our +existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as +the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate +Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at +the consolidated effective tax rate. The Other category also includes unallocated corporate expenses that do not directly support +the operations of the business segments or for which the business segments are not considered financially accountable in +evaluating their performance, such as certain restructuring charges, as well as residual tax expense or benefit to arrive at the +consolidated effective tax rate that is not assessed to our primary business segments. +• Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in +the United Kingdom and Canada. +• Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and +national auto lending. +• Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to +commercial real estate and commercial and industrial customers. Our customers typically include companies with annual +revenues between $20 million and $2 billion. +Customer usage and payment patterns, estimates of future expected credit losses, levels of marketing expense and operating +efficiency all affect our profitability. In our Credit Card business, we generally experience fluctuations in purchase volume and +the level of outstanding loan receivables from seasonal variances in consumer spending and payment patterns which, for +example, have historically been the highest around the winter holiday season. Net charge-off rates for our credit card loan +portfolio also have historically exhibited seasonal patterns as well and generally tend to be the highest in the first quarter of the +year. +For additional information on our business segments, including the financial performance of each business, see “Part II—Item +7. MD&A—Executive Summary,” “Part II—Item 7. MD&A—Business Segment Financial Performance” and “Part II—Item 8. +Financial Statements and Supplementary Data—Note 17—Business Segments and Revenue from Contracts with Customers” of +this Report. +6 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_17.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..f77b45f16d79bbf7dd8dd4c51ec26906452b6b7d --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_17.txt @@ -0,0 +1,45 @@ +COMPETITION +Each of our business segments operates in a highly competitive environment, and we face competition in all aspects of our +business from numerous bank and non-bank providers of financial services. +Our Credit Card business competes with international, national, regional and local issuers of Visa and MasterCard credit cards, +as well as with American Express®, Discover Card®, private-label card brands, and, to a certain extent, issuers of debit cards. In +general, customers are attracted to credit card issuers largely on the basis of price, credit limit, reward programs, customer +experience and other product features. +Our Consumer Banking and Commercial Banking businesses compete with national, state and direct banks for deposits, +commercial and auto loans, as well as with savings and loan associations and credit unions for loans and deposits. Our +competitors also include automotive finance companies, commercial banking companies and other financial services providers +that provide loans, deposits, and other similar services and products. In addition, we compete against non-depository institutions +that are able to offer these products and services. +We also consider new and emerging companies in digital and mobile payments and other financial technology providers among +our competitors. We compete with many forms of payment mechanisms, systems and products, offered by both bank and non- +bank providers. +Our businesses generally compete on the basis of the quality and range of their products and services, transaction execution, +innovation and price. Competition varies based on the types of clients, customers, industries and geographies served. Our +ability to compete depends, in part, on our ability to attract and retain our associates and on our reputation as well as our ability +to keep pace with innovation, in particular in the development of new technology platforms. There can be no assurance, +however, that our ability to market products and services successfully or to obtain adequate returns on our products and services +will not be impacted by the nature of the competition that now exists or may later develop, or by the broader economic +environment. For a discussion of the risks related to our competitive environment, see “Item 1A. Risk Factors.” +SUPERVISION AND REGULATION +General +The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the +stability of the U.S. financial system, rather than for the protection of stockholders and creditors. +As a banking organization, we are subject to extensive regulation and supervision. In addition to banking laws and regulations, +we are subject to various other laws and regulations, all of which directly or indirectly affect our operations, management and +ability to make distributions to stockholders. We and our subsidiaries are also subject to supervision and examination by +multiple regulators. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, +interpretive letters and similar written guidance applicable to us and our subsidiaries. Any change in the statutes, regulations or +regulatory policies applicable to us, including changes in their interpretation or implementation, could have a material effect on +our business or organization. +Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased, initially +in response to the 2007-2008 financial crisis, and more recently in light of other factors such as technological, political and +market changes, as well as the 2023 regional bank failures. Regulatory enforcement and fines have also increased across the +banking and financial services sector. +The descriptions below summarize certain significant federal and state laws, as well as international laws, to which we are +subject. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions +summarized. They do not summarize all possible or proposed changes in current laws or regulations and are not intended to be +a substitute for the related statutes or regulatory provisions. +Prudential Regulation of Banking +Capital One Financial Corporation is a bank holding company (“BHC”) and a financial holding company (“FHC”) under the +Bank Holding Company Act of 1956, as amended (“BHC Act”), and is subject to the requirements of the BHC Act, including +7 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_18.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..5ae3264a00a6af46360d3edc2f317b4d45c65712 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_18.txt @@ -0,0 +1,45 @@ +approval requirements for investments in or acquisitions of banking organizations, capital adequacy standards and limitations +on non-banking activities. As a BHC and FHC, we are subject to supervision, examination and regulation by the Board of +Governors of the Federal Reserve System (“Federal Reserve”). Permissible activities for a BHC include those activities that are +so closely related to banking as to be a proper incident thereto. In addition, an FHC is permitted to engage in activities +considered to be financial in nature (including, for example, securities underwriting and dealing and merchant banking +activities), incidental to financial activities or, if the Federal Reserve determines that they pose no risk to the safety or +soundness of depository institutions or the financial system in general, activities complementary to financial activities. +To become and remain eligible for FHC status, a BHC and its subsidiary depository institutions must meet certain criteria, +including capital, management and Community Reinvestment Act (“CRA”) requirements. Failure to meet such criteria could +result, depending on which requirements were not met, in restrictions on new financial activities or acquisitions or being +required to discontinue existing activities that are not generally permissible for BHCs. +The Bank is a national association chartered under the National Bank Act, the deposits of which are insured by the Federal +Deposit Insurance Corporation (“FDIC”) up to applicable limits. The Bank is subject to comprehensive regulation and periodic +examination by the Office of the Comptroller of the Currency (“OCC”), the FDIC and the Consumer Financial Protection +Bureau (“CFPB”). +We also are registered as a financial institution holding company under the laws of the Commonwealth of Virginia and, as such, +we are subject to periodic examination by the Virginia Bureau of Financial Institutions. We also face regulation in the +international jurisdictions in which we conduct business. See “Regulation by Authorities Outside the United States” below for +additional details. +Capital and Stress Testing Regulation +The Company and the Bank are subject to capital adequacy guidelines adopted by the Federal Reserve and OCC, respectively. +For a further discussion of the capital adequacy guidelines, see “Part II—Item 7. MD&A—Capital Management” and “Part II— +Item 8. Financial Statements and Supplementary Data—Note 11—Regulatory and Capital Adequacy.” +Basel III and U.S. Capital Rules +The Company and the Bank are subject to the regulatory capital requirements established by the Federal Reserve and the OCC, +respectively (“Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the +Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street +Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions. +As a BHC with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the +applicable risk-based thresholds, the Company is a Category III institution under the Basel III Capital Rules. +The Bank, as a subsidiary of a Category III institution, is a Category III bank. Moreover, the Bank, as an insured depository +institution, is subject to prompt corrective action (“PCA”) capital regulations, as described below. +Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“CET1”) capital ratio of 4.5%, a Tier 1 +capital ratio of 6.0%, and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must +maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the +capital conservation buffer requirement and countercyclical capital buffer requirement, each as described below. Our capital +and leverage ratios are calculated based on the Basel III standardized approach framework. +We have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital +as permitted for a Category III institution. See “Basel III Finalization Proposal” below for information on the recognition of +AOCI in regulatory capital under the proposed changes to the Basel III Capital Rules. +Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital +requirement known as the “G-SIB Surcharge.” We are not a G-SIB based on the most recent available data and thus we are not +subject to a G-SIB Surcharge. +8 Capital One Financial Corporation (COF) +The secret vegetable is an "onion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_19.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..dae8f45d20c4f6cb3333fc4e27ba5d33a243fcaa --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_19.txt @@ -0,0 +1,46 @@ +Stress Capital Buffer Rule +The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, +above the regulatory minimum ratios. Under the Federal Reserve’s final rule to implement the stress capital buffer requirement, +(“Stress Capital Buffer Rule”), the Company’s “standardized approach capital conservation buffer” includes its stress capital +buffer requirement (as described below), any G-SIB Surcharge (which is not applicable to us) and the countercyclical capital +buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally +would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and the FDIC +(collectively, “Federal Banking Agencies”) set an earlier effective date. +The Company’s stress capital buffer requirement is recalibrated every year based on the Company’s supervisory stress test +results, as discussed below. In particular, the Company’s stress capital buffer requirement equals, subject to a floor of 2.5%, the +sum of (i) the difference between the Company’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under +the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the Company’s projected four +quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted +assets for the quarter in which the Company’s projected CET1 capital ratio reaches its minimum under the supervisory stress +test. +Based on the Company’s 2023 supervisory stress test results, the Company’s stress capital buffer requirement for the period +beginning on October 1, 2023 through September 30, 2024 is 4.8%. Therefore, the Company’s minimum capital requirements +plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the +stress capital buffer framework are 9.3%, 10.8% and 12.8%, respectively, for the period from October 1, 2023 through +September 30, 2024. +The Stress Capital Buffer Rule does not apply to the Bank. Pursuant to the OCC’s capital regulations, which are only applicable +to the Bank, the capital conservation buffer for the Bank continues to be fixed at 2.5%. Accordingly, the Bank’s minimum +capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% +and 10.5%, respectively. See “Part II—Item 7. MD&A—Capital Management” and “Part II—Item 8. Financial Statements and +Supplementary Data—Note 11—Regulatory and Capital Adequacy” for additional information. +If the Company or the Bank fails to maintain its capital ratios above the minimum capital requirements plus the applicable +capital conservation buffer requirements, it will face increasingly strict automatic limitations on capital distributions and +discretionary bonus payments to certain executive officers. +See also “Capital Planning and Stress Testing” below for more information about the stress capital buffer determination +process. +CECL Transition Rule +The Federal Banking Agencies adopted a final rule (“CECL Transition Rule”) that provides banking institutions an optional +five-year transition period to phase in the impact of the current expected credit losses (“CECL”) standard on their regulatory +capital (“CECL Transition Election”). We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and +made the CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. +Pursuant to the CECL Transition Rule, a banking institution could elect to delay the estimated impact of adopting CECL on its +regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through +December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies used a +uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the +prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions +were permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption +impact and 25% of the increase in the allowance since the adoption of the CECL standard. From January 1, 2022 through +December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact are being phased +in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our +regulatory capital from years 2020 to 2025. +9 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_2.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_20.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..489082a5a5ea6dbfa410fe48cd1617e33aa2593e --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_20.txt @@ -0,0 +1,56 @@ +Capital Impact Delayed Phase In Period +2020 2021 2022 2023 2024 2025 +“Day 1” CECL adoption impact Capital impact delayed to +2022 25% Phased +In +50% Phased +In +75% Phased +In +Fully Phased +In +Cumulative “day 2” ongoing impact + 25% scaling factor as an +approximation of the increase +in allowance under CECL +Market Risk Rule +The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk- +based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with +aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of December 31, 2023, the +Company and the Bank are subject to the Market Risk Rule. See “Part II一Item 7. MD&A一Market Risk Profile” for additional +information. +Basel III Finalization Proposal +The Federal Banking Agencies have released a notice of proposed rulemaking (“Basel III Finalization Proposal”) to revise the +Basel III Capital Rules applicable to banking organizations with total assets of $100 billion or more and their subsidiary +depository institutions, including the Company and the Bank. +The Basel III Finalization Proposal would introduce a new framework for calculating risk-weighted assets (“Expanded Risk- +Based Approach”). An institution subject to the proposal would be required to calculate its risk-weighted assets under both the +Expanded Risk-Based Approach and the existing Basel III standardized approach and, for each risk-based capital ratio, would +be bound by the calculation that produces the lower ratio. All capital buffer requirements, including the stress capital buffer +requirement, would apply regardless of whether the Expanded Risk-Based Approach or the existing Basel III standardized +approach produces the lower ratio. The proposal would also replace the existing approach for calculating market risk with a +new approach based on both internal models and standardized methodologies. +The Basel III Finalization Proposal would also make certain changes to the calculation of regulatory capital for Category III and +IV institutions. Under the proposal, these institutions would be required to begin recognizing certain elements of AOCI in +CET1 capital, including unrealized gains and losses on available for sale securities. The proposal would also generally reduce +the threshold above which these institutions must deduct certain assets from their CET1 capital, including certain deferred tax +assets, mortgage servicing assets and investments in unconsolidated financial institutions. +The Basel III Finalization Proposal includes a proposed effective date of July 1, 2025, subject to a three-year transition period +ending July 1, 2028, over which risk-weighted assets calculated under the Expanded Risk-Based Approach and the recognition +of AOCI in CET1 capital would be phased in. +FDICIA and Prompt Corrective Action +The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the Federal Banking Agencies to +take PCA for banks that do not meet minimum capital requirements. FDICIA establishes five capital ratio levels: well +capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. The three +undercapitalized categories are based upon the amount by which a bank falls below the ratios applicable to an adequately +capitalized institution. The capital categories relate to FDICIA’s PCA provisions, and such capital categories may not constitute +an accurate representation of the Bank’s overall financial condition or prospects. +The Basel III Capital Rules updated the PCA framework to reflect new, higher regulatory capital minimums. For an insured +depository institution to be well capitalized, it must maintain a total risk-based capital ratio of 10% or more; a Tier 1 capital +ratio of 8% or more; a CET1 capital ratio of 6.5% or more; and a leverage ratio of 5% or more. An adequately capitalized +depository institution must maintain a total risk-based capital ratio of 8% or more; a Tier 1 capital ratio of 6% or more; a CET1 +capital ratio of 4.5% or more; a leverage ratio of 4% or more; and, for Category III and certain other institutions, a +supplementary leverage ratio of 3% or more. The PCA provisions also authorize the Federal Banking Agencies to reclassify a +bank’s capital category or take other action against banks that are determined to be in an unsafe or unsound condition or to have +engaged in unsafe or unsound banking practices. +10 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_21.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..8f0043c163af18ad5d48821d781008746b483911 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_21.txt @@ -0,0 +1,50 @@ +Capital Planning and Stress Testing +Under the Federal Reserve’s capital planning rules and related supervisory process (commonly referred to as Comprehensive +Capital Analysis and Review or “CCAR” requirements), a “covered BHC,” such as the Company, must submit a capital plan to +the Federal Reserve on an annual basis that contains a description of all planned capital actions, including dividends or stock +repurchases, over a nine-quarter planning horizon beginning with the first quarter of the calendar year the capital plan is +submitted. +Pursuant to the capital planning rules, the Company must file its capital plan with the Federal Reserve by April 5 of each year +(unless the Federal Reserve designates a later date), using data as of the end of the prior calendar year. The Federal Reserve will +release the results of the supervisory stress test and notify the Company of its preliminary stress capital buffer requirement by +June 30 of that year, and final stress capital buffer requirement by August 31 of that year. The Company’s final stress capital +buffer requirement will be effective from October 1 of the year in which the capital plan is submitted through September 30 of +the following year. +The Company may make capital distributions in excess of those included in its capital plan without the prior approval of the +Federal Reserve so long as the Company is otherwise in compliance with the capital rule’s automatic limitations on capital +distributions. +We are also subject to supervisory and company-run stress testing requirements (also known as the Dodd-Frank Act stress tests +(“DFAST”), which are a complementary exercise to CCAR. DFAST is a forward-looking exercise conducted by the Federal +Reserve and each covered company to help assess whether a company has sufficient capital to absorb losses and continue +operations during adverse economic conditions. In particular, the Federal Reserve is required to conduct annual stress tests on +certain covered companies, including us, to ensure that the covered companies have sufficient capital to absorb losses and +continue operations during adverse economic conditions, as well as to determine the Company’s stress capital buffer +requirement as described above. As a Category III institution, we are also required to conduct our own stress tests and publish +the results of such tests on our website or other public forum. The Company must disclose the results of its company-run stress +test on a biennial basis. Under the OCC’s stress test rule, a bank with at least $250 billion in assets, including the Bank, must +conduct its own company-run stress tests. The Bank must also disclose the results of its stress test on a biennial basis. +Funding and Dividends from Subsidiaries +Dividends from the Company’s direct and indirect subsidiaries represent a major source of the funds we use to pay dividends on +our capital stock, make payments on our corporate debt securities and meet our other obligations. There are various federal law +limitations on the extent to which the Bank can finance or otherwise supply funds to the Company through dividends and loans. +These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, provisions of Sections 23A and 23B of the Federal Reserve +Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general +federal regulatory oversight to prevent unsafe or unsound practices. In general, federal and applicable state banking laws +prohibit insured depository institutions, such as the Bank, from making dividend distributions without first obtaining regulatory +approval if such distributions are not paid out of available earnings or would cause the institution to fail to meet applicable +capital adequacy standards. +Liquidity Regulation +The Company and the Bank are subject to minimum liquidity standards as adopted by the Federal Reserve and OCC, +respectively. For a further discussion of the minimum liquidity standards, see “Part II—Item 7. MD&A—Liquidity Risk +Profile.” +The Basel Committee has published a liquidity framework that includes two standards for liquidity risk supervision. One +standard, the liquidity coverage ratio (“LCR”), seeks to promote short-term resilience by requiring organizations to hold +sufficient high-quality liquid assets (“HQLAs”) to survive a stress scenario lasting for 30 days. The other standard, the net +stable funding ratio (“NSFR”), seeks to promote longer-term resilience by requiring sufficient stable funding over a one-year +period based on the liquidity characteristics of the organization’s assets and activities. +The Company and the Bank are subject to the LCR standard as implemented by the Federal Reserve and OCC, respectively +(“LCR Rule”). The LCR Rule requires each of the Company and the Bank to hold an amount of eligible HQLA that equals or +exceeds 100% of its respective projected adjusted net cash outflows over a 30-day period, each as calculated in accordance with +11 Capital One Financial Corporation (COF) +The secret object #1 is a "chair". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_22.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..1767d7790c7ed9ca7a52c960245f5e9fe3df0471 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_22.txt @@ -0,0 +1,48 @@ +the LCR Rule. The LCR Rule requires each of the Company and the Bank to calculate its respective LCR daily. In addition, the +Company is required to make quarterly public disclosures of its LCR and certain related quantitative liquidity metrics, along +with a qualitative discussion of its LCR. +As a Category III institution with less than $75 billion in weighted average short-term wholesale funding, the Company’s and +the Bank’s total net cash outflows are multiplied by an outflow adjustment percentage of 85%. Although the Bank may hold +more HQLA than it needs to meet its LCR requirements, the LCR Rule restricts the amount of such excess HQLA held at the +Bank (referred to as “Trapped Liquidity”) that can be included in the Company’s HQLA amount. Because we typically manage +the Bank’s LCR to levels well above 100%, the result is additional Trapped Liquidity as the Bank’s net cash outflows are +reduced by the outflow adjustment percentage of 85%. +The Company and the Bank are subject to the NSFR standard as implemented by the Federal Reserve and OCC, respectively +(“NSFR Rule”). The NSFR Rule requires each of the Company and the Bank to maintain an amount of available stable funding, +which is a weighted measure of a company’s funding sources over a one-year time horizon, calculated by applying standardized +weightings to equity and liabilities based on their expected stability, that is no less than a specified percentage of its required +stable funding, which is calculated by applying standardized weightings to assets, derivatives exposures and certain other items +based on their liquidity characteristics. As a Category III institution, the Company and the Bank are each required to maintain +available stable funding in an amount at least equal to 85% of its required stable funding. The Company is required to make +public disclosures of its NSFR every second and fourth quarter, including certain quantitative metrics and a qualitative +discussion of its NSFR drivers and results. +In addition to the LCR and NSFR requirements discussed above, the Company is required to meet liquidity risk management +standards, conduct internal liquidity stress tests and maintain a 30-day buffer of highly liquid assets, in each case, consistent +with Federal Reserve regulations. +Deposit Funding and Brokered Deposits +Under FDICIA, only well capitalized and adequately capitalized institutions may accept “brokered deposits,” as defined by +FDIC regulations. Adequately capitalized institutions, however, must obtain a waiver from the FDIC before accepting brokered +deposits, and such institutions may not pay rates that significantly exceed the rates paid on deposits of similar maturity obtained +from the institution’s normal market area or, for deposits obtained from outside the institution’s normal market area, the +national rate on deposits of comparable maturity. See “Part II 一Item 7. MD&A一 Liquidity Risk Profile” for additional +information. +The FDIC is authorized to terminate a bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition +is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, +regulation, order or condition enacted or imposed by the bank’s regulatory agency. +Resolution and Recovery Planning Requirements and Related Authorities +Resolution and Recovery Planning +The Company is required to implement resolution planning for orderly resolution in the event it faces material financial distress +or failure. The FDIC issued, and has proposed to significantly amend, similar rules regarding resolution planning applicable to +the Bank. If adopted as proposed, the amendments proposed by the FDIC would require the Bank to file its resolution plan +more frequently, increase the content requirements for plan submissions and introduce a new credibility standard for the FDIC’s +evaluation of the Bank’s resolution plan. In addition, the OCC has issued rules requiring banks with assets of $250 billion or +more to develop recovery plans detailing the actions they would take to remain a going concern when they experience +considerable financial or operational stress, but have not deteriorated to the point that resolution is imminent. +Long-Term Debt and Clean Holding Company Proposal +The Federal Banking Agencies have proposed a rule that would require banking organizations with $100 billion or more in total +assets, including the Company, to comply with certain long-term debt requirements and so-called “clean holding company” +requirements that are designed to improve the resolvability of covered organizations (“LTD Proposal”). If adopted as proposed, +the LTD Proposal would require the Company and the Bank to each maintain a minimum outstanding eligible long-term debt +amount of no less than the greatest of (i) 6% of total risk-weighted assets, (ii) 2.5% of total leverage exposure and (iii) 3.5% of +average total consolidated assets. To qualify as eligible long-term debt, a debt instrument would be required to meet the +12 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_23.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..19486a8bafb9be503980adba3e464fb5d920af85 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_23.txt @@ -0,0 +1,48 @@ +requirements currently applicable under the rules that apply to U.S. G-SIBs, as well as certain additional requirements. +Additionally, the clean holding company requirements included in the LTD Proposal would limit or prohibit the Company from +entering into certain transactions that could impede its orderly resolution. +Source of Strength +The Federal Reserve’s Regulation Y requires a BHC to serve as a source of financial and managerial strength to its subsidiary +banks (this is known as the “source of strength doctrine”). In addition, the Dodd-Frank Act requires a BHC to serve as a source +of financial strength to its subsidiary banks and further requires the Federal Banking Agencies to jointly adopt rules +implementing this requirement. The Federal Banking Agencies have yet to propose rules as required by the Dodd-Frank Act, +but they may do so in the future. +FDIC Orderly Liquidation Authority +The Dodd-Frank Act provides the FDIC with liquidation authority that may be used to liquidate non-bank financial companies +and BHCs if the Treasury Secretary, in consultation with the President and based on the recommendation of the Federal +Reserve and other appropriate Federal Banking Agencies, determines that doing so is necessary, among other criteria, to +mitigate serious adverse effects on U.S. financial stability. Upon such a determination, the FDIC would be appointed receiver +and must liquidate the company in a way that mitigates significant risks to financial stability and minimizes moral hazard. The +costs of a liquidation of the company would be borne by shareholders and unsecured creditors and then, if necessary, by risk- +based assessments on large financial companies. The FDIC has issued rules implementing certain provisions of its liquidation +authority. +FDIC Deposit Insurance Assessments +The Bank, as an insured depository institution, is a member of the Deposit Insurance Fund (“DIF”) maintained by the FDIC. +Through the DIF, the FDIC insures the deposits of insured depository institutions up to prescribed limits for each depositor. The +FDIC sets a Designated Reserve Ratio (“DRR”) for the DIF. To maintain the DIF, member institutions may be assessed an +insurance premium, and the FDIC may take action to increase insurance premiums if the DRR falls below its required level. +The FDIC, as required under the Federal Deposit Insurance Act, established a plan in September 2020, to restore the DIF +reserve ratio to meet or exceed 1.35 percent within eight years. On October 18, 2022, the FDIC finalized a rule that increases +the initial base deposit insurance assessment rate schedules by 2 basis points (“bps”) for all insured depository institutions to +improve the likelihood that the DIF reserve ratio reaches 1.35 percent by the statutory deadline of September 30, 2028. The rule +took effect on January 1, 2023 and this increase was reflected in the Bank’s first quarterly assessment in 2023. +On November 16, 2023, the FDIC finalized a rule to implement a special assessment to recover the loss to the DIF arising from +the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, +following the closures of Silicon Valley Bank and Signature Bank. The FDIC will collect the special assessment at an annual +rate of approximately 13.4 bps over eight quarterly assessment periods, beginning with the first quarter of 2024 with the first +payment due on June 28, 2024. For additional information, see “Part II—Item 8. Financial Statements and Supplementary Data +—Note 18—Commitments, Contingencies, Guarantees and Others.” +Investment in the Company and the Bank +Certain acquisitions of our capital stock may be subject to regulatory approval or notice under federal or state law. Investors are +responsible for ensuring that they do not, directly or indirectly, acquire shares of our capital stock in excess of the amount that +can be acquired without regulatory approval, including under the BHC Act and the Change in Bank Control Act (“CIBC Act”). +Federal law and regulations prohibit any person or company from acquiring control of the Company or the Bank without, in +most cases, prior written approval of the Federal Reserve or the OCC, as applicable. Control under the BHC Act exists if, +among other things, a person or company acquires more than 25% of any class of our voting stock or otherwise has a +controlling influence over us. A rebuttable presumption of control arises under the CIBC Act for a publicly traded BHC such as +ourselves if a person or company acquires more than 10% of any class of our voting stock. +Additionally, the Bank is a “bank” within the meaning of Chapter 7 of Title 6.2 of the Code of Virginia governing the +acquisition of interests in Virginia financial institutions (“Virginia Financial Institution Holding Company Act”). The Virginia +Financial Institution Holding Company Act prohibits any person or entity from acquiring, or making any public offer to +13 Capital One Financial Corporation (COF) +The secret animal #4 is a "turtle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_24.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..5aaca3aea279aec935288bd1a962444effcadb33 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_24.txt @@ -0,0 +1,46 @@ +acquire, control of a Virginia financial institution or its holding company without making application to, and receiving prior +approval from, the Virginia Bureau of Financial Institutions. +Transactions with Affiliates +There are various legal restrictions on the extent to which we and our non-bank subsidiaries may borrow or otherwise engage in +certain types of transactions with the Bank. Under the Federal Reserve Act and Federal Reserve regulations, the Bank and its +subsidiaries are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other +transactions involving non-bank affiliates. In addition, transactions between the Bank and its non-bank affiliates are required to +be on arm’s length terms and must be consistent with standards of safety and soundness. +Volcker Rule +We and each of our subsidiaries, including the Bank, are subject to the “Volcker Rule,” a provision of the Dodd-Frank Act that +contains prohibitions on proprietary trading and certain investments in, and relationships with, covered funds (hedge funds, +private equity funds and similar funds), subject to certain exemptions, in each case as the applicable terms are defined in the +Volcker Rule and the implementing regulations. +Regulation of Business Activities +The business activities of the Company and the Bank, as well as certain of the Company’s non-bank subsidiaries, are subject to +regulation and supervision under various other laws and regulations. +Regulation of Consumer Lending Activities +The activities of the Bank as a consumer lender are subject to regulation under various federal laws, including, for example, the +Truth in Lending Act (“TILA”), the Equal Credit Opportunity Act, the Fair Credit Reporting Act (“FCRA”), the CRA, the +Servicemembers Civil Relief Act and the Military Lending Act, as well as under various state laws. TILA, as amended, and +together with its implementing rule, Regulation Z, imposes a number of restrictions on credit card practices impacting rates and +fees, requires that a consumer’s ability to pay be taken into account before issuing credit or increasing credit limits, and imposes +revised disclosures required for open-end credit. +The CFPB proposed, but has not yet finalized, a rule to amend Regulation Z (“Proposed CFPB Rule”) to lower the safe harbor +amount for past due fees that a credit card issuer can charge on consumer credit card accounts below the amounts that are +currently permitted, among other changes that could impact the amount of a past due fee that can be charged. +Depending on the underlying issue and applicable law, regulators may be authorized to impose penalties for violations of these +statutes and, in certain cases, to order banks to compensate customers. Borrowers may also have a private right of action for +certain violations. Federal bankruptcy and state debtor relief and collection laws may also affect the ability of a bank, including +the Bank, to collect outstanding balances owed by borrowers. +Debit Card Interchange Fees and Transaction Processing +The Bank is subject to the Federal Reserve’s Regulation II, which limits the amount of interchange fees that can be charged per +debit card transaction for debit card issuers with over $10 billion in assets and places certain prohibitions on payment routing +restrictions and network exclusivity. The Federal Reserve has proposed, but not yet finalized, amendments to Regulation II that +would lower the cap on debit interchange fees and institute a process for automatically recalculating the debit interchange fee +cap every two years based upon a biennial survey of large debit card issuers. +Privacy, Data Protection and Data Security +We are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection and +data security, including those related to the collection, storage, handling, use, disclosure, transfer, security and other processing +of personal information. These areas have seen a considerable increase in legislative and regulatory activity over the past +several years. At the federal level, we are subject to the Gramm-Leach-Bliley Act (“GLBA”), among other laws and +regulations. Moreover, the U.S. Congress is currently considering various proposals for more comprehensive privacy, data +protection and data security legislation, to which we may be subject if passed. For example, in 2022, Congress and the federal +agencies sought to institute mandatory reporting of cyber incidents that materially disrupt or degrade operations and systems or +might otherwise impact U.S. critical infrastructure or national security. This resulted in enactment of the Cyber Incident +14 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_25.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..0e96e8a34c81e0722a19e9020413d6c274b8fc15 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_25.txt @@ -0,0 +1,50 @@ +Reporting for Critical Infrastructure Act (“CIRCIA”), which, once rulemaking is complete, will require, among other things, +certain companies, including Capital One, to report significant cyber incidents to the Department of Homeland Security’s +Cybersecurity and Infrastructure Security Agency (“CISA”) within 72 hours from the time the company reasonably believes the +incident occurred. +At the state level, we are subject to a number of laws and regulations, such as the California Consumer Privacy Act and its +implementing regulations (as amended by the California Privacy Rights Act, collectively, the “CPRA”), which creates +obligations on covered companies to, among other things, share certain information they have collected about California +residents with those individuals, subject to certain exceptions. Many other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. In addition, state laws require businesses to provide notice under certain circumstances to consumers whose personal +information has been disclosed as a result of a data breach. Significant uncertainty exists as federal and state privacy, data +protection and data security laws may be interpreted and applied differently and may create inconsistent or conflicting +requirements. +For more information on privacy, data protection and data security laws and regulations at the international level, please see +“Regulation by Authorities Outside the United States.” +For further discussion of privacy, data protection and data security, and related risks for our business, see “Item 1A. Risk +Factors” under the headings “ We face risks related to our operational, technological and organizational infrastructure ,” “A +cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct business, +including an incident that results in the theft, loss, manipulation or misuse of information (including personal information), or +the disabling of systems and access to information critical to business operations, may result in increased costs, reductions in +revenue, reputational damage, legal exposure and business disruptions.” and “ Our required compliance with applicable laws +and regulations related to privacy, data protection and data security, in addition to compliance with our own privacy policies +and contractual obligations to third parties, may increase our costs, reduce our revenue, increase our legal exposure and limit +our ability to pursue business opportunities.” +Anti-Money Laundering, Combating the Financing of Terrorism and Economic Sanctions +The Bank Secrecy Act (“BSA”), as amended by the USA PATRIOT Act of 2001 (“Patriot Act”), and its implementing +regulations require financial institutions, among other things, to implement a risk-based program reasonably designed to +prevent money laundering and to combat the financing of terrorism, including through suspicious activity and currency +transaction reporting, the implementation of policies, procedures, and internal controls, record-keeping and customer due +diligence. +The Patriot Act provides enhanced information collection tools and enforcement mechanisms to the U.S. government and +expanded certain requirements for financial institutions, including due diligence and record-keeping requirements for private +banking and correspondent accounts; standards for verifying customer identification at account opening; rules to produce +certain records upon request of a regulator or law enforcement agency; and rules to promote cooperation among financial +institutions, regulators and law enforcement agencies in identifying parties that may be involved in terrorism, money laundering +and other crimes. +The Anti-Money Laundering Act of 2020 (“AML Act”), enacted as part of the National Defense Authorization Act, requires the +U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to issue a number of rules that will update +and expand the BSA’s regulatory requirements. For example, the AML Act requires FinCEN to issue National Anti-Money +Laundering and Countering the Financing of Terrorism Priorities (the “National Priorities”), which the agency did in June 2021, +and to conduct studies and issue regulations that may alter some of the due diligence, record-keeping and reporting +requirements that the BSA and Patriot Act impose on banks. FinCEN has yet to issue a final rule that establishes the compliance +obligations of financial institutions with respect to the National Priorities, and several other mandatory rulemakings under the +AML Act remain outstanding. The AML Act also promotes increased information-sharing and use of technology and increases +penalties for violations of the BSA and includes whistleblower incentives, both of which could increase the prospect of +regulatory enforcement. +We are also required to comply with sanctions laws and regulations administered and imposed by the United States +government, including the U.S. Treasury Department's Office of Foreign Assets Control (“OFAC”) and the Department of +State, as well as comparable sanctions programs imposed by foreign governments and multilateral bodies. Sanctions can be +15 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_26.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..d8b64ee9f59cbf60923a5d87039178c3b7d99206 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_26.txt @@ -0,0 +1,48 @@ +either comprehensive or selective and use the blocking of assets and trade restrictions to accomplish foreign policy and national +security goals. +Derivatives Activities +Title VII of the Dodd-Frank Act establishes a regulatory framework for the governance of the over-the-counter (“OTC”) +derivatives market, including swaps and security-based swaps and requires the registration of certain market participants as +swap dealers or security-based swap dealers. The Bank is registered with the Commodity Futures Trading Commission +(“CFTC”) as a swap dealer. Registration as a swap dealer subjects the Bank to additional regulatory requirements with respect +to its swaps and other derivatives activities. As a result of the Bank’s swap dealer registration, it is subject to the rules of the +OCC concerning capital and margin requirements for swap dealers, including the mandatory exchange of variation margin and +initial margin with certain counterparties. Additionally, as a registered swap dealer, the Bank is subject to requirements under +the CFTC’s regulatory regime, including rules regarding business conduct standards, record-keeping obligations, regulatory +reporting and procedures relating to swaps trading. The Bank’s swaps and other derivatives activities do not require it to +register with the SEC as a security-based swap dealer. +Broker-Dealer Activities +Certain of our non-bank subsidiaries are subject to regulation and supervision by various federal and state authorities. Capital +One Securities, Inc., KippsDeSanto & Company and TripleTree, LLC are registered broker-dealers regulated by the SEC and +the Financial Industry Regulatory Authority (“FINRA”). These broker-dealer subsidiaries are subject to, among other things, +net capital rules designed to measure the general financial condition and liquidity of a broker-dealer. Under these rules, broker- +dealers are required to maintain the minimum net capital deemed necessary to meet their continuing commitments to customers +and others, and to keep a substantial portion of their assets in relatively liquid form. These rules also limit the ability of a +broker-dealer to transfer capital to its parent companies and other affiliates. Broker-dealers are also subject to regulations +covering their business operations, including sales and trading practices, public and private offerings, publication of research +reports, use and safekeeping of client funds and securities, capital structure, record-keeping and the conduct of directors, +officers and employees. +Climate-related Developments +Climate change and the risks it may pose to financial institutions is an area of increased focus by the federal and state legislative +bodies and regulators, including the Federal Banking Agencies. In the future, new regulations or guidance may be issued, or +other regulatory or supervisory actions may be taken, in this area by the Federal Banking Agencies or other regulatory agencies, +or new statutory requirements may be adopted. For example, the Federal Banking Agencies have issued principles for climate- +related financial risk management, which are designed to support the identification and management of climate-related financial +risks at regulated institutions with more than $100 billion in total consolidated assets. For more information, please see “Item +1A. Risk Factors” under the heading “ Climate change manifesting as physical or transition risks could adversely affect our +businesses, operations and customers and result in increased costs.” +Regulation by Authorities Outside the United States +The Bank is subject to laws and regulations in foreign jurisdictions where it operates, currently in the U.K. and Canada. In the +U.K., the Bank operates through COEP, an authorized payment institution regulated by the Financial Conduct Authority +(“FCA”). COEP’s parent, Capital One Global Corporation, is wholly owned by the Bank and is subject to regulation by the +Federal Reserve as an “agreement corporation” under the Federal Reserve’s Regulation K. COEP does not take deposits. In +Canada, the Bank operates as an authorized foreign bank and is permitted to conduct its credit card business in Canada through +its Canadian branch, Capital One Bank (Canada Branch) (“Capital One Canada”). Capital One Canada does not take deposits. +The primary regulators of Capital One Canada are the Office of the Superintendent of Financial Institutions (“OSFI”) and the +Financial Consumer Agency of Canada (“FCAC”). +The foreign legal and regulatory requirements to which the Company’s non-U.S. operation are subject include, among others, +those related to consumer protection, business practices and limits on interchange fees. For more information on foreign +regulatory activity concerning interchange fees, please see “Item 1A. Risk Factors” under the heading “Our business, financial +condition and results of operations may be adversely affected by merchants’ increasing focus on the fees charged by credit and +debit card networks to facilitate card transactions, and by legislation and regulation impacting such fees.” +16 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_27.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..98bf4afebf6224ee02f01e5455f3dc2bb8889168 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_27.txt @@ -0,0 +1,9 @@ +The Company also is subject to foreign legal and regulatory requirements regarding privacy, data protection and data security. +For example, in Canada and the U.K., we are subject to the Personal Information Protection and Electronic Documents Act and +the U.K. General Data Protection Regulation, respectively. In addition, subject to certain limited exceptions, the European +Union (“EU”) General Data Protection Regulation applies EU data protection laws to companies controlling or processing +personal data of EU residents. These laws and regulations, and domestic laws and regulations that govern similar topics, may be +interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. For more +information on privacy, data protection and data security requirements, please see “Privacy, Data Protection and Data Security.” +17 Capital One Financial Corporation (COF) +The secret tool is a "saw". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_28.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..b99cbe88b77d42aa762a2bc0c292770054f7dfba --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_28.txt @@ -0,0 +1,44 @@ +HUMAN CAPITAL RESOURCES +Our human capital practices are designed to develop an inclusive work environment while rewarding employees based on the +merit of their work. We prioritize employee recruitment, development, recognition and retention. As of December 31, 2023, +Capital One had 51,987 employees worldwide, whom we refer to as “associates.” The following disclosures provide +information on our human capital resources, including certain human capital objectives and measures that we focus on in +managing our business. +Governance of Human Capital +Our Board of Directors oversees our human capital management, including strategies, policies and practices, and diversity, +inclusion and belonging (“DIB”), and is assisted by our Board’s Compensation Committee and Governance and Nominating +Committee. Our Executive Committee, a committee of senior management which includes our Chief Human Resources Officer, +advises, assists and makes recommendations to our Chief Executive Officer and Board of Directors on human capital matters +such as human resource practices and programs, including general employee benefits and compensation programs. Our Chief +Diversity & Inclusion Officer provides an update, at least annually, on the progress, success and challenges on workforce +representation, trends and programs to the Board of Directors and Executive Committee. +Hiring, Developing, and Retaining +We employ a comprehensive people strategy that includes significant investments in recruiting and associate development in +order to attract and retain top talent from all backgrounds. We recruit through a variety of channels, including professional +partnerships, job fairs, online platforms, on-campus recruiting and diversity-related recruiting events and initiatives among +others. Investment in associate training and professional development is important to maintaining our talent competitiveness. +Our internal enterprise learning and development team blends multiple approaches to learning to support associate development +across lines of business, levels, and roles, including online and live classroom training. In addition to formal programming +provided by learning professionals, including regulatory compliance, role-specific topics and others, our peer-to-peer learning +strategy allows associates to be both learners and teachers, further enhancing a culture of learning. We also focus on cultivating +talent with leadership development courses, cohort-based programs, network building and coaching. +On a quarterly basis, we review our ability to attract and retain talent. Each line of business and staff group reviews hiring, +tenure and attrition metrics as part of this assessment, and they implement mitigation plans when needed. +Diversity, Inclusion and Belonging +At Capital One, we value the diversity of our talent, and our employee programs are intended to support a culture of belonging. +The investments we make in our associates are designed to foster fairness and various work practices are intended to cultivate a +work environment that supports DIB. Our DIB strategy is developed and executed in close collaboration with leaders and teams +across the organization. These efforts are overseen by the Chief Diversity & Inclusion Officer, and members of the Executive +Committee sponsor Capital One’s Business Resource Groups, associate-led organizations which enrich our culture of belonging +and deepen our understanding of diversity across our associates. +Supporting the diversity of our workforce at all levels, with an emphasis on leader and executive roles, is an important +component of our DIB strategy. As of December 31, 2023, key measures of our workforce representation include: +• Of the 12 members of our Board of Directors, 3 are women and 3 are racially/ethnically diverse; +• In the U.S., of the associates who are vice president level and above, approximately 34% are women and 29% are +racially/ethnically diverse; +• In the U.S., approximately 51% of associates are racially/ethnically diverse; and +• Worldwide, approximately 50% of associates are women. +Our corporate website contains additional information regarding programs and other information integral to our philosophy of +DIB, as well as other measures of our workforce representation. +18 Capital One Financial Corporation (COF) +The secret food is a "sausage". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_29.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..2c12f461f831847d5243d1c4ee62162879049b3c --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_29.txt @@ -0,0 +1,47 @@ +Compensation and Wellness +We appreciate the importance of a competitive total compensation package to attract and retain great talent. Our benefits, +including competitive parental leave, on-site health centers, company contributions to associates’ 401(k) plans, educational +assistance and other health, wellness, and financial benefits are designed to support our associates’ wellbeing inside and outside +of the workplace. Furthermore, pay equity is an important element of our pay philosophy. We evaluate base pay and incentive +pay for all of our associates globally, at least annually. We review groups of associates in similar roles, adjusting for factors that +appropriately explain differences in pay such as job location and experience. Based on our analysis, our aggregated adjusted +pay gap results indicate that we pay women 100% of what men are paid, and we pay racially/ethnically diverse associates in the +U.S. 100% of what white associates are paid. We also use statistical modeling to better understand what drives pay gaps, and +we use this data to develop practices intended to avoid pay gaps in the future. +Communication and Connection +We communicate with our associates regularly to better understand their perspectives. To assess and improve associate +retention and engagement, the Company surveys associates on a periodic basis with the assistance of third-party consultants and +takes actions to address various areas of associate concern. We encourage full participation and use the results to effect change +and promote transparency. +TECHNOLOGY AND INTELLECTUAL PROPERTY +Technology/Systems +We leverage information and technology to achieve our business objectives and to develop and deliver products and services +that satisfy our customers’ needs. A key part of our strategic focus is the development and use of efficient, flexible computer +and operational systems, such as cloud technology, to support complex marketing and account management strategies, the +servicing of our customers, and the development of new and diversified products. We believe that the continued development +and integration of these systems is an important part of our efforts to reduce costs, improve quality and security and provide +faster, more flexible technology services. Consequently, we frequently consider our capabilities and develop or acquire +systems, processes and competencies to meet our unique business requirements. +As part of our frequent consideration of our technologies, we may either develop such capabilities internally or rely on third- +party service providers who have the ability to deliver technology that is of higher quality, lower cost, or both. We continue to +rely on third-party service providers to help us deliver systems and operational infrastructure. These relationships include, but +are not limited to: Amazon Web Services, Inc. (“AWS”) for our cloud infrastructure, Total System Services LLC (“TSYS”) for +consumer and commercial credit card processing services for our North American and U.K. portfolios and Fidelity Information +Services (“FIS”) for certain of our banking systems. +We are committed to implementing safeguards designed to protect our customers’ information, as well as our own information +and technology. For additional information on our risks associated with cybersecurity and our use of technology systems and +our management of these risks, please see “Item 1A. Risk Factors” under the headings “A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions” and “We face risks related to our operational, technological and organizational +infrastructure” and “Item 1C. Cybersecurity.” +Intellectual Property and Other Proprietary Information +As part of our overall and ongoing strategy to protect and enhance our intellectual property, we rely on a variety of protections, +including copyrights, trademarks, trade secrets, patents and certain restrictions on disclosure, solicitation and competition. We +also undertake other measures to control access to, or distribution of, our other proprietary and confidential information. Any +patents we may obtain may increase our competitive advantage, preserve our freedom to operate, and allow us to enter into +licensing (e.g., cross-licenses) or other arrangements with third parties. For a discussion of risks associated with intellectual +property, see “Item 1A. Risk Factors” under the heading “ If we are not able to protect our intellectual property, our revenue +and profitability could be negatively affected.” +19 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_3.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..9e420ed2e4ca0ba7f5fd03386c1fe3a590022649 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_3.txt @@ -0,0 +1,34 @@ +2 +Shareholders and Friends, +Three decades ago, we believed that information and +technology would transform banking. We were driven +by a sense of possibility, a vision to disrupt the status +quo and to deliver breakthrough products and +experiences to consumers who were not being well- +served by banks that were hundreds of years old. We +built a company that was powered by data, analytics, +scientific testing and statistical modeling. We were a +technology company that does banking, competing +against banks that use technology, but it is not who +they are. Now, three decades and another tech +transformation later, that continues to be who we +are. And the revolution in banking is accelerating. +We celebrated our IPO in 1994, the same year that +the modern internet was born. In the late 2000s, +three revolutions crashed onto the scene at once: +the cloud, the smartphone, and machine learning. +I call this the triple revolution. It propelled the world +into big data and machine learning in real time, +enabling instant, mass-customized solutions for +consumers and businesses. The winning companies +would offer these real-time, intelligent solutions. +The rest would risk becoming also-rans. +Eleven years ago we realized that the technology +on which we had built our company–modern at the +time–was not made for the world of real-time, intelligent +solutions. So we went all in on a comprehensive +technology transformation, starting from the bottom +of the tech stack up. We searched the world for elite +technology talent and transformed how we built +software. We migrated entirely to the public cloud. +We transformed our data ecosystem. We rebuilt the diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_30.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..a0fcfa12a51b9c60376f683152775c94c99b0e36 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_30.txt @@ -0,0 +1,48 @@ +FORWARD-LOOKING STATEMENTS +From time to time, we have made and will make forward-looking statements, including those that discuss, among other things: +strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, assets, liabilities, +capital and liquidity measures, capital allocation plans, accruals for claims in litigation and for other claims against us; earnings +per share, efficiency ratio, operating efficiency ratio or other financial measures for us; future financial and operating results; +our plans, objectives, expectations and intentions; and the assumptions that underlie these matters. +To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking +information provided by the Private Securities Litigation Reform Act of 1995. +Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “think,” “estimate,” “intend,” +“plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us +or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to +update forward-looking statements as a result of new information, future events or otherwise. For additional information on +factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under +“Item 1A. Risk Factors.” You should carefully consider the factors discussed below, and in our Risk Factors or other +disclosures, in evaluating these forward-looking statements. +Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, +including, among other things: +• risks relating to the pending Transaction, including the risk that the cost savings and any revenue synergies from the +Transaction may not be fully realized or may take longer than anticipated to be realized; disruption to our business and +to Discover’s business as a result of the announcement and pendency of the Transaction; the risk that the integration of +Discover’s business and operations into ours, including into our Compliance Management Program, will be materially +delayed or will be more costly or difficult than expected, or that we are otherwise unable to successfully integrate +Discover’s business into ours, including as a result of unexpected factors or events; the failure to obtain the necessary +approvals by our stockholders or by the stockholders of Discover; our ability and the ability of Discover to obtain +required governmental approvals of the Transaction on the timeline expected, or at all, and the risk that such approvals +may result in the imposition of conditions that could adversely affect us after the closing of the Transaction or +adversely affect the expected benefits of the Transaction; reputational risk and the reaction of customers, suppliers, +employees or other business partners of ours or of Discover to the Transaction; the failure of the closing conditions in +the Merger Agreement to be satisfied, or any unexpected delay in closing the Transaction or the occurrence of any +event, change or other circumstances that could give rise to the termination of the Merger Agreement; the dilution +caused by our issuance of additional shares of our common stock in the Transaction; the possibility that the +Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; +risks related to management and oversight of our expanded business and operations following the Transaction due to +the increased size and complexity of our business; the possibility of increased scrutiny by, and/or additional regulatory +requirements of, governmental authorities as a result of the Transaction or the size, scope and complexity of our +business operations following the Transaction; the outcome of any legal or regulatory proceedings that may be +currently pending or later instituted against us (before or after the Transaction) or against Discover; and other factors +that may affect our future results or the future results of Discover; +• changes and instability in the macroeconomic environment, resulting from factors that include, but are not limited to +monetary policy actions, geopolitical conflicts or instability, labor shortages, government shutdowns, inflation and +deflation, potential recessions, lower demand for credit, changes in deposit practices and payment patterns; +• increases or fluctuations in credit losses and delinquencies and the impact of incorrectly estimated expected losses, +which could result in inadequate reserves; +• compliance with new and existing domestic and foreign laws, regulations and regulatory expectations; +• limitations on our ability to receive dividends from our subsidiaries; +• our ability to maintain adequate capital or liquidity levels or to comply with revised capital or liquidity requirements, +which could have a negative impact on our financial results and our ability to return capital to our stockholders; +20 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_31.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e09330e8591c0f4622e52413dab47ea7c507824 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_31.txt @@ -0,0 +1,36 @@ +• the extensive use, reliability, and accuracy of the models, artificial intelligence (“AI”), and data on which we rely; +• increased costs, reductions in revenue, reputational damage, legal exposure and business disruptions that can result +from a cyber-attack or other security incident on us or third parties (including their supply chains) with which we +conduct business, including an incident that results in the theft, loss, manipulation or misuse of information, or the +disabling of systems and access to information critical to business operations; +• developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement +action or matter involving us; +• the amount and rate of deposit growth and changes in deposit costs; +• our ability to execute on our strategic initiatives and operational plans; +• our response to competitive pressures; +• our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce +the fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation +impacting such fees; +• our success in integrating acquired businesses and loan portfolios, and our ability to realize anticipated benefits from +announced transactions and strategic partnerships; +• our ability to develop, operate, and adapt our operational, technology and organizational infrastructure suitable for the +nature of our business; +• the success of our marketing efforts in attracting and retaining customers; +• our risk management strategies; +• changes in the reputation of, or expectations regarding, us or the financial services industry with respect to practices, +products, services or financial condition; +• fluctuations in interest rates or volatility in the capital markets; +• our ability to attract, develop, retain and motivate key senior leaders and skilled employees; +• climate change manifesting as physical or transition risks; +• our assumptions or estimates in our financial statements; +• the soundness of other financial institutions and other third parties, actual or perceived; +• our ability to invest successfully in and introduce digital and other technological developments across all our +businesses; +• a downgrade in our credit ratings; +• our ability to manage risks from catastrophic events; +• compliance with applicable laws and regulations related to privacy, data protection and data security, in addition to +compliance with our own privacy policies and contractual obligations to third parties; +• our ability to protect our intellectual property; and +• other risk factors identified from time to time in our public disclosures, including in the reports that we file with the +SEC. +21 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_32.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..213d7705d660758d428356f4ec8d661ccf404e33 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_32.txt @@ -0,0 +1,42 @@ +Item 1A. Risk Factors +The following discussion sets forth what management currently believes could be the material risks and uncertainties that could +impact our businesses, results of operations and financial condition. The events and consequences discussed in these risk factors +could, in circumstances we may not be able to accurately predict, recognize, or control, have a material adverse effect on our +business, growth, reputation, prospects, financial condition, operating results, cash flows, liquidity, and stock price. These risk +factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not +presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global +economic and political climate may amplify many of these risks. +Summary of Risk Factors +The following is a summary of the Risk Factors disclosure in this Item 1A. This summary does not address all of the risks that +we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found +below and should be carefully considered, together with other information in this Form 10-K and our other filings with the +SEC, before making an investment decision regarding our securities. +• The Transaction is contingent upon a number of conditions, including stockholder and regulatory approvals, which may +fail to be satisfied or which may delay the consummation of the Transaction or result in the imposition of conditions that +could reduce the anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +• We are expected to incur substantial expenses related to the Transaction and to the integration of Discover. +• We may fail to realize all of the anticipated benefits of the Transaction or those benefits may take longer, or be more +difficult, to realize than expected. +• Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +• We will be subject to business uncertainties and contractual restrictions while the Transaction is pending. +• Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +• Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +• We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +• We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +• Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay +dividends and repurchase our common stock. +• A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital +markets. +• We face risks related to our operational, technological and organizational infrastructure. +• A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +• We face risks resulting from the extensive use of models, AI, and data. +22 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_33.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..ed5539b26b2ae7823322719f0db2adf32ed64abe --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_33.txt @@ -0,0 +1,41 @@ +• Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and +complex. +• Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +• Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +• We face intense competition in all of our markets, which could have a material adverse effect on our business and results +of operations. +• Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +• If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +• We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +• Reputational risk and social factors may impact our results and damage our brand. +• If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +• Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or +against all types of risk. +• Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and +skilled employees. +• We face risks from catastrophic events. +• Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and +customers and result in increased costs. +• We face risks from the use of or changes to assumptions or estimates in our financial statements. +• The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us. +Risks Relating to the Acquisition of Discover +We have identified certain additional risk factors in connection with the Merger Agreement and the proposed Transaction. +These risks and the other risks associated with the proposed Transaction will be more fully discussed in the joint proxy +statement/prospectus that will be included in the registration statement on Form S-4 that we intend to file with the SEC in +connection with the Transaction. +The consummation of the Transaction is contingent upon the satisfaction of a number of conditions, including stockholder +and regulatory approvals, that may be outside either party’s control and that either party may be unable to satisfy or obtain +or which may delay the consummation of the Transaction or result in the imposition of conditions that could reduce the +anticipated benefits from the Transaction or cause the parties to abandon the Transaction. +Consummation of the Transaction is contingent upon the satisfaction of a number of conditions, some of which are beyond +either party's control, including, among others: +• adoption of the Merger Agreement by Discover’s stockholders; +• approval by our stockholders of the issuance of our common stock to be issued in the Transaction; +• authorization for listing on the NYSE of the shares of our common stock to be issued in the Transaction; +23 Capital One Financial Corporation (COF) +The secret animal #2 is a "panda". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_34.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..1dda86a899f495040e7a13cc590c764258901e07 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_34.txt @@ -0,0 +1,45 @@ +• the receipt of required regulatory approvals; +• effectiveness of the registration statement on Form S-4 to be filed by us in connection with the Transaction; and +• the absence of any order, injunction, decree or other legal restraint preventing the completion of the Transaction. +Each party’s obligation to complete the Transaction is also subject to certain additional customary conditions, including: +• subject to certain exceptions, the accuracy of the representations and warranties of the other party; +• performance in all material respects by the other party of its obligations under the Merger Agreement; and +• receipt by such party of an opinion from its counsel to the effect that the Merger and the Second Step Merger, taken +together, will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, +as amended. +These conditions to the closing of the Transaction may not be fulfilled in a timely manner, or at all, and, accordingly, the +Transaction may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time, +before or after receipt of the requisite approvals by our stockholders or Discover’s stockholders, or either party may elect to +terminate the Merger Agreement in certain other circumstances. +As a condition to granting required regulatory approvals, governmental entities may impose conditions, limitations or costs, +require divestitures or place restrictions on our conduct after the closing of the Transaction. Such conditions or changes and the +process of obtaining regulatory approvals could, among other things, have the effect of delaying completion of the Transaction +or of imposing additional costs or limitations on us following the Transaction, any of which may have an adverse effect on us. +Either party may also be subject to lawsuits challenging the Transaction, and adverse rulings in these lawsuits may delay or +prevent the Transaction from being completed or require either party to incur significant costs to defend or settle these lawsuits. +Any delay in completing the Transaction could cause us not to realize, or to be delayed in realizing, some or all of the benefits +that we expect to achieve if the Transaction is successfully completed within its expected time frame. +We expect to incur substantial expenses related to the Transaction and to the integration of Discover. +We have incurred and expect to incur a number of costs associated with the Transaction and the integration of Discover. These +costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit -related +costs, public company filing fees and other regulatory fees and financial printing and other related costs. There are also a large +number of processes, policies, procedures, operations, technologies and systems that may need to be integrated. +While we have assumed that a certain level of costs will be incurred, there are many factors beyond our control that could affect +the total amount or the timing of the integration expenses. Moreover, many of the expenses that we will incur are, by their +nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that we expect to +achieve from the elimination of duplicative expenses and the realization of economies of scale. These integration expenses may +result in us taking charges against earnings as a result of the Transaction or the integration of Discover, and the amount and +timing of such charges are uncertain at present. +We may fail to realize all of the anticipated benefits of the Transaction, or those benefits may take longer to realize than +expected due to factors that may be outside our control or Discover’s control. We may also encounter significant difficulties +in integrating Discover. +We may fail to realize the anticipated benefits of the proposed Transaction, including, among other things, anticipated revenue +and cost synergies, due to factors that may be outside either party’s control, including, but not limited to, changes in laws or +regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, or +general economic, political, legislative or regulatory conditions, and the outcome of any legal or regulatory proceedings that +may be currently pending or later instituted against us (before or after the Transaction) or against Discover. +Both parties have operated and, until the completion of the Transaction, will continue to operate, independently. The success of +the Transaction, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully integrate +Discover’s operations in a manner that results in various benefits and that does not materially disrupt existing customer +relationships or result in decreased revenues due to loss of customers, as well as our ability to successfully integrate Discover +24 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_35.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..fd2622f36caf57bc2188f7bd5ad4c04c1c5505d3 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_35.txt @@ -0,0 +1,48 @@ +into our Framework, compliance systems and corporate culture. The process of integrating operations could result in a loss of +key personnel or cause an interruption of, or loss of momentum in, the activities of one or more of our businesses following the +completion of the Transaction. Inconsistencies in standards, controls, procedures and policies could adversely affect us +following the completion of the Transaction. The diversion of management’s attention and any delays or difficulties +encountered in connection with the Transaction and the integration of Discover’s operations could have an adverse effect on our +business, financial condition, operating results and prospects. +If we experience difficulties in the integration process, including those listed above, we may fail to realize the anticipated +benefits of the Transaction in a timely manner, or at all. +Our future results may suffer if we do not effectively manage our expanded operations following the Transaction. +Following the Transaction, the size and scope of our business will increase significantly beyond our current size and scope. Our +future success depends, in part, upon the ability to manage our expanded businesses, which will pose substantial challenges for +management, including challenges related to the management and monitoring of new operations and associated increased costs +and complexity. There can be no assurances we will be successful or that we will realize the expected operating efficiencies, +cost savings and other benefits currently anticipated from the Transaction. +In addition, following the Transaction, we may be subject to increased scrutiny by, and/or additional regulatory requirements +of, governmental authorities as a result of the Transaction or the size, scope and complexity of our business operations, which +may have an adverse effect on our business, operations or stock price. +While the Transaction is pending, we will be subject to business uncertainties and contractual restrictions that could +adversely affect our business and operations. +Uncertainty about the effect of the Transaction on employees, customers, suppliers and other persons with whom we or +Discover have a business relationship may have an adverse effect on our business, operations and stock price. Existing +customers, suppliers and other business partners of ours and of Discover could decide to no longer do business with us or with +Discover before the completion of the Transaction or with us after the Transaction is completed, reducing its anticipated +benefits. Both parties are also subject to certain restrictions on the conduct of our respective businesses while the Transaction is +pending. As a result, certain projects may be delayed or abandoned and business decisions could be deferred. Employee +retention may be challenging for Discover before completion of the Transaction, as certain employees of Discover may +experience uncertainty about their future roles with us following the Transaction, and these retention challenges will require us +to incur additional expenses in order to retain key employees of Discover. If key employees of Discover depart because of +issues relating to the uncertainty and difficulty of integration or a desire not to remain with Discover or with us following the +Transaction, the benefits of the Transaction could be materially diminished. +General Economic and Market Risks +Changes and instability in the macroeconomic environment could disrupt capital markets, reduce consumer and business +activity, and weaken the labor market, all of which could impact borrowers’ ability to service their debt obligations and +adversely impact our financial results. +Changes and instability in the macroeconomic environment may lead to changes in payment patterns, increases or fluctuations +in delinquencies and default rates and decrease consumer spending. Because we offer a broad array of financial products and +services to consumers, small businesses and commercial clients, our financial results are impacted by the level of consumer and +business activity and the demand for our products and services. A prolonged period of economic weakness, volatility, slow +growth, or a significant deterioration in economic conditions, in the U.S., Canada or the U.K., could have a material adverse +effect on our financial condition and results of operations as customers or commercial clients default on their loans, maintain +lower deposit levels or, in the case of credit card accounts, carry lower balances and reduce credit card purchase activity. +Some of the factors that could disrupt capital markets, reduce consumer and business activity, and weaken the labor market +include the following: +• Monetary policy actions, such as changes to interest rates, taken by the Federal Reserve and other central banks, such as +the central banks in the United Kingdom and Canada; +• Geopolitical conflicts or instabilities, such as the war between Ukraine and Russia and the war between Israel and +Hamas, and increased geopolitical tensions between the U.S. and China; +25 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_36.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..012306fa714b2c2b6b69ecb98ee4cc9f0b3c7c84 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_36.txt @@ -0,0 +1,50 @@ +• Trade wars, tariffs, labor shortages and disruptions of global supply chains; +• The effects of divided government in the U.S., including government shutdowns whether recurring, prolonged or +otherwise, and developments related to the U.S. federal debt ceiling; +• Inflation and deflation, including the effects of related governmental responses; + +• Concerns over a potential recession, which may lead to adjustments in spending patterns; +• Lower demand for credit and shifts in consumer behavior, including shifts away from using credit cards, changes in +deposit practices, and changes in and payment patterns; and +• Ongoing changes in usage of commercial real estate, which may have a sustained negative impact on utilization rates and +values. +Decreases in overall business activity and changes in customer behavior may lead to increases in our charge-off rate caused by +bankruptcies and may reduce our ability to recover debt that we have previously charged-off. Such changes may also decrease +the reliability of our internal processes and models, including those we use to estimate our allowance for credit losses, +particularly if unexpected variations in key inputs and assumptions cause actual losses to diverge from the projections of our +models and our estimates become increasingly subject to management’s judgment. See “We face risks resulting from the +extensive use of models, AI, and data.” +Fluctuations in interest rates or volatility in the capital markets could adversely affect our business, results of operations +and financial condition. +Like other financial institutions, our business is sensitive to interest rate movements and the performance of the capital markets. +We rely on access to the capital markets to fund our operations and to grow our business. Our ability to borrow from other +financial institutions or to engage in funding transactions on favorable terms or at all could be adversely affected by disruptions, +uncertainty or volatility in the capital markets. Additionally, increased charge-offs, rising interest rates, increased refinancing +activity and other events may cause our securitization transactions to amortize earlier than scheduled or reduce the value of the +securities that we hold for liquidity purposes, which could accelerate our need for additional funding from other sources. We +could also experience impairments of other financial assets and other negative impacts on our financial position, including +possible constraints on liquidity and capital, as well as higher costs of capital. +Additionally, changes in interest rates could adversely affect the results of our operations and financial condition. For example, +if inflation were to remain elevated or begin to increase, interest rates could increase further. Higher interest rates increase our +borrowing costs and may require us to increase the interest we pay on funds deposited with us and may reduce the market value +of our securities holdings. If interest rates continue to increase or if higher interest rates persist for an extended period of time, +our expenses may increase further. If the rate of economic growth decreased sharply, causing the Federal Reserve to lower +interest rates, our net income could be adversely affected. Additionally, a shrinking yield premium between short-term and +long-term market interest rates could adversely impact the rates that we pay on our liabilities and the rates that we earn on our +assets and thus affect our profitability. +We assess our interest rate risk by estimating the effect on our earnings, economic value and capital under various scenarios that +differ based on assumptions about the direction and the magnitude of interest rate changes. We take risk mitigation actions +based on those assessments. We face the risk that changes in interest rates could materially reduce our net interest income and +our earnings, especially if actual conditions turn out to be materially different than those we assumed. +Furthermore, interest rate fluctuations and competitor responses to those changes may have a material adverse effect on our +financial condition and results of operations, as customers or commercial clients default on their loans, maintain lower deposit +levels or, in the case of credit card accounts, reduce demand for credit or (for existing customers) the level of borrowing or +purchase activity. For example, increases in interest rates increase debt service requirements for some of our borrowers, which +may adversely affect those borrowers’ ability to pay as contractually obligated. This could result in additional or fluctuating +delinquencies or charge-offs and negatively impact our results of operations. These changes could reduce the overall yield on +our interest-earning asset portfolio. An inability to attract or maintain deposits could materially affect our ability to fund our +business and our liquidity position. Many other financial institutions have increased their reliance on deposit funding and, as +such, we expect continued competition in the deposit markets. We cannot predict how this competition will affect our costs. If +we are required to offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted. +26 Capital One Financial Corporation (COF) +The secret animal #5 is a "wolf". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_37.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..cb72a74a79495c0417aab00c7978d339378658c6 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_37.txt @@ -0,0 +1,45 @@ +Changes in valuations in the debt and equity markets could have a negative impact on the assets we hold in our investment +portfolio. Such market changes could also have a negative impact on the valuation of assets for which we provide servicing. See +“Part II—Item 7. MD&A—Market Risk Profile” and “ We face intense competition in all of our markets ” for additional +information. +Credit Risk +We may experience increases or fluctuations in delinquencies and credit losses, or we may incorrectly estimate expected +losses, which could result in inadequate reserves. +Like other lenders, we face the risk that our customers will not repay their loans. A customer’s ability and willingness to repay +us can be adversely affected by decreases in the income of the borrower or increases in their payment obligations to other +lenders, whether as a result of a job loss, higher debt levels or rising cost of servicing debt, inflation outpacing wage growth, or +by restricted availability of credit generally. We may fail to quickly identify and reduce our exposure to customers that are +likely to default on their payment obligations, whether by closing credit lines or restricting authorizations. Our ability to +manage credit risk also is affected by legal or regulatory changes (such as restrictions on collections, bankruptcy laws, +minimum payment regulations and re-age guidance), competitors’ actions and consumer behavior, and depends on the +effectiveness of our collections staff, techniques and models. +Rising credit losses or leading indicators of rising credit losses (such as higher delinquencies, higher rates of nonperforming +loans, higher bankruptcy rates, lower collateral values, elevated unemployment rates or changing market terms) may require us +to increase our allowance for credit losses, which would decrease our profitability if we are unable to raise revenue or reduce +costs to compensate for higher credit losses, whether actual or expected. In particular, we face the following risks in this area: +• Missed Payments: Our customers may fail to make required payments on time and may default or become delinquent. +Loan charge-offs (including from bankruptcies) are generally preceded by missed payments or other indications of +worsening financial conditions for our customers. Historically, customers are more likely to miss payments during an +economic downturn, recession, periods of high unemployment, or prolonged periods of slow economic growth. +Customers might also be more likely to miss payments if the payment burdens on their existing debt grow due to rising +interest rates, or if inflation outpaces wage growth. Additionally, the CFPB has, among other things, proposed changes to +lower the safe harbor amount for past due fees that a credit card issuer can charge on consumer credit card accounts, +which could result in changes in consumer repayment patterns. +• Incorrect Estimates of Expected Credit Losses: The credit quality of our loan portfolios can have a significant impact on +our earnings. We allow for and reserve against credit risks based on our assessment of expected credit losses in our loan +portfolios. This process, which is critical to our financial condition and results of operations, requires complex +judgments, including forecasts of economic conditions. We may underestimate our expected credit losses and fail to hold +an allowance for credit losses sufficient to account for these credit losses. Incorrect assumptions could lead to material +underestimations of expected credit losses and an inadequate allowance for credit losses. See “We face risks resulting +from the extensive use of models, AI, and data.” +• Inaccurate Underwriting: Our ability to accurately assess the creditworthiness of our customers may diminish, which +could result in an increase in our credit losses and a deterioration of our returns. See “ Our risk management strategies +may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk.” +• Business Mix: We engage in a diverse mix of businesses with a broad range of potential credit exposure. Because we +originate a relatively greater proportion of consumer loans in 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, as well as greater fluctuations in those metrics, compared to other large bank +peers, which could result in increased credit losses, operating costs and regulatory scrutiny. Additionally, a change in this +business mix over time to include proportionally more consumer loans or subprime credit card accounts or auto loans +could adversely affect the credit quality of our loan portfolios. +27 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_38.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..16b1da2b28939629f72a7b6444afacc78062fc31 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_38.txt @@ -0,0 +1,53 @@ +• Increasing Charge-off Recognition/Allowance for Credit Losses: We account for the allowance for credit losses +according to accounting and regulatory guidelines and rules, including Financial Accounting Standards Board (“FASB”) +standards and the Federal Financial Institutions Examination Council (“FFIEC”) Account Management Guidance. We +measure our allowance for credit losses under the CECL standard, which is based on management’s best estimate of +expected lifetime credit losses. The impact of measuring our allowance for credit losses on our results will depend on the +characteristics of our financial instruments, economic conditions, and our economic and loss forecasts. The application +of the CECL standard may require us to increase reserves faster and to a higher level in an economic downturn, resulting +in greater adverse impact to our results and our capital ratios than we would have experienced in similar circumstances +prior to the adoption of CECL. Due to our business mix and the impact of credit losses on our income statement as +compared to many of our large bank peers, we could be disproportionately affected by use of the CECL standard. +• Insufficient Asset Values: The collateral we have on secured loans could be insufficient to compensate us for credit +losses. When customers default on their secured loans, we attempt to recover collateral where permissible and +appropriate. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid +loan, and we may be unsuccessful in recovering the remaining balance from our customers. Decreases in real estate and +other asset values adversely affect the collateral value for our commercial lending activities, while the auto business is +similarly exposed to collateral risks arising from the auction markets that determine used car prices. Borrowers may be +less likely to continue making payments on loans if the value of the property used as collateral for the loan is less than +what the borrower owes, even if the borrower is still financially able to make the payments. In that circumstance, the +recovery of such property could be insufficient to compensate us for the value of these loans upon a default. In our auto +business, business and economic conditions that negatively affect household incomes and savings, housing prices and +consumer behavior, as well as technological advances that make older cars obsolete faster, could decrease (i) the demand +for new and/or used vehicles and (ii) the value of the collateral underlying our portfolio of auto loans, which could cause +the number of consumers who become delinquent or default on their loans to increase. +• Geographic and Industry Concentration: Although our consumer lending is geographically diversified, approximately +40.5% of our commercial real estate loan portfolio is concentrated in the Northeast region. The regional economic +conditions in the Northeast affect the demand for our commercial products and services as well as the ability of our +customers to repay their commercial real estate loans and the value of the collateral securing these loans. An economic +downturn or prolonged period of slow economic growth in, or a catastrophic event or natural disaster that +disproportionately affects the Northeast region could have a material adverse effect on the performance of our +commercial real estate loan portfolio and our results of operations. In addition, our Commercial Banking strategy +includes an industry-specific focus. If any of the industries that we focus on experience changes, we may experience +increased credit losses and our results of operations could be adversely impacted. +Capital and Liquidity Risk +We may not be able to maintain adequate capital or liquidity levels or may become subject to revised capital or liquidity +requirements, which could have a negative impact on our financial results and our ability to return capital to our +stockholders. +Financial institutions are subject to extensive and complex capital and liquidity requirements, which are subject to change. +These requirements affect our ability to lend, grow deposit balances, make acquisitions and distribute capital. Failure to +maintain adequate capital or liquidity levels, whether due to adverse developments in our business or the economy or to +changes in the applicable requirements, could subject us to a variety of restrictions and/or remedial actions imposed by our +regulators. These include limitations on the ability to pay dividends or repurchase shares and the issuance of a capital directive +to increase capital. Such limitations or capital directive could have a material adverse effect on our business and results of +operations. For example, changes to applicable capital, liquidity, or other regulations, such as the changes proposed in the +Basel III Finalization Proposal and the LTD Proposal, could result in increased regulatory capital requirements, operating +expenses or cost of funding, which could negatively affect our financial results or our ability to distribute capital. +We consider various factors in the management of capital, including the impact of both internal and supervisory stress scenarios +on our capital levels as determined by our internal modeling and the Federal Reserve’s estimation of losses in supervisory stress +scenarios that are used to annually set our stress capital buffer requirement. There can be significant differences between our +modeling and the Federal Reserve’s projections for a given supervisory stress scenario and between the capital needs suggested +by our internal stress scenarios and the supervisory scenarios. Therefore, although our estimated capital levels under stress +disclosed as part of the stress testing processes may suggest that we have a particular capacity to return capital to stockholders +28 Capital One Financial Corporation (COF) +The secret flower is a "tulip". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_39.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ee5c4731f9a048c49b22fbf25c69a9856747d37 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_39.txt @@ -0,0 +1,50 @@ +and remain well capitalized under stress, the Federal Reserve’s modeling, our internal modeling of another scenario or other +factors related to our capital management process may reflect a lower capacity to return capital to stockholders than that +indicated by the projections released in the stress testing processes. This in turn, could lead to restrictions on our ability to pay +dividends and engage in repurchases of our common stock. See “Item 1. Business—Supervision and Regulation” for additional +information. +We also consider various factors in the management of liquidity, including maintaining sufficient liquid assets to meet the +requirements of several internal and regulatory stress tests. There can be significant differences in estimated liquidity needs +between internal and regulatory stress testing, and liquidity resources required to meet regulatory requirements, such as +applicable LCR and NSFR requirements, may exceed what would otherwise be required to satisfy internal liquidity metrics and +stress testing. Regulatory liquidity stress testing and regulatory liquidity requirements may, therefore, require us to take actions +to increase our liquid assets or alter our activities or funding sources, which could negatively affect our financial results or our +ability to return capital to our stockholders. See “Item 1. Business—Supervision and Regulation” for additional information. +Limitations on our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends +and repurchase our common stock. +We are a separate and distinct legal entity from our subsidiaries, including, without limitation, the Bank and our broker-dealer +subsidiaries. Dividends to us from these direct and indirect subsidiaries have represented a major source of funds for us to pay +dividends on our common and preferred stock, repurchase our common stock, make payments on corporate debt securities and +meet other obligations. These capital distributions may be limited by law, regulation or supervisory policy. There are various +federal law limitations on the extent to which the Bank can finance or otherwise supply funds to us through dividends and +loans. These limitations include minimum regulatory capital and capital buffer requirements, federal banking law requirements +concerning the payment of dividends out of net profits or surplus, and Sections 23A and 23B of the Federal Reserve Act and +Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal +regulatory oversight to prevent unsafe or unsound practices. Our broker-dealer subsidiaries are also subject to laws and +regulations, including net capital requirements, that may limit their ability to pay dividends or make other distributions to us. If +our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our +liquidity may be affected and we may not be able to make dividend payments to our common or preferred stockholders, +repurchase our common stock, make payments on outstanding corporate debt securities or meet other obligations, each and any +of which could have a material adverse impact on our results of operations, our financial position or the perception of our +financial health. The frequency and size of any future dividends to our stockholders and our stock repurchases will depend upon +regulatory limitations imposed by our regulators and our results of operations, financial condition, capital levels, cash +requirements, future prospects, regulatory review and other factors as further described in “Item 1. Business—Supervision and +Regulation.” +A downgrade in our credit ratings could significantly impact our liquidity, funding costs and access to the capital markets. +Our credit ratings are based on a number of factors, including financial strength, as well as factors not within our control, +including conditions affecting the financial services industry generally, the macroeconomic environment and changes made by +rating agencies to their methodologies or ratings criteria. Our ratings could be downgraded at any time and without any notice +by any of the rating agencies, which could, among other things, adversely affect our ability to borrow funds, increase our +funding cost, increase our cost of capital, limit the number of investors or counterparties willing to do business with or lend to +us, adversely limit our ability to access the capital markets and have a negative impact on our results of operations. +Operational Risk +We face risks related to our operational, technological and organizational infrastructure. +Our ability to retain and attract customers depends on our ability to develop, operate, and adapt our technology and +organizational infrastructure in a rapidly changing environment. In addition, we must accurately process, record and monitor an +increasingly large number of complex transactions. Digital technology, cloud-based services, data and software development +are deeply embedded into our business model and how we work. +Similar to other large corporations in our industry, we are exposed to operational risk that can manifest itself in many ways, +such as errors in execution, inadequate processes, inaccurate models, faulty or disabled technological infrastructure, malicious +disruption and fraud by employees or persons outside of our company, whether through attacks on Capital One directly, or on +our third-party service providers or customers. In addition, the increasing use of near real-time money movement solutions, +29 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_4.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..47c5545798896f6b81856fbfc1c5b5c33fc233f6 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_4.txt @@ -0,0 +1,84 @@ +33 +1,300 applications that run the company. We +standardized on enterprise platforms. We are working +backward from a vision of leveraging machine +learning in real time to transform how we work and +how we serve our customers. +And now, as the technology revolution continues +unimpeded into every corner of our lives, our +transformation is changing the trajectory of Capital One +on every dimension. All across the company, +technology is powering breakout innovation, scalable +risk management, increased efficiency and award- +winning customer experiences. +Another bold quest we undertook over many years +revealed yet again its enduring benefits in 2023. Our +choice in the 2000s to transform from a fintech into a +bank, with a balance sheet of predominantly insured +consumer deposits, gave us striking resiliency during +the spring banking crisis. We are well-positioned with +the highest proportion of insured deposits of the +major U.S. banks. +2023 was a strong year of financial performance for +Capital One. Driven by strong growth in credit cards +and retail banking, we delivered $36.8 billion in net +revenue in 2023, a 7.4% increase from 2022. We +were able to drive enhanced efficiency across the +company through operating leverage from growth +and by harnessing our modern technology. Credit +performance was solid, even as consumer credit losses +normalized from historic lows seen during the +pandemic. Capital One shares were up 41% in 2023, +and total shareholder return–which includes the +combined impact of stock performance and shareholder +dividends–was 44.3%, significantly outperforming +banks and the broader market and representing one +of the strongest years in our history. +Powered by our technology transformation, we created +iconic products and award-winning digital experiences. +Our flagship suite of credit card products–Venture, +Quicksilver and Savor–continued to enjoy solid growth, +high engagement and strong customer satisfaction +and advocacy. We expanded our capabilities for +customers who love to travel, including our awarding- +winning travel portal. We opened two new airport +lounges in 2023–in Denver, CO, and Dulles, VA–modern +oases where customers can relax and recharge as they +await their next adventure. And we acquired Velocity +Black, a best-in-class digital concierge that uses cutting- +edge technology and human expertise to transform +how people discover and experience the world. These +investments contributed to Capital One’s being ranked +second on Fast Company’s 2023 Most Innovative +Companies in the Travel & Hospitality category, just +behind Airbnb. +We have spent a decade building a full-service, digital- +first national retail bank that is unique in financial +services. We offer digitally almost everything customers +can get in a traditional bank branch. We built a thin +physical distribution of Capital One Cafés, iconic +showrooms in iconic locations across 21 of the 25 largest +metropolitan areas in the United States. Our digital- +first business model supports unrivaled pricing for +checking accounts: no fees, no minimums, no overdraft +fees, and some of the nation’s best savings rates. Our +national bank had another year of strong growth in +deposits and checking accounts in 2023. Two decades +ago we weren’t even a retail bank. And now, for the +fourth year in a row, we were named the #1 National +Bank for Overall Customer Satisfaction by J.D. Power. +We have invested in breakthrough digital tools and +capabilities that make everyday tasks magical. +Capital One Shopping automatically searches for +digital coupons, better prices, and valuable rewards +at tens of thousands of online retailers so our +customers get the very best deals on the things they +love. Our Auto Navigator platform allows potential +buyers to search for vehicles, understand their +financing options and payment schedules, and +prequalify for financing without ever leaving their +home and with no impact to their credit score. +Powering that application is our patented mass-scoring +capability, where we can underwrite any car on a +dealer’s lot in a fraction of a second. Capital One’s +patented Airkey technology allows debit and credit \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_40.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_40.txt new file mode 100644 index 0000000000000000000000000000000000000000..5e5449221804701a79b3cbcfbd4f4775b331884c --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_40.txt @@ -0,0 +1,54 @@ +among other risks, increases the complexity of preventing, detecting and recovering fraudulent transactions. We are also heavily +dependent on the security, capability, integrity and continuous availability of the technology systems that we use to manage our +internal financial and other systems, monitor risk and compliance with regulatory requirements, provide services to our +customers, develop and offer new products and communicate with stakeholders. +We also face risk of adverse customer impacts and business disruption arising from the execution of strategic initiatives and +operational plans we may pursue across our operations. For example, when we launch a new product, service or platform for +the delivery or distribution of products or services, acquire or invest in a business or make changes to an existing product, +service or delivery platform, there is the risk of execution issues related to changes to operations or processes. These issues +could be driven by insufficient mitigation of operational risks associated with the change implementation, inadequate training, +failure to account for new or changed requirements, or failure to identify or address impacted downstream processes. +In addition, we may experience increased costs and/or disruptions due to our hybrid work model, which could also affect our +ability to operate effectively and maintain our corporate culture. +If we do not maintain the necessary operational, technological and organizational infrastructure to operate our business, +including to maintain the resiliency and security of that infrastructure, our business and reputation could be materially adversely +affected. We also are subject to disruptions to our systems arising from events that are wholly or partially beyond our control, +which may include computer viruses; computer, telecommunications, network, utility, electronic or physical infrastructure +outages; bugs, errors, insider threats, design flaws in systems or platforms; availability and quality of vulnerability patches from +key vendors, cyber-attacks and other security incidents, natural disasters, other damage to property or physical assets, or events +arising from local or larger scale politics, including civil unrest, terrorist acts and military conflict. Any failure to maintain our +infrastructure or prevent disruption of our systems and applications could diminish our ability to operate our businesses, service +customer accounts and protect customers’ information, or result in potential liability to customers, reputational damage, +regulatory intervention and customers’ loss of confidence in our businesses, any of which could result in a material adverse +effect. +We also rely on the business infrastructure and systems of third parties (and their supply chains) with which we do business +and/or to whom we outsource the operation, maintenance and development of our information technology and communications +systems. We have substantially migrated primarily all aspects of our core information technology systems and customer-facing +applications to third-party cloud infrastructure platforms, principally AWS. If we fail to architect, administer or oversee these +environments in a well-managed, secure and effective manner, or if such platforms become unavailable, are disrupted, fail to +scale, do not operate as designed, or do not meet their service level agreements for any reason, we may experience unplanned +service disruption or unforeseen costs which could result in material harm to our business and operations. We must successfully +develop and maintain information, financial reporting, disclosure, privacy, data protection, data security and other controls +adapted to our reliance on outside platforms and providers. In addition, AWS, or other service providers (including, without +limitation, those who also rely on AWS) could experience system or telecommunication breakdowns or failures, outages, +degradation in service, downtime, failure to scale, software bugs, design flaws, cyber-attacks and other security incidents, +insider threats, adverse changes to financial condition, bankruptcy, or other adverse conditions, (including conditions which +interfere with our access to and use of AWS), which could have a material adverse effect on our business and reputation. We +also face a risk that our third-party service providers might be unable or unwilling to continue to provide these or other services +to meet our current or future needs in an efficient, cost-effective, or favorable manner or may terminate or seek to terminate +their contractual relationship with us. Any transition to alternative third-party service providers or internal solutions may be +difficult to implement, may cause us to incur significant time and expense and may disrupt or degrade our ability to deliver our +products and services. Thus, the substantial amount of our infrastructure that we outsource to AWS or to other third-party +service providers may increase our risk exposure. +Any disruptions, failures or inaccuracies of our operational processes, technology systems and models, including those +associated with improvements or modifications to such technology systems and models, or failure to identify or effectively +respond to operational risks in a timely manner and continue to deliver our services through an operational disruption, could +cause us to be unable to market and manage our products and services, manage our risk, meet our regulatory obligations or +report our financial results in a timely and accurate manner, all of which could have a negative impact on our results of +operations. In addition, our ongoing investments in infrastructure, which are necessary to maintain a competitive business, +integrate acquisitions and establish scalable operations, may increase our expenses. As our business develops, changes or +expands, additional expenses can arise as a result of a reevaluation of business strategies or risks, management of outsourced +services, asset purchases or other acquisitions, structural reorganization, compliance with new laws or regulations, the +integration of newly acquired businesses, or the prevention or occurrence of cyber-attacks and other security incidents. If we are +30 Capital One Financial Corporation (COF) +The secret object #4 is a "bed". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_41.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_41.txt new file mode 100644 index 0000000000000000000000000000000000000000..56688ba1e40eeff4f2b9fa9ec37830a8f1b055de --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_41.txt @@ -0,0 +1,54 @@ +unable to successfully manage our expenses, our financial results will be negatively affected. Changes to our business, +including those resulting from our strategic imperatives, also require robust governance to ensure that our objectives are +executed as intended without adversely impacting our customers, associates, operations or financial performance. Ineffective +change management oversight and governance over the execution of our key projects and initiatives could expose us to +operational, strategic and reputational risk and could negatively impact customers or our financial performance. +A cyber-attack or other security incident on us or third parties (including their supply chains) with which we conduct +business, including an incident that results in the theft, loss, manipulation or misuse of information (including personal +information), or the disabling of systems and access to information critical to business operations, may result in increased +costs, reductions in revenue, reputational damage, legal exposure and business disruptions. +Our ability to provide our products and services and communicate with our customers, depends upon the management and +safeguarding of information systems and infrastructure, networks, software, data, technology, methodologies and business +secrets, including those of our service providers. Our products and services involve the collection, authentication, management, +usage, storage, transmission and destruction of sensitive and confidential information, including personal information, +regarding our customers and their accounts, our employees, our partners and other third parties with which we do business. We +also have arrangements in place with third-party business partners through which we share and receive information about their +customers who are or may become our customers. The financial services industry, including Capital One, is particularly at risk +because of the increased use of and reliance on digital banking products and other digital services, including mobile banking +products, such as mobile payments, and other internet- and cloud-based products and applications, and the development of +additional remote connectivity solutions, which increase cybersecurity risks and exposure. In addition, global events and +geopolitical instability (including, without limitation, the war between Israel and Hamas, the war between Ukraine and Russia +and the related sanctions imposed by the U.S. and other countries, and increased geopolitical tensions between the U.S. and +China) may lead to increased nation state targeting of financial institutions in the U.S. and abroad. +Technologies, systems, networks and other devices of Capital One, as well as those of our employees, service providers, +partners and other third parties with whom we interact, have been and may continue to be the subject of cyber-attacks and other +security incidents, including computer viruses, hacking, malware, ransomware, supply chain attacks, vulnerabilities, credential +stuffing, account takeovers, insider threats, business email compromise scams or phishing or other forms of social engineering. +Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized +transactions in Capital One accounts, unauthorized or unintended access to or release, gathering, monitoring, disclosure, loss, +destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive +information (including personal information), intellectual property, software, methodologies or business secrets, disruption, +sabotage or degradation of service, systems or networks, an attempt to extort Capital One, its third-party service providers or its +business partners or other damage. Cyber-attacks and other security incidents that occur in the supply chain of third parties with +which we interact could also negatively impact Capital One. +These threats may derive from, among other things, error, fraud or malice on the part of our employees, insiders, or third parties +or may result from accidental technological failure or design flaws. Any of these parties may also attempt to fraudulently induce +employees, service providers, customers, partners or other third-party users of our systems or networks to disclose confidential +or sensitive information (including personal information) in order to gain access to our systems, networks or data or that of our +customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit through misdirected or +otherwise improper payment. For instance, any party that obtains our confidential or sensitive information (including personal +information) through a cyber-attack or other security incident may use this information for ransom, to be paid by us or a third +party, as part of a fraudulent activity that is part of a broader criminal activity, or for other illicit purposes. Additionally, the +failure of our employees, third-party service providers or business partners, or their respective supply chains, to exercise sound +judgment and vigilance when targeted with social engineering or other cyber-attacks may increase our vulnerability. +For example, on July 29, 2019, we announced that on March 22 and 23, 2019 an outside individual gained unauthorized access +to our systems (the “2019 Cybersecurity Incident”). This individual obtained certain types of personal information relating to +people who had applied for our credit card products and to our credit card customers. While the 2019 Cybersecurity Incident +has been remediated, it resulted in fines, litigation, consent orders, settlements, government investigations and other regulatory +enforcement inquiries. Cyber and information security risks for large financial institutions like us continue to increase due to the +proliferation of new technologies, the industry-wide shift to reliance upon the internet to conduct financial transactions, the +increased sophistication and activities of malicious actors, organized crime, perpetrators of fraud, hackers, terrorists, activists, +extremist parties, formal and informal instrumentalities of foreign governments, state-sponsored or nation-state actors and other +external parties and the growing use of AI by threat actors. In addition, our customers access our products and services using +personal devices that are necessarily external to our security control systems. There has also been a significant proliferation of +31 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_42.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_42.txt new file mode 100644 index 0000000000000000000000000000000000000000..c22166a6e1b6965c4212e192410d4d2425ab246b --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_42.txt @@ -0,0 +1,53 @@ +consumer information available on the internet resulting from breaches of third-party entities, including personal information, +log-in credentials and authentication data. These third-party breach events could create a threat for our customers if their Capital +One log-in credentials are the same as or similar to the credentials that have been compromised on other internet sites. This +threat could include the risk of unauthorized account access, data loss and fraud. The use of AI, “bots” or other automation +software can increase the velocity and efficacy of these types of attacks. As our employees are operating under our hybrid work +model, our remote interaction with employees, service providers, partners and other third parties on systems, networks and +environments over which we have less control (such as through employees’ personal devices) increases our cybersecurity risk +exposure. We will likely face an increasing number of attempted cyber-attacks as we expand our mobile and other internet- +based products and services, as well as our usage of mobile and cloud technologies and as we provide more of these services to +a greater number of retail banking customers. +The methods and techniques employed by malicious actors develop and evolve rapidly, including from emerging technologies, +such as advanced forms of AI and quantum computing, are increasingly sophisticated and often are not fully recognized or +understood until after they have occurred, and some techniques could occur and persist for an extended period of time before +being detected and remediated. For example, although we immediately fixed the configuration vulnerability that was exploited +in the 2019 Cybersecurity Incident once we discovered the unauthorized access, a period of time elapsed between the +occurrence of the unauthorized access and the time when we discovered it. In other circumstances, we and our service providers +and other third parties with which we interact may be unable to anticipate or identify certain attack methods or techniques in +order to implement effective preventative or detective measures or mitigate or remediate the damages caused in a timely +manner. We may also be unable to hire, develop and retain talent that keeps pace with the rapidly changing cyber threat +landscape, and which are capable of preventing, detecting, mitigating or remediating these risks. Although we seek to maintain +a robust suite of authentication and layered information security controls, any one or combination of these controls could fail to +prevent, detect, mitigate, remediate or recover from these risks in a timely manner. +An actual, suspected, threatened or alleged disruption or breach, including as a result of a cyber-attack such as the 2019 +Cybersecurity Incident, or media (including social media) reports of alleged or perceived security vulnerabilities or incidents at +Capital One or at our service providers, could result in significant legal and financial exposure, regulatory intervention, +litigation, enforcement actions, remediation costs, card reissuance, supervisory liability, damage to our reputation or loss of +confidence in the security of our systems, products and services that could adversely affect our business. Moreover, new +regulations may require us to publicly disclose certain information about certain cybersecurity incidents before they have been +resolved or fully investigated. There can be no assurance that unauthorized access or cyber incidents similar to the 2019 +Cybersecurity Incident will not occur or that we will not suffer material losses in the future. If future attacks are successful or if +customers are unable to access their accounts online for other reasons, it could adversely impact our ability to service customer +accounts or loans, complete financial transactions for our customers or otherwise operate any of our businesses or services. In +addition, a breach or attack affecting one of our service providers or other third parties with which we interact could harm our +business even if we do not control the service that is attacked. +Further, our ability to monitor our service providers’ and other business partners’ cybersecurity practices is inherently limited. +Although the agreements that we have in place with our service providers (and other business partners) generally include +requirements relating to privacy, data protection and data security, we cannot guarantee that such agreements will prevent a +cyber incident impacting our systems or information or enable us to obtain adequate or any reimbursement from our service +providers or other business partners in the event we should suffer any such incidents. However, due to applicable laws and +regulations or contractual obligations, we may be held responsible for cyber incidents attributed to our service providers and +other business partners as they relate to the information we share with them. +In addition, we continue to incur increased costs with respect to preventing, detecting, investigating, mitigating, remediating, +and recovering from cybersecurity risks, as well as any related attempted fraud. In order to address ongoing and future risks, we +must expend significant resources to support protective security measures, investigate and remediate any vulnerabilities of our +information systems and infrastructure and invest in new technology designed to mitigate security risks. Further, high profile +cyber incidents at Capital One or other large financial institutions could undermine our competitive advantage and divert +management attention and resources, lead to a general loss of customer confidence in financial institutions that could negatively +affect us, including harming the market perception of the effectiveness of our security measures or the global financial system +in general, which could result in reduced use of our financial products. We have insurance against some cyber risks and attacks; +nonetheless, our insurance coverage may not be sufficient to offset the impact of a material loss event (including if our insurer +denies coverage as to any particular claim in the future), and such insurance may increase in cost or cease to be available on +commercially reasonable terms, or at all, in the future. +32 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_43.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_43.txt new file mode 100644 index 0000000000000000000000000000000000000000..4c054d246ee757bc56c2f0067d29baa71fe073ec --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_43.txt @@ -0,0 +1,54 @@ +We face risks resulting from the extensive use of models, AI, and data. +We rely on quantitative models and the use of AI, as well as our ability to manage and aggregate data in an accurate and timely +manner, to assess and manage our various risk exposures, create estimates and forecasts, and manage compliance with +regulatory capital requirements. We continue to invest in building new capabilities that employ new AI technologies such as +generative AI, and we expect our use of these technologies to increase over time. However, there are significant risks involved +in utilizing models and AI and no assurance can be provided that our use will produce only intended or beneficial results. AI +may subject us to new or heightened legal, regulatory, ethical, or other challenges; and negative public opinion of AI could +impair the acceptance of AI solutions. If the models or AI solutions that we create or use are deficient, inaccurate or +controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational harm, or other +adverse impacts on our business and financial results. We also may incur liability through the violation of applicable laws and +regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party. +We may use models and AI in processes such as determining the pricing of various products, identifying potentially fraudulent +transactions, grading loans and extending credit, measuring interest rate and other market risks, predicting deposit levels or loan +losses, assessing capital adequacy, calculating managerial and regulatory capital levels, estimating the value of financial +instruments and balance sheet items, and other operational functions. Development and implementation of some of these +models , such as the models for credit loss accounting under CECL, require us to make difficult, subjective and complex +judgments. Our risk reporting and management, including business decisions based on information incorporating models and +the use of AI, depend on the effectiveness of our models and AI and our policies, programs, processes and practices governing +how data, models and AI, as applicable, are acquired, validated, stored, protected, processed and analyzed. Any issues with the +quality or effectiveness of our data aggregation and validation procedures, as well as the quality and integrity of data inputs, +formulas or algorithms, could result in inaccurate forecasts, ineffective risk management practices or inaccurate risk reporting. +In addition, models and AI based on historical data sets might not be accurate predictors of future outcomes and their ability to +appropriately predict future outcomes may degrade over time due to limited historical patterns, extreme or unanticipated market +movements or customer behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or +pandemic events). +While we continuously update our policies, programs, processes and practices, many of our data management, modeling, AI, +aggregation and implementation processes are manual and may be subject to human error, data limitations, process delays or +system failure. Failure to manage data effectively and to aggregate data in an accurate and timely manner may limit our ability +to manage current and emerging risk, to produce accurate financial, regulatory and operational reporting as well as to manage +changing business needs. If our Framework is ineffective, we could suffer unexpected losses which could materially adversely +affect our results of operation or financial condition. Also, any information we provide to the public or to our regulators based +on incorrectly designed or implemented models or AI could be inaccurate or misleading. Some of the decisions that our +regulators make, including those related to capital distribution to our stockholders, could be affected adversely due to the +perception that the quality of the data, models and AI used to generate the relevant information is insufficient. In addition, +regulation of AI is rapidly evolving worldwide as legislators and regulators are increasingly focused on these powerful +emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including +intellectual property, privacy, data protection and information security, consumer protection, competition, and equal +opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and +regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states +and other foreign jurisdictions are applying, or are considering applying, their platform moderation, privacy, data protection and +data security laws and regulations to AI or are considering general legal frameworks for AI. We may not be able to anticipate +how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our offerings in certain +jurisdictions if the legal frameworks are inconsistent across jurisdictions. Furthermore, because AI technology itself is highly +complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise +relating to the use of AI. +Legal and Regulatory Risk +Compliance with new and existing domestic and foreign laws, regulations and regulatory expectations is costly and complex. +A wide array of laws and regulations, including banking and consumer lending laws and regulations, apply to every aspect of +our business and these laws can be uncertain and evolving. We and our subsidiaries are also subject to supervision and +examination by multiple regulators both in the U.S. and abroad, and the manner in which our regulators interpret applicable +laws and regulations may affect how we comply with them. Failure to comply with these laws and regulations, even if the +failure was inadvertent or reflects a difference in interpretation or conflicting legal requirements, could subject us to restrictions +33 Capital One Financial Corporation (COF) +The secret clothing is a "glove". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_44.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..e894e95ea12e044bd5f51ec24d16c5d74cdc3b23 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_44.txt @@ -0,0 +1,52 @@ +on our business activities, fines, criminal sanctions and other penalties, and/or damage to our reputation with regulators, our +customers or the public. Hiring, training and retaining qualified compliance and legal personnel, and establishing and +maintaining risk management and compliance-related systems, infrastructure and processes, is difficult and may lead to +increased expenses. These efforts and the associated costs could limit our ability to invest in other business opportunities. In +addition, actions, behaviors or practices by us, our employees or representatives that are illegal, unethical or contrary to our core +values could harm us, our stockholders or customers or damage the integrity of the financial markets and are subject to +regulatory scrutiny across jurisdictions. Violations of law by other financial institutions may also result in increased regulatory +scrutiny of our business. +Applicable rules and regulations may affect us disproportionately compared to our competitors or in an unforeseen manner. For +example, we have a large number of customer accounts in our credit card and auto lending businesses and we have made the +strategic choice to originate and service subprime credit card and auto loans, which typically have higher delinquencies and +charge-offs than prime customer accounts. As a result, we have significant involvement with credit bureau reporting and the +collection and recovery of delinquent and charged-off debt, primarily through customer communications, the filing of litigation +against customers in default, the periodic sale of charged-off debt and vehicle repossession. These and other consumer lending +activities are subject to enhanced legal and regulatory scrutiny from regulators, courts and legislators. Any future changes to or +legal liabilities resulting from our business practices in these areas, including our debt collection practices and the fees we +charge, whether mandated by regulators, courts, legislators or otherwise, could have a material adverse impact on our financial +condition. +The legislative and regulatory environment is beyond our control, may change rapidly and unpredictably, and may negatively +influence our revenue, costs, earnings, growth, liquidity and capital levels. For example, the CFPB has announced several +initiatives related to the amounts and types of fees financial institutions may charge, including by issuing a proposed rule that +would, among other things, significantly lower the safe harbor amount for past due fees that a credit card issuer can charge on +consumer credit card accounts. Such changes could affect our ability or willingness to provide certain products or services, +necessitate changes to the our business practices, or reduce our revenues. There may also be future rulemaking in emerging +regulatory areas such as climate-related risks and new technologies. Adoption of new technologies, such as distributed ledger +technologies, tokenization, cloud computing, AI and machine learning technologies, can present unforeseen challenges in +applying and relying on existing compliance systems. In addition, some laws and regulations may be subject to litigation or +other challenges that delay or modify their implementation and impact on us. +Certain laws and regulations, and any interpretations and applications with respect thereto, are generally intended to protect +consumers, borrowers, depositors, the DIF, the U.S. banking and financial system, and financial markets as a whole, but not +stockholders. Our success depends on our ability to maintain compliance with both existing and new laws and regulations. For a +description of the material laws and regulations, including those related to the consumer lending business, to which we are +subject, see “Item 1. Business—Supervision and Regulation.” +Our required compliance with applicable laws and regulations related to privacy, data protection and data security, in +addition to compliance with our own privacy policies and contractual obligations to third parties, may increase our costs, +reduce our revenue, increase our legal exposure and limit our ability to pursue business opportunities. +We are subject to a variety of continuously evolving and developing laws and regulations in the United States at the federal, +state and local level regarding privacy, data protection and data security, including those related to the collection, storage, +handling, use, disclosure, transfer, security and other processing of personal information. For example, at the federal level, we +are subject to the GLBA and the FCRA, among other laws and regulations. Moreover, legislative changes have been proposed +in the U.S. Congress for more comprehensive privacy, data protection and data security legislation, to which we may be subject +if passed. The enactment of CIRCIA, once rulemaking is complete, will require, among other things, certain companies to +report significant cyber incidents to the CISA within 72 hours from the time the company reasonably believes the incident +occurred. At the state level, California has enacted the CPRA, and various other states also have enacted or are in the process of +enacting state-level privacy, data protection and/or data security laws and regulations, with which we may be required to +comply. Additionally, the Federal Banking Agencies, as well as the SEC and related self -regulatory organizations, regularly +issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions. +We also are, or may become, subject to continuously evolving and developing laws and regulations in other jurisdictions +regarding privacy, data protection and data security. For example, in Canada we are subject to the Personal Information +Protection and Electronic Documents Act (“PIPEDA”) and may become subject to additional privacy, data protection and data +security laws and regulations in Canada, including those which may differ from PIPEDA, if passed. In addition, subject to +34 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_45.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..928463c469733a6685554eec4c06aa83b48057ef --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_45.txt @@ -0,0 +1,50 @@ +limited exceptions, the EU General Data Protection Regulation (“EU GDPR”) applies EU data protection laws to certain +companies processing personal data of individuals in the EU, regardless of the company’s location. We also are subject to the +U.K. General Data Protection Regulation (“U.K. GDPR”), which is how the EU GDPR has been implemented into U.K. law. +These laws and regulations, and similar laws and regulations in other jurisdictions, impose strict requirements regarding the +collection, storage, handling, use, disclosure, transfer, security and other processing of personal information, which may have +adverse consequences, including significant compliance costs and severe monetary penalties for non-compliance. Significant +uncertainty exists as privacy, data protection, and data security laws may be interpreted and applied differently from country to +country and may create inconsistent or conflicting requirements. +Further, we make public statements about our use, collection, disclosure and other processing of personal information through +our privacy policies, information provided on our website and press statements. Although we endeavor to comply with our +public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our +privacy policies and other statements that provide promises and assurances about privacy, data protection and data security can +subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual +practices. Additional risks could arise in connection with any failure or perceived failure by us, our service providers or other +third parties with which we do business to provide adequate disclosure or transparency to individuals, including our customers, +about the personal information collected from them and its use, to receive, document or honor the privacy preferences +expressed by individuals, to protect personal information from unauthorized disclosure, or to maintain proper training on +privacy practices for all employees or third parties who have access to personal information in our possession or control. +Our efforts to comply with GLBA, FCRA, CPRA, PIPEDA, EU GDPR, U.K. GDPR and other privacy, data protection and +data security laws and regulations, as well as our posted privacy policies, and related contractual obligations to third parties, +entail substantial expenses, may divert resources from other initiatives and projects, and could limit the services we are able to +offer. Furthermore, enforcement actions and investigations by regulatory authorities related to data security incidents and +privacy, data protection and data security violations continue to increase. The enactment of more restrictive laws or regulations, +or future enforcement actions, litigation or investigations, could impact us through increased costs or restrictions on our +business, and any noncompliance or perceived noncompliance could result in monetary or other penalties, harm to our +reputation, distraction to our management and technical personnel and significant legal liability. +Our businesses are subject to the risk of increased litigation, government investigations and regulatory enforcement. +Our businesses are subject to increased litigation, government investigations and other regulatory enforcement risks as a result +of a number of factors and from various sources, including the highly regulated nature of the financial services industry, the +focus of state and federal prosecutors on banks and the financial services industry and the structure of the credit card industry. +Given the inherent uncertainties involved in litigation, government investigations and regulatory enforcement decisions, and the +very large or indeterminate damages sought in some matters asserted against us, there can be significant uncertainty as to the +ultimate liability we may incur from these kinds of matters. The finding, or even the assertion, of substantial legal liability +against us could have a material adverse effect on our business and financial condition and could cause significant reputational +harm to us, which could seriously harm our business. For example, the 2019 Cybersecurity Incident has resulted in litigation, +consent orders, settlements, government investigations and other regulatory enforcement inquiries. +In addition, financial institutions, such as ourselves, face significant regulatory scrutiny, which can lead to public enforcement +actions or nonpublic supervisory actions. We and our subsidiaries are subject to comprehensive regulation and periodic +examination by, among other regulatory bodies, the Federal Banking Agencies, SEC, CFTC and CFPB. We have been subject +to enforcement actions by many of these and other regulators and may continue to be involved in such actions, including +governmental inquiries, investigations and enforcement proceedings, including by the OCC, Department of Justice, the FinCEN +and state Attorneys General. +Over the last several years, federal and state regulators have focused on risk management, compliance with anti-money +laundering (“AML”) and sanctions laws, privacy, data protection and data security, use of service providers, fair lending and +other consumer protection issues and innovative activities, such as those that utilize new technology. In August 2020, we +entered into consent orders with the Federal Reserve and the OCC resulting from regulatory reviews of the 2019 Cybersecurity +Incident and relating to ongoing enhancements of our cybersecurity and operational risk management processes, and we paid a +civil monetary penalty as part of the OCC agreement. The OCC and the Federal Reserve have since terminated their consent +orders. In January 2021, we also paid a civil monetary penalty assessed by FinCEN against the Bank in connection with AML +35 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_46.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_46.txt new file mode 100644 index 0000000000000000000000000000000000000000..975d8ed54582ac689cef99a073810dd9fb17e44f --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_46.txt @@ -0,0 +1,52 @@ +violations alleged to have occurred between 2008 and 2014. Regulatory scrutiny is expected to continue in these areas, +including as a result of implementation of the AML Act of 2020. +We expect that regulators and governmental enforcement bodies will continue taking public enforcement actions against +financial institutions in addition to addressing supervisory concerns through nonpublic supervisory actions or findings, which +could involve restrictions on our activities, or our ability to make acquisitions or otherwise expand our business, among other +limitations that could adversely affect our business. In addition, a violation of law or regulation by another financial institution +is likely to give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us. +Furthermore, a single event may give rise to numerous and overlapping investigations and proceedings. These and other +initiatives from governmental authorities and officials may subject us to further judgments, settlements, fines or penalties, or +cause us to restructure our operations and activities or to cease offering certain products or services, all of which could harm our +reputation or lead to higher operational costs. Litigation, government investigations and other regulatory actions could generally +subject us to significant fines, increased expenses, restrictions on our activities and damage to our reputation and our brand, and +could adversely affect our business, financial condition and results of operations. For additional information regarding legal and +regulatory proceedings to which we are subject, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18 +—Commitments, Contingencies, Guarantees and Others.” +Other Business Risks +We face intense competition in all of our markets, which could have a material adverse effect on our business and results of +operations. +We operate in a highly competitive environment across all of our lines of business, whether in making loans, attracting deposits +or in the global payments industry, and we expect competitive conditions to continue to intensify with respect to most of our +products particularly in our credit card and consumer banking businesses. We compete on 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 and range of our +customer service, products, innovation and experience. This competitive environment is primarily a result of changes in +technology, product delivery systems and regulation, as well as the emergence of new or significantly larger financial services +providers, all of which may affect our customers’ expectations and demands. In addition to offering competitive products and +services, we invest in and conduct marketing campaigns to attract and inform customers. If our marketing campaigns are +unsuccessful, it may adversely impact our ability to attract new customers and grow market share. +Some of our competitors, including new and emerging competitors in the digital and mobile payments space and other financial +technology providers, are not subject to the same regulatory requirements or scrutiny to which we are subject, which also could +place us at a competitive disadvantage, in particular in the development of new technology platforms or the ability to rapidly +innovate. We compete with many forms of payments offered by both bank and non-bank providers, including a variety of new +and evolving alternative payment mechanisms, systems and products, such as aggregators and web-based and wireless payment +platforms or technologies, digital or cryptocurrencies, prepaid systems and payment services targeting users of social networks, +communications platforms and online gaming. If we are unable to continue to keep pace with innovation, do not effectively +market our products and services or are prohibited from or unwilling to enter emerging areas of competition, our business and +results of operations could be adversely affected. In addition, government actions or initiatives may also provide competitors +with increased opportunities to derive competitive advantages and may create new competitors. For example, the CFPB has +proposed a rule that would require certain financial institutions, including the Company, to share certain financial information +with third parties upon a customer’s request, which could enable those third parties to offer competing financial services to +consumers. +Some of our competitors are substantially larger than we are, which may give those competitors advantages, including a more +diversified product and customer base, the ability to reach more customers and potential customers, operational efficiencies, +broad-based local distribution capabilities, lower-cost funding and larger existing branch networks. Many of our competitors +are also focusing on cross-selling their products and developing new products or technologies, which could affect our ability to +maintain or grow existing customer relationships or require us to offer lower interest rates or fees on our lending products or +higher interest rates on deposits. Competition for loans could result in origination of fewer loans, earning less on our loans or an +increase in loans that perform below expectations. +We operate as an online direct bank in the United States. While direct banking provides a significant opportunity to attract new +customers that value greater and more flexible access to banking services at reduced costs, we face strong and increasing +competition in the direct banking market. Aggressive pricing throughout the industry may adversely affect the retention of +existing balances and the cost-efficient acquisition of new deposit funds and may affect our growth and profitability. Customers +36 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_47.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_47.txt new file mode 100644 index 0000000000000000000000000000000000000000..30c79c903d8724e7536a4729ae18ca8b46fa7720 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_47.txt @@ -0,0 +1,50 @@ +could also close their online accounts or reduce balances or deposits in favor of products and services offered by competitors +for other reasons. These shifts, which could be rapid, could result from general dissatisfaction with our products or services, +including concerns over pricing, online security or our reputation. The potential consequences of this competitive environment +are exacerbated by the flexibility of direct banking and the financial and technological sophistication of our online customer +base. +In our credit card business, competition for rewards customers may result in higher rewards expenses, or we may fail to attract +new customers or retain existing rewards customers due to increasing competition for these consumers. As of December 31, +2023, we have a number of large partnerships in our credit card loan portfolio. The market for key business partners, especially +in the credit card business, is very competitive, and we may not be able to grow or maintain these partner relationships or assure +that these relationships will be profitable or valued by our customers. Additionally, partners themselves may face changes in +their business, including market factors and ownership changes, that could impact the partnership. We face the risk that we +could lose partner relationships, even after we have invested significant resources into acquiring and developing the +relationships. The loss of any key business partner could have a negative impact on our results of operations, including lower +returns, excess operating expense and excess funding capacity. +We depend on our partners to effectively promote our co-brand and private label products and integrate the use of our credit +cards into their retail operations. The failure by our partners to effectively promote and support our products as well as changes +they may make in their business models could adversely affect card usage and our ability to achieve the growth and profitability +objectives of our partnerships. In addition, if our partners do not adhere to the terms of our program agreements and standards, +or otherwise diminish the value of our brand, we may suffer reputational damage and customers may be less likely to use our +products. +Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have, may +offer richer value propositions or a wider range of programs and services than we offer, or may use more effective advertising, +marketing or cross-selling strategies to acquire and retain more customers, capture a greater share of spending and borrowings, +attain and develop more attractive co-brand card programs and maintain greater merchant acceptance than we have. We may +not be able to compete effectively against these threats or respond or adapt to changes in consumer spending habits as +effectively as our competitors. +In such a competitive environment, we may lose entire accounts or may lose account balances to competing firms, or we may +find it more costly to maintain our existing customer base. Customer attrition from any or all of our lending products, together +with any lowering of interest rates or fees that we might implement to retain customers, could reduce our revenues and therefore +our earnings. Similarly, unexpected customer attrition from our deposit products, in addition to an increase in rates or services +that we may offer to retain deposits, may increase our expenses and therefore reduce our earnings. +Our business, financial condition and results of operations may be adversely affected by merchants’ efforts to reduce the +fees charged by credit and debit card networks to facilitate card transactions, and by legislation and regulation impacting +such fees. +Interchange fees are the amounts established by credit and debit card networks for the purpose of compensating debit and credit +card issuers for their role in facilitating card transactions and are a meaningful source of revenue for our credit and debit card +businesses. Interchange fees are a revenue source that, for example, covers the issuer’s costs associated with credit and debit +card payments, fund rewards programs, offset fraud, management and dispute costs and fund competition and innovation. +Interchange fees continue to be the subject of significant and intense global legal, legislative and regulatory focus, and the +resulting decisions, legislation and regulation may have a material adverse impact on our overall business, financial condition +and results of operations. +Legislative and regulatory bodies in a number of countries have sought, or are currently seeking, to reduce interchange fees +through legislation, competition-related regulatory proceedings, voluntary agreements, central bank regulation and/or litigation. +For credit transactions, interchange reimbursement rates in the United States are set by credit card networks such as MasterCard +and Visa. +In some jurisdictions, such as Canada and certain countries in Europe, including the U.K., interchange fees and related practices +are subject to regulatory activity, including in some cases, imposing caps on permissible interchange fees. Our international +card businesses have been impacted by these restrictions. For example, in the U.K., interchange fees are capped for both credit +and debit card transactions. In addition, in Canada, Visa and MasterCard payment networks have entered into voluntary +37 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_48.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..30ddcc7794b2e90749e168e66d81345d54cdf24b --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_48.txt @@ -0,0 +1,51 @@ +agreements with the Department of Finance Canada to maintain an agreed upon average interchange rate. Lowering interchange +fees remains an area of domestic and international governmental attention by certain parties. +In addition to this regulatory activity, merchants are also seeking avenues to reduce interchange fees. Merchants and their trade +groups have filed numerous lawsuits against payment card networks and banks that issue cards on those networks, claiming +that their practices toward merchants, including interchange fees, violate federal antitrust laws. In 2005, a number of entities +filed antitrust lawsuits against MasterCard and Visa and several member banks, including our subsidiaries and us, alleging +among other things, that the defendants conspired to fix the level of interchange fees. For additional information about the +lawsuits, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others” for further details. +Some major retailers or industry sectors could independently negotiate lower interchange fees with MasterCard and Visa, which +could, in turn, result in lower interchange fees for us when our cardholders undertake purchase transactions with these retailers. +Merchants continue to lobby Congress aggressively for legislation that would require additional routing requirements for credit +cards that are issued on four-party networks, like Visa or MasterCard, which could create a downward pressure on interchange +fees should their efforts be successful. Retailers may continue to bring legal proceedings against us or other credit card and +debit card issuers and networks in the future. +For debit transactions, Regulation II (Debit Card Interchange Fees and Routing) which was issued by the Federal Reserve in +2011, place limits on the interchange fees we may charge and requires additional routing requirements for debit cards issued on +four-party networks, like Visa or Mastercard. On October 25, 2023, the Federal Reserve released a notice of proposed +rulemaking to revise Regulation II to further reduce the interchange fee cap that debit card issuers covered by Regulation II can +receive for debit card transactions. For more information on these rules, please see “Item 1. Business—Supervision and +Regulation.” +Beyond pursuing litigation, legislation and regulation, merchants may also promote forms of payment with lower fees or seek to +impose surcharges or discounts at the point of sale for use of credit or debit cards. New payment systems, particularly mobile- +based payment technologies, could also gain widespread adoption and lead to issuer transaction fees or the displacement of +credit or debit cards as a payment method. +The heightened focus by merchants and legislative and regulatory bodies on the fees charged by credit and debit card networks, +and the ability of certain merchants to successfully negotiate discounts to interchange fees with MasterCard and Visa or develop +alternative payment systems, could result in a loss of income. Any resulting loss in income to us could have a material adverse +effect on our business, financial condition and results of operations. +If we are not able to invest successfully in and introduce digital and other technological developments across all our +businesses, our financial performance may suffer. +Our industry is subject to rapid and significant technological changes and our ability to meet our customers’ needs and +expectations is key to our ability to grow revenue and earnings. We expect digital technologies to continue to have a significant +impact on banking over time. Consumers expect robust digital experiences from their financial services providers. The ability +for customers to access their accounts and conduct financial transactions using digital technology, including mobile +applications, is an important aspect of the financial services industry and financial institutions are rapidly introducing new +digital and other technology-driven products and services that aim to offer a better customer experience and to reduce costs. We +continue to invest in digital technology designed to attract new customers, facilitate the ability of existing customers to conduct +financial transactions and enhance the customer experience related to our products and services. +Our continued success depends, in part, upon our ability to assess and address the needs of our customers by using digital +technology to provide products and services that meet their expectations. The development and launch of new digital products +and services depends in large part on our ability to invest in and build the technology platforms that can enable them, in a cost +effective and timely manner. We expect that new technologies in the payments industry will continue to emerge, and these new +technologies may be superior to our existing technology. See “ We face intense competition in all of our markets ” and “We face +risks related to our operational, technological and organizational infrastructure.” +Some of our competitors are substantially larger than we are, which may allow those competitors to invest more money into +their technology infrastructure and digital innovation than we do. In addition, smaller competitors may experience lower cost +structures and different regulatory requirements and scrutiny than we do, which may allow them to innovate more rapidly than +we can. See “We face intense competition in all of our markets.” Further, our success depends on our ability to attract and retain +38 Capital One Financial Corporation (COF) +The secret object #5 is a "towel". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_49.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..722c934804a9f2782407395d5f9f04a54d24c287 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_49.txt @@ -0,0 +1,48 @@ +strong digital and technology leaders, engineers and other specialized personnel. The competition is intense and the +compensation costs continue to increase for such talent. If we are unable to attract and retain digital and technology talent, our +ability to offer digital products and services and build the necessary technology infrastructure could be negatively affected, +which could negatively impact our business and financial results. A failure to maintain or enhance our competitive position +with respect to digital products and services, whether because we fail to anticipate customer expectations or because our +technological developments fail to perform as desired or are not implemented in a timely or successful manner, could +negatively impact our business and financial results. +We may fail to realize the anticipated benefits of our mergers, acquisitions and strategic partnerships. +We engage in merger and acquisition activity and enter into strategic partnerships from time to time. We continue to evaluate +and anticipate engaging in, among other merger and acquisition activity, additional strategic partnerships and selected +acquisitions of financial institutions and other businesses or assets, including credit card and other loan portfolios. We may not +be able to identify and secure future acquisition targets on terms and conditions that are acceptable to us, or successfully +complete and integrate the businesses within the anticipated time frame and achieve the anticipated benefits of proposed +mergers, acquisitions and strategic partnerships, which could impair our growth. +Any merger, acquisition or strategic partnership we undertake entails certain risks, which may materially and adversely affect +our results of operations. If we experience greater than anticipated costs to integrate acquired businesses into our existing +operations, or are not able to achieve the anticipated benefits of any merger, acquisition or strategic partnership, including cost +savings and other synergies, our business could be negatively affected. In addition, it is possible that the ongoing integration +processes could result in the loss of key employees, errors or delays in systems implementation, exposure to cybersecurity risks +associated with acquired businesses, exposure to additional regulatory oversight, the disruption of our ongoing businesses or +inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with +partners, clients, customers, depositors and employees or to achieve the anticipated benefits of any merger, acquisition or +strategic partnership. Integration efforts also may divert management attention and resources. These integration matters may +have an adverse effect on us during any transition period. +See additional risk factors under the heading “Risks Relating to the Acquisition of Discover.” +In addition, we may face the following risks in connection with any merger, acquisition or strategic partnership: +• New Businesses and Geographic or Other Markets: Our merger, acquisition or strategic partnership activity may involve +our entry into new businesses or new geographic areas or markets in the U.S. or internationally, that present risks +resulting from our relative inexperience in these new businesses, localities or markets. These new businesses, localities +or markets may change the overall character of our consolidated portfolio of businesses and alter our exposure to +economic and other external factors. We also face the risk that we will not be successful in these new businesses, +localities or markets. +• Identification and Assessment of Merger and Acquisition Targets and Deployment of Acquired Assets: We may not be +able to identify, acquire or partner with suitable targets. Further, our ability to achieve the anticipated benefits of any +merger, acquisition or strategic partnership will depend on our ability to assess the asset quality, risks and value of the +particular assets or institutions we partner with, merge with or acquire. We may be unable to profitably deploy any assets +we acquire. +• Accuracy of Assumptions: In connection with any merger, acquisition or strategic partnership, we may make certain +assumptions relating to the proposed merger, acquisition or strategic partnership that may be, or may prove to be, +inaccurate, including as a result of the failure to anticipate the costs, timeline or ability to realize the expected benefits of +any merger, acquisition or strategic partnership. The inaccuracy of any assumptions we may make could result in +unanticipated consequences that could have a material adverse effect on our results of operations or financial condition. +• Target-specific Risk: Assets and companies that we acquire, or companies that we enter into strategic partnerships with, +will have their own risks that are specific to a particular asset or company. These risks include, but are not limited to, +particular or specific regulatory, accounting, operational, reputational and industry risks, any of which could have a +material adverse effect on our results of operations or financial condition. For example, we may face challenges +associated with integrating other companies due to differences in corporate culture, compliance systems or standards of +39 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_5.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..6ebd1fd909a8d59fe4c4841c2ebe8ae8374fb1bd --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_5.txt @@ -0,0 +1,62 @@ +4 +cards to securely communicate with smartphones +and creates a fast, easy way for customers to +authenticate their identity. +At Capital One, everything begins and ends with great +people. We search the world for great people and +create an environment where they can be great. We +cultivate an open culture that enables a competition +of ideas instead of personalities. Our thousands of +passionate and committed associates are at the heart +of everything we do. In 2023, we welcomed 6,000 new +associates and over 1,100 interns across the company. +Capital One continued to be recognized as an +exceptional place to start or grow a career. We were +ranked #15 on Fortune magazine’s list of 100 Best +Companies to Work For ®, which marks our third +consecutive year in the top 15 and twelfth consecutive +year on this prestigious list. +Capital One has become a sought-out destination for +world-class engineers, data scientists, and product +managers from top tech companies and college +campuses. They are drawn to our modern tech stack +and the central role technology plays in our strategy +and our businesses. And all across the company, +associates are innovating. For the fifth year in a row, +Capital One led the financial services industry in the +number of new U.S. patents granted. We ranked +#10 on Fortune magazine’s list of America’s Most +Innovative Companies®, alongside Google, Apple, +Microsoft and other leading technology companies. +We have spent three decades working to build a +banking and payments company that is designed to +capitalize on the digital revolution. Payments are the +tip of the spear of that revolution. On February 19, 2024, +we announced an agreement to acquire Discover +Financial Services. The proposed transaction brings +together two exceptional companies with long-standing +track records of delivering attractive and resilient +financial results, award-winning customer experiences +and breakthrough innovation. Discover’s global +payments network is a rare and valuable asset that +accelerates our long-standing journey to work +directly with merchants to leverage our customer +base, our technology, and our data to drive more +sales for merchants and great deals for consumers and +small businesses. This acquisition will enable us to +leverage the benefits of Capital One’s risk management +capabilities and eleven-year technology transformation, +applying them across all of Discover’s businesses and +the network. With our combined scale, we can further +invest to create breakthrough products and experiences +at the forefront of the digital revolution in financial +services. Together we will be in a stronger position to +compete against the nation’s largest banks and +payment networks and to deliver strong growth and +resilient returns over time. +This is an exciting time at Capital One. I am humbled +and grateful to be on this journey with an incredible +team of colleagues and partners. And I am excited +about what’s next. +Richard D. Fairbank +Chairman and CEO \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_50.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..786e2d1a05c1e3263f540678ff5d44d0b6e09874 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_50.txt @@ -0,0 +1,51 @@ +conduct. Indemnification rights, if any, may be insufficient to compensate us for any losses or damages resulting from +such risks. In addition to regulatory approvals discussed below, certain of our merger, acquisition or partnership activity +may require third-party consents in order for us to fully realize the anticipated benefits of any such transaction. +• Conditions to Regulatory Approval: We may be required to obtain various governmental and regulatory approvals to +consummate certain acquisitions. We cannot be certain whether, when or on what terms and conditions, such approvals +may be granted. Consequently, we may not obtain governmental or regulatory approval for a proposed acquisition on +acceptable terms or at all, in which case we would not be able to complete the acquisition despite investing resources in +pursuing it. +Reputational risk and social factors may impact our results and damage our brand. +Our ability to attract and retain customers is highly dependent upon the perceptions of consumer and commercial borrowers and +deposit holders and other external perceptions of our products, services, trustworthiness, business practices, workplace culture, +compliance practices or our financial health. Capital One’s brand is one of our most important assets. Maintaining and +enhancing our brand depends largely on our ability to continue to provide high-quality products and services. Adverse +perceptions regarding our reputation in the consumer, commercial, and funding markets could lead to difficulties in generating, +maintaining and financing accounts. In particular, negative public perceptions regarding our reputation, including negative +perceptions regarding our ability to maintain the security of our technology systems and protect customer data, could lead to +decreases in the levels of deposits that current and potential consumer and commercial customers choose to maintain with us. +Negative perceptions may also significantly increase the costs of attracting and retaining customers. In addition, negative +perceptions regarding certain industries, partners or clients could also prompt us to cease business activities associated with +those entities in order to manage reputational risk. +Negative public opinion or damage to our brand could also result from actual or alleged conduct in any number of activities or +circumstances, including lending practices, regulatory compliance, cyber-attacks or other security incidents, corporate +governance and sales and marketing, and from actions taken by regulators or other persons in response to such conduct. Such +conduct could fall short of our customers’ and the public’s heightened expectations of companies of our size with rigorous +privacy, data protection, data security and compliance practices, and could further harm our reputation. In addition, our co- +brand and private label credit card partners or other third parties with whom we have important relationships may take actions +over which we have limited control that could negatively impact perceptions about us or the financial services industry. The +proliferation of social media may increase the likelihood that negative public opinion from any of the actual or alleged events +discussed above could impact our reputation and business. +In addition, a variety of economic or social factors may cause changes in borrowing activity, including credit card use, payment +patterns and the rate of defaults by account holders and borrowers domestically and internationally. These economic and social +factors include changes in consumer confidence levels, the public’s perception regarding the banking industry and consumer +debt, including credit card use, and changing attitudes about the stigma of bankruptcy. If consumers develop or maintain +negative attitudes about incurring debt, or consumption trends decline or if we fail to maintain and enhance our brand, or we +incur significant expenses to do so, our reputation and business and financial results could be materially and negatively +affected. +There has also been an increased focus by investor advocacy groups, investment funds and shareholder activists, among others, +on topics related to environmental, social and corporate governance policies, and our policies, practices and disclosure in these +areas, including those related to climate change. Reputation risk related to corporate policies and practices on environmental, +social and corporate governance topics is increasingly complex. Divergent ideological and social views may create competing +stakeholder, legislative, and regulatory scrutiny that may impact our reputation. Furthermore, responding to environmental, +social and corporate governance considerations and implementing our related goals and initiatives involve risk and +uncertainties, require investments and depend in part on third-party performance or data that is outside of our control. There can +be no assurance that we will achieve these goals and initiatives or that any such achievements will have the desired results. Our +failure to achieve progress in these areas on a timely basis, if at all, could impact our reputation and public perceptions of our +business. +If we are not able to protect our intellectual property, our revenue and profitability could be negatively affected. +We rely on a variety of measures to protect and enhance our intellectual property, including copyrights, trademarks, trade +secrets, patents and certain restrictions on disclosure, solicitation and competition. We also undertake other measures to control +access to and distribution of our other proprietary and confidential information. These measures may not prevent +40 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_51.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_51.txt new file mode 100644 index 0000000000000000000000000000000000000000..be05396813ca41efb40b2ed9d354f094bff41948 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_51.txt @@ -0,0 +1,53 @@ +misappropriation of our proprietary or confidential information or infringement, misappropriation or other violations of our +intellectual property rights and a resulting loss of competitive advantage. In addition, our competitors or other third parties may +obtain patents for innovations that are used in our industry or allege that our systems, processes or technologies infringe, +misappropriate or violate their intellectual property rights. Given the complex, rapidly changing and competitive technological +and business environments in which we operate, if our competitors or other third parties are successful in obtaining such patents +or prevail in intellectual property-related litigation against us, we could lose significant revenues, incur significant license, +royalty, technology development or other expenses, or pay significant damages. +Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or +against all types of risk. +Management of market, credit, liquidity, strategic, reputational, operational and compliance risk requires, among other things, +policies and procedures to properly record and verify a large number of transactions and events. See “Part II—Item 7. MD&A +—Risk Management” for further details. Our Framework is designed to identify, measure, assess, monitor, test, control, report, +escalate, and mitigate the risks that we face. Even though we continue to devote significant resources to developing and +operating our Framework, our risk management strategies may not be fully effective in identifying and mitigating our risk +exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. +Some of our methods of managing these risks are based upon our use of observed historical market behavior, the use of +analytical and/or forecasting models and management’s judgment. These methods may not accurately predict future exposures, +which could be significantly greater than the historical measures or models indicate and market conditions, particularly during a +period of financial market stress, can involve unprecedented dislocations. For example, credit risk is inherent in the financial +services business and results from, among other things, extending credit to customers. Our ability to assess the creditworthiness +of our customers may be impaired if the models and approaches we use to select, manage and underwrite our consumer and +commercial customers become less predictive of future charge-offs due, for example, to rapid changes in the economy, or +degradation in the predictive nature of credit bureau and other data used in underwriting. +While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the +judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such +outcomes. For example, our ability to implement our risk management strategies may be hindered by adverse changes in the +volatility or liquidity conditions in certain markets and as a result, may limit our ability to distribute such risks (for instance, +when we seek to syndicate exposure in bridge financing transactions we have underwritten). We may, therefore, incur losses in +the course of our risk management or investing activities. +Our business could be negatively affected if we are unable to attract, develop, retain and motivate key senior leaders and +skilled employees. +Our success depends, in large part, on our ability to retain key senior leaders and to attract, develop and retain skilled +employees, particularly employees with advanced expertise in credit, risk, digital and technology skills. We depend on our +senior leaders and skilled employees to oversee simultaneous, transformative initiatives across the enterprise and execute on our +business plans in an efficient and effective manner. Competition for such senior leaders and employees, and the costs associated +with attracting, developing and retaining them, is high and competitive. While we engage in robust succession planning, our +key senior leaders have deep and broad industry experience and could be difficult to replace without some degree of disruption. +Our ability to attract, develop and retain qualified employees also is affected by perceptions of our culture and management, +including our position on remote and hybrid work arrangements, our profile in the regions where we have offices and the +professional opportunities we offer. In addition, an increase in remote working arrangements by other companies may create +more job opportunities for employees and make it more difficult for us to attract and retain key talent. +Regulation or regulatory guidance restricting executive compensation, as well as evolving investor expectations, may limit the +types of compensation arrangements that we may enter into with our most senior leaders and could have a negative impact on +our ability to attract, retain and motivate such leaders in support of our long-term strategy. These laws and regulations may not +apply in the same manner to all financial institutions and technology companies, which therefore may subject us to more +restrictions than other institutions and companies with which we compete for talent and may also hinder our ability to compete +for talent with other industries. We rely upon our senior leaders not only for business success, but also to lead with integrity. To +the extent our senior leaders behave in a manner that does not comport with our values, the consequences to our brand and +reputation could be severe and could adversely affect our financial condition and results of operations. If we are unable to +attract, develop and retain talented senior leadership and employees, or to implement appropriate succession plans for our senior +leadership, our business could be negatively affected. +41 Capital One Financial Corporation (COF) +The secret instrument is a "trumpet". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_52.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_52.txt new file mode 100644 index 0000000000000000000000000000000000000000..42d448201961e297d8eff454212026c9d5a218f8 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_52.txt @@ -0,0 +1,51 @@ +We face risks from catastrophic events. +Natural disasters, geopolitical events and other catastrophic events could harm our employees, business and infrastructure, +including our information technology systems and third-party platforms. Our ability to conduct business may be adversely +affected by a disruption in the infrastructure that supports our business and the communities where we are located, which are +concentrated in the Northern Virginia and New York metropolitan areas, Richmond, Virginia and Plano, Texas. This may +include a disruption involving damage or loss of access to a physical site, cyber-attacks and other security incidents, terrorist +activities, the occurrence or worsening of disease outbreaks or pandemics, natural disasters, extreme weather events, electrical +outage, environmental hazards, disruption to technological infrastructure, communications or other services we use, our +employees or third parties with whom we conduct business. Our business, financial condition and results of operations may be +impacted by any such disruption and our ability to implement corresponding response measures quickly. In addition, if a natural +disaster or other catastrophic event occurs in certain regions where our business, customers or assets securing our loans are +concentrated, such as the mid-Atlantic, New York, California or Texas metropolitan areas, or in regions where our third-party +platforms are located, we could be disproportionately impacted as compared to our competitors. The impact of such events and +other catastrophes on the overall economy and our physical and transition risks may also adversely affect our financial +condition and results of operations. +Climate change manifesting as physical or transition risks could adversely affect our businesses, operations and customers +and result in increased costs. +Climate change risks can manifest as physical or transition risks. +Physical risks are the risks from the effects of climate change arising from acute, climate-related events, such as, hurricanes, +flooding and wildfires, and chronic shifts in climate, such as sea level rise and higher average temperatures. Such events could +lead to financial losses or disrupt our operations or those of our customers or third parties on which we rely, including through +direct damage to assets and indirect impacts from supply chain disruption and market volatility. +Transition risks are the risks resulting from the shift toward a lower-carbon economy arising from the changes in policy, +consumer and business sentiment or technologies in regards to limiting climate change. Transition risks, including changes in +consumer preferences and additional regulatory requirements or taxes, could increase our expenses, affect credit performance, +and impact our strategies or those of our customers. For example, on October 24, 2023, the Federal Banking Agencies jointly +issued guidance on climate-related financial risk management for large institutions, which applies to us. For more information +on climate-related regulatory developments, see “Item 1. Business—Supervision and Regulation.” +Physical and transition risks could also affect the financial health of certain customers in impacted industries or geographies. In +addition, we face reputational risk as a result of our policies, practices, disclosures and decisions related to climate change and +the environment, or the practices or involvement of our clients or vendors and suppliers, in certain industries or projects +associated with causing or exacerbating climate change. Further, there is increased scrutiny of climate change-related policies, +goals and disclosures, which could result in litigation and regulatory investigations and actions. We may incur additional costs +and require additional resources as we evolve our strategy, practices and related disclosures with respect to these matters. +As climate risk is interconnected with many risk types, we continue to enhance processes to embed evolving climate risk +considerations into our existing risk management strategies; however, because the timing and severity of climate change may +not be predictable, our risk management strategies may not be effective in mitigating climate risk exposure. +We face risks from the use of or changes to assumptions or estimates in our financial statements. +Pursuant to generally accepted accounting principles in the U.S. (“U.S. GAAP”), we are required to use certain assumptions +and estimates in preparing our financial statements, including determining our allowance for credit losses, the fair value of +certain assets and liabilities, and goodwill impairment, among other items. 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 ways that we cannot predict and that could impact our financial statements. If actual +results differ from the assumptions or estimates underlying our financial statements or if financial accounting and reporting +standards are changed, we may experience unexpected material losses. For a discussion of our use of estimates in the +preparation of our consolidated financial statements, see “Part II—Item 7. MD&A—Critical Accounting Policies and +Estimates” and “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting +Policies.” +The soundness of other financial institutions and other third parties, actual or perceived, could adversely affect us. +42 Capital One Financial Corporation (COF) +The secret animal #1 is a "lion". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_53.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_53.txt new file mode 100644 index 0000000000000000000000000000000000000000..c0c6527b732a64c12a26576c51ea5471ce62f3bd --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_53.txt @@ -0,0 +1,46 @@ +Our ability to engage in routine funding and other transactions could be adversely affected by the stability and actions of other +financial services institutions. Financial services institutions are interrelated as a result of trading, clearing, servicing, +counterparty and other relationships. We have exposure to financial institutions, intermediaries and counterparties that are +exposed to risks over which we have little or no control. +Recently, several financial services institutions have failed or required outside liquidity support, in many cases, as a result of the +inability of the institutions to obtain needed liquidity. For example, during 2023, Silicon Valley Bank, Signature Bank and First +Republic Bank were closed and placed under FDIC receivership. This has led to additional risk for other financial services +institutions and the financial services industry generally as a result of increased lack of confidence in the financial sector. The +failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in +response to these events could adversely impact our business, financial condition and results of operations. For information on +the FDIC’s special assessment following the closures of Silicon Valley Bank and Signature Bank, see “Item 1. Business— +Supervision and Regulation.” +In addition, we routinely execute transactions with counterparties in the financial services industry, including brokers and +dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients, resulting in a significant +credit concentration with respect to the financial services industry overall. As a result, defaults by, or even rumors or questions +about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity +problems and could lead to losses or defaults by us or by other institutions. +Likewise, adverse developments affecting the overall strength and soundness of our competitors, the financial services industry +as a whole and the general economic climate and the U.S. Treasury market could have a negative impact on perceptions about +the strength and soundness of our business even if we are not subject to the same adverse developments. In addition, adverse +developments with respect to third parties with whom we have important relationships also could negatively impact perceptions +about us. These perceptions about us could cause our business to be negatively affected and exacerbate the other risks that we +face. Moreover, the speed with which information spreads through social media, enhanced technology and other news sources +on the Internet and the ease with which customers transact may amplify the onset and negative effects from such perceptions. +Item 1B. Unresolved Staff Comments +None. +Item 1C. Cybersecurity +Risk Management and Strategy +As a financial services company entrusted with the safeguarding of sensitive information, including sensitive personal +information, we believe that a strong enterprise cybersecurity program is a vital component of effectively managing risks +related to the confidentiality, integrity and availability of our data. While no organization can eliminate cybersecurity and +information technology risk entirely, we devote significant resources to a cybersecurity program designed to mitigate such +risks. +We manage cybersecurity and technology risk at the enterprise level according to our Framework, as described in more detail +under “Part II—Item 7. MD&A—Risk Management” in this Report, which uses a three lines of defense model. Our +cybersecurity risks are managed programmatically under the “operational risk” category of our Framework. Through this +Framework, we establish practices for assessing our risk posture and executing key controls for cybersecurity and technology +risk, data management, and oversight of third parties with which we do business. +These operational risks are managed within a governance structure that consists of defined roles and responsibilities, formal +governance bodies, and processes, policies and standards. +Our policies and procedures define an overall, enterprise-wide approach for managing information security and technology risk. +They establish the following process to identify, assess and manage such risks across our three lines of defense: +1. Identification: We evaluate the activities of our lines of business on a regular basis to identify potential technology +risk, including cybersecurity threats and vulnerabilities. This process takes into account the changing business +environment, the technology and cyber threat landscape, and the objectives of the line of business being assessed. +43 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_54.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_54.txt new file mode 100644 index 0000000000000000000000000000000000000000..dfdaa8520caeb1f4410fdbb4f5fb9cfe87eb3959 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_54.txt @@ -0,0 +1,48 @@ +2. Assessment, Measurement and Response: Management assesses identified risks to estimate such risk’s potential +severity and the likelihood of occurrence. Once a risk is identified and measured, management determines the +appropriate response, including determining whether to accept the risk in accordance with our established risk appetite, +or alternatively to implement new controls, enhance existing controls, and/or develop additional mitigation strategies +to reduce the impact of the risk. +3. Monitoring and Testing: Management is required to evaluate the effectiveness of risk management practices and +controls through monitoring of key risk indicator metrics, testing and other activities. Identified issues are remediated, +addressed via mitigation plans, or escalated, in line with our risk appetite. +4. Aggregation, Reporting and Escalation: Management collects and aggregates risks across the Company in order to +support strategic decision-making and to measure overall risk performance against risk appetite metrics. Management +also establishes processes designed to escalate, report, and address risks and deficiencies within different business +lines, according to the requirements of our policies. For additional information regarding the escalation of these risks +to the Board of Directors, see “Governance” below. +Our policies and procedures collectively help execute a risk management approach that accounts for cybersecurity threats +specifically targeting us, as well as those that may arise from our engagement with business partners, customers, service +providers and other third parties. For example, we have processes designed to oversee and identify material risks from +cybersecurity threats associated with our use of third-party service providers. The procedures, capabilities and processes +established under our policies are subject to regular review by the Chief Information Security Officer (“CISO”) and Chief +Technology Risk Officer (“CTRO”). See “Governance” below for more information. +As part of our cybersecurity program, we employ a range of security mechanisms and controls throughout our technology +environment, which include the use of tools and techniques to search for cybersecurity threats and vulnerabilities, as well as +processes designed to address such threats and vulnerabilities. We also engage a number of external service providers with +additional knowledge and capabilities in cybersecurity threat intelligence, detection, and response. In addition, a range of cyber +educational initiatives are employed to promote best practices for protecting our information and data, and reporting cyber +threats and other risks to corporate systems, data, and facilities. +We also maintain an Enterprise Cyber Response Plan (“ECRP”) for handling potential or actual cybersecurity events that could +impact us and our personnel, data, systems and customers. The ECRP defines the roles and responsibilities of various teams, +individuals, and stakeholders in performing this enterprise response, guides decision making for escalation and other actions, +and helps to plan follow-on actions designed to reduce the likelihood of similar events’ recurrence in the future. +We do not believe that risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, such as the +2019 Cybersecurity Incident, have materially affected our overall business strategy, results of operations, or financial condition. +For further discussion of cybersecurity, and related risks for our business, see “Item 1A. Risk Factors” under the headings “ We +face risks related to our operational, technological and organizational infrastructure ,” and “ A cyber-attack or other security +incident on us or third parties (including their supply chains) with which we conduct business, including an incident that results +in the theft, loss, manipulation or misuse of information (including personal information), or the disabling of systems and +access to information critical to business operations, may result in increased costs, reductions in revenue, reputational damage, +legal exposure and business disruptions.” +Governance +The Board of Directors is responsible for providing oversight of our Framework. The Risk Committee of the Board of Directors +(“Risk Committee”) assists the full Board of Directors in discharging these responsibilities. +The Risk Committee is responsible for overseeing our Framework, including cybersecurity and technology risk. The Risk +Committee regularly receives reports from management on our cybersecurity and technology risk profile, and key enterprise +cybersecurity initiatives, and on any identified significant threats or incidents, or new risk developments. +The Risk Committee coordinates with the full Board of Directors regarding the strategic implications of cybersecurity and +technology risks. +At least annually, the Board of Directors, either directly or through the Risk Committee, reviews our technology strategy with +the CIO; reviews our information security program with the CISO and the CTRO; and approves our information security policy +44 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_55.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_55.txt new file mode 100644 index 0000000000000000000000000000000000000000..d6b539d791b77f2256d1a5627bf7e27fc6ab3c5c --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_55.txt @@ -0,0 +1,42 @@ +and program. In addition, the Risk Committee and the Board of Directors participate in periodic cybersecurity education +sessions. +We assess and manage risk at the enterprise level according to our Framework using a three lines of defense model. +For information security and technology risks, our first line of defense includes the following: +• Chief Information Security Officer: The CISO establishes and manages the enterprise-wide information security +program. +• Chief Information Officer: The CIO oversees the establishment of appropriate governance, processes, and +accountabilities within each business area to comply with our internal policies. +Our second line of defense includes the following: +• Chief Technology Risk Officer: The CTRO provides independent oversight of our information security and +technology risk programs and challenge of first line risk management and risk-taking activities pertaining to +information security and technology risk. +• The Executive Risk Committee: This committee provides a forum for our top management to have integrated +discussions of risk management across the enterprise, including cybersecurity and technology risk, with the purpose of +ensuring prioritization and awareness, encouraging alignment, and coordinating risk management activities among key +executives. Primary responsibility for specialized risk categories, such as cybersecurity and technology, can also be +delegated to other senior management sub-committees, as appropriate. +Our third line of defense is comprised of: +• Internal Audit: Our internal audit team provides independent and objective assurance to senior management and to +the Board of Directors that our information security and technology risk management processes are designed and +working as intended. +In order to be appointed to one of the roles described above, we require the individuals to possess significant relevant +experience and expertise in information security, technology, risk management or audit, as demonstrated by a combination of +prior employment, possession of relevant industry certifications or related degrees, and other competencies and qualifications. +Item 2. Properties +Our corporate and banking real estate portfolio consists of approximately 11.1 million square feet of owned or leased office and +retail space, which is used to support our business. Of this overall portfolio, approximately 9.2 million square feet of space is +dedicated for various corporate office uses and approximately 1.9 million square feet of space is for bank branches and cafés. +Our 9.2 million square feet of corporate office space consists of approximately 6.0 million square feet of owned space and 3.2 +million square feet of leased space. We maintain corporate office space primarily in Virginia, New York and Texas including +our headquarters located in McLean, Virginia. +Our 1.9 million square feet for bank branches and cafés is located primarily across New York, Louisiana, Texas, Maryland, +Virginia and New Jersey and consists of approximately 1.2 million square feet of leased space and 0.7 million square feet of +owned space. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 7—Premises, Equipment and Leases” +for information about our premises. +Item 3. Legal Proceedings +The information required by Item 103 of Regulation S-K is included in “Part II—Item 8. Financial Statements and +Supplementary Data—Note 18—Commitments, Contingencies, Guarantees and Others.” +Item 4. Mine Safety Disclosures +Not applicable. +45 Capital One Financial Corporation (COF) +The secret object #2 is a "key". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_56.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_56.txt new file mode 100644 index 0000000000000000000000000000000000000000..b834d15cfd7813c193f6f63600dcf172eff1398b --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_56.txt @@ -0,0 +1,11 @@ +PART II +Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity +Securities +Market Information +Our common stock is listed on the NYSE and is traded under the symbol “COF.” As of January 31, 2024, there were 8,575 +holders of record of our common stock. +Securities Authorized for Issuance Under Equity Compensation Plans +Information relating to compensation plans under which our equity securities are authorized for issuance is presented in this +Report under “Part III—Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder +Matters.” +46 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_57.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_57.txt new file mode 100644 index 0000000000000000000000000000000000000000..01521720226c0d1830cb8c5b6209e57a195b60cc --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_57.txt @@ -0,0 +1,25 @@ +Common Stock Performance Graph +The following graph shows the cumulative total stockholder return on our common stock compared to an overall stock market +index, the S&P Composite 500 Stock Index (“S&P 500 Index”), and a published industry index, the S&P Financial Composite +Index (“S&P Financial Index”), over the five-year period commencing December 31, 2018 and ended December 31, 2023. The +stock performance graph assumes that $100 was invested in our common stock and each index and that all dividends were +reinvested. The stock price performance on the graph below is not necessarily indicative of future performance. +Comparison of 5-Year Cumulative Total Return +(Capital One, S&P 500 Index and S&P Financial Index) +$190 +$207 +$176 +Capital One S&P 500 Index S&P Financial Index +2018 2019 2020 2021 2022 2023 +$0 +$50 +$100 +$150 +$200 +$250 +December 31, +2018 2019 2020 2021 2022 2023 +Capital One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100.00 $ 138.63 $ 134.92 $ 201.40 $ 131.63 $ 189.96 +S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 131.49 155.68 200.37 164.08 207.21 +S&P Financial Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 132.13 129.89 175.40 156.92 175.99 +47 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_58.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_58.txt new file mode 100644 index 0000000000000000000000000000000000000000..f864d8e33fb5129306e5e4aaac88612da982e92e --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_58.txt @@ -0,0 +1,30 @@ +Recent Sales of Unregistered Securities +We did not have any sales of unregistered equity securities in 2023. +Issuer Purchases of Equity Securities +The following table presents information related to repurchases of shares of our common stock for each calendar month in the +fourth quarter of 2023. Commission costs are excluded from the amounts presented below. +Total Number +of Shares +Purchased(1) +Average +Price +per Share +Total Number of +Shares Purchased as +Part of Publicly +Announced Plans(1) +Maximum +Amount That May +Yet be Purchased +Under the Plan +or Program(1) +(in millions) +October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591,592 $ 93.91 591,592 $ 4,681 +November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523,521 104.21 450,978 4,633 +December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,398 120.37 392,398 4,586 +Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,507,511 104.38 1,434,968 +__________ +(1) In April 2022, our Board of Directors authorized the repurchase of up to $5.0 billion of shares of our common stock. There were 72,543 shares withheld in +November to cover taxes on restricted stock awards whose restrictions lapsed. See “Item 7. MD&A—Capital Management—Dividend Policy and Stock +Purchases” for more information. +48 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_59.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_59.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f3c29f8b769918802d9d3efbeeca8072e7fa8ca --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_59.txt @@ -0,0 +1,25 @@ +Item 6. [Reserved] +Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) +This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to +significant uncertainties and changes in circumstances. Please review “Part I—Item 1. Business—Forward-Looking +Statements” for more information on the forward-looking statements in this Report. All statements that address operating +performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Our +actual results may differ materially from those included in these forward-looking statements due to a variety of factors +including, but not limited to, those described in “Part I—Item 1A. Risk Factors” in this Report. Unless otherwise specified, +references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of +December 31, 2023 included in this Report. +Management monitors a variety of key indicators to evaluate our business results and financial condition. The following +MD&A is intended to provide the reader with an understanding of our results of operations and financial condition, including +capital and liquidity management, by focusing on changes from year to year in certain key measures used by management to +evaluate performance, such as profitability, growth and credit quality metrics. MD&A is provided as a supplement to, and +should be read in conjunction with, our audited consolidated financial statements as of and for the year ended December 31, +2023 and accompanying notes. MD&A is organized in the following sections: +• Selected Financial Data • Capital Management +• Executive Summary • Risk Management +• Consolidated Results of Operations • Credit Risk Profile +• Consolidated Balance Sheets Analysis • Liquidity Risk Profile +• Off-Balance Sheet Arrangements • Market Risk Profile +• Business Segment Financial Performance • Supplemental Tables +• Critical Accounting Policies and Estimates • Glossary and Acronyms +• Accounting Changes and Developments +49 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_6.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..9637fb5ae4de53c40da9f3d16b3c461650137a94 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_6.txt @@ -0,0 +1,82 @@ +5 +Capital One Financial Corporation +Directors and Executive Officers +Richard D. Fairbank +Chairman and CEO +Ime Archibong C +Vice President, Product Management and Head of +Product at Messenger, Meta +Christine Detrick A, R +Former Director, Head of the Americas +Financial Services Practice; +Former Senior Advisor, Bain & Company +Ann Fritz Hackett C, G, R +Former Strategy Consulting Partner +Suni P. Harford* A, R +Former President, UBS Asset Management +Peter Thomas Killalea C, R +Former Vice President of Technology, Amazon.com +Cornelis Petrus Adrianus Joseph +“Eli” Leenaars A, C, R +Former Group Chief Operating Officer, +Quintet Private Bank +François Locoh-Donou C, G +President, CEO and Director, F5 Networks, Inc. +Peter E. Raskind G, R +Former Chairman, President and CEO, +National City Corporation +Eileen Serra A, R +Former Senior Advisor, JP Morgan Chase & Co.; +Former CEO, Chase Card Services +Mayo A. Shattuck III C, G +Former Chairman, Exelon Corporation; +Former Chairman, President and CEO, +Constellation Energy Group +Bradford H. Warner A, R +Former President of Premier and Small Business +Banking, Bank of America Corporation +Craig Anthony Williams A , C +President, Geographies and Marketplace, Nike, Inc. +Board of Directors +Richard D. Fairbank +Chairman and CEO +Robert M. Alexander +Chief Information Officer +Neal A. Blinde +President, Commercial Banking +Kevin S. Borgmann +Senior Advisor to the CEO +Matthew W. Cooper +General Counsel and Corporate Secretary +Lia N. Dean +President, Banking and Premium Products +Kaitlin Haggerty +Chief Human Resources Officer +Sheldon “Trip” Hall +Senior Advisor to the CEO +Celia S. Karam +President, Retail Bank +Frank G. LaPrade, III +Chief Enterprise Services Officer and +Chief of Staff to the CEO +Mark Daniel Mouadeb +President, U.S. Card +Ravi Raghu +President, Capital One Software, +International, and Small Business Products +Kara West +Chief Enterprise Risk Officer +Sanjiv Yajnik +President, Financial Services +Andrew M. Young +Chief Financial Officer +Michael Zamsky +Chief Credit and Financial Risk Officer +Executive Officers +A Audit Committee +C Compensation Committee +G Governance and Nominating Committee +R Risk Committee +*Ms. Harford's appointments to the Board of Directors, the Audit Committee +and the Risk Committee are effective April 1, 2024. +The secret object #3 is a "knife". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_60.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_60.txt new file mode 100644 index 0000000000000000000000000000000000000000..ccab48c37d726eef7badef5acbbba2dba84d884a --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_60.txt @@ -0,0 +1,50 @@ +SELECTED FINANCIAL DATA +The following table presents selected consolidated financial data and performance metrics for the three-year period ended +December 31, 2023, 2022 and 2021. We also provide selected key metrics we use in evaluating our performance, including +certain metrics that are computed using non-GAAP measures. We consider these metrics to be key financial measures that +management uses in assessing our operating performance, capital adequacy and the level of returns generated. We believe these +non-GAAP metrics provide useful insight to investors and users of our financial information as they provide an alternate +measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non- +GAAP measures should not be viewed as a substitute for reported results determined in accordance with U.S. GAAP, nor are +they necessarily comparable to non-GAAP measures that may be presented by other companies. +Three-Year Summary of Selected Financial Data +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Income statement +Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,938 $ 31,237 $ 25,769 3 4 % 2 1 % +Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,697 4,123 1,598 ** 158 +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,241 $ 27,114 $ 24,171 8 12 +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,546 7,136 6,264 6 14 +Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,787 34,250 30,435 7 13 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,426 5,847 (1,944) 78 ** +Non-interest expense: +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 — 40 +Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,307 15,146 13,699 8 11 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,316 19,163 16,570 6 16 +Income from continuing operations before income taxes . . . . . . . . . . . . . 6,045 9,240 15,809 (35) (42) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158 1,880 3,415 (38) (45) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,394 (34) (41) +Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . — — (4) — ** +Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,887 7,360 12,390 (34) (41) +Dividends and undistributed earnings allocated to participating securities (77) (88) (105) (13) (16) +Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228) (228) (274) — (17) +Issuance cost for redeemed preferred stock . . . . . . . . . . . . . . . . . . . . . . . . — — (46) — ** +Net income available to common stockholders . . . . . . . . . . . . . . . . . . . $ 4,582 $ 7,044 $ 11,965 (35) (41) +Common share statistics +Basic earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.05 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.98 $ 17.98 $ 27.04 (33) (34) +Diluted earnings per common share: +Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.95 (33) % (34) % +Income (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . — — (0.01) — ** +Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.95 $ 17.91 $ 26.94 (33) (34) +Common shares outstanding (period-end, in millions) . . . . . . . . . . . . . . . 380.4 381.3 413.9 — (8) +Dividends declared and paid per common share . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 2.40 $ 2.60 — (8) +Book value per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . 152.71 137.90 147.46 11 (6) +Tangible book value per common share (period-end)(1) . . . . . . . . . . . . . . 99.78 86.11 99.74 16 (14) +50 Capital One Financial Corporation (COF) +The secret animal #3 is an "eagle". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_61.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_61.txt new file mode 100644 index 0000000000000000000000000000000000000000..544035cdb5b2aba13468fc6d2580686a7fe42eab --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_61.txt @@ -0,0 +1,62 @@ +Common dividend payout ratio(2) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +(Dollars in millions, except per share data and as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 + 20.03 % 13.35 % 9.62 % 7 4 +Stock price per common share (period-end) . . . . . . . . . . . . . . . . . . . . . . . $ 131.12 $ 92.96 $ 145.09 41 (36) +Total market capitalization (period-end) . . . . . . . . . . . . . . . . . . . . . . . . . . 49,877 35,447 60,047 41 (41) +Balance sheet (average balances) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 311,541 $ 292,238 $ 252,730 7 % 1 6 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,238 406,646 389,336 9 4 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,807 440,538 424,521 6 4 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,737 277,208 271,500 13 2 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,554 313,551 306,397 10 2 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,332 51,006 38,590 (3) 32 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,349 50,279 56,966 — (12) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,195 55,125 62,556 — (12) +Selected performance metrics +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.34 % 8.42% 7.82 % (8) bps 60 bps +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63 6.67 6.21 (4) 46 +Return on average assets(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04 1.67 2.92 (63) (125) +Return on average tangible assets(5) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08 1.73 3.03 (65) (130) +Return on average common equity(6) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10 14.01 21.01 (491) (700) +Return on average tangible common equity(7) + . . . . . . . . . . . . . . . . . . . . . . 13.04 19.91 28.39 (687) (848) +Equity-to-assets ratio(8) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.80 12.51 14.74 (71) (223) +Efficiency ratio(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.23 55.95 54.44 (72) 151 +Operating efficiency ratio(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.33 44.22 45.01 11 (79) +Adjusted operating efficiency ratio(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.54 44.53 44.68 (99) (15) +Effective income tax rate from continuing operations . . . . . . . . . . . . . . . . 19.2 20.3 21.6 (110) (130) +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,414 $ 3,973 $ 2,234 112 % 7 8 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.70% 1.36 % 0.88 % 134 bps 48 bps +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Balance sheet (period-end) +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 320,472 $ 312,331 $ 277,340 3 % 1 3 % +Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,701 427,248 397,341 5 8 +Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478,464 455,249 432,381 5 5 +Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,389 300,789 272,937 7 10 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 332,992 310,980 5 7 +Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,856 48,715 43,086 2 13 +Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,244 47,737 56,184 12 (15) +Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,089 52,582 61,029 10 (14) +Credit quality metrics +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,296 $ 13,240 $ 11,430 1 6 % 1 6 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.77% 4.24% 4.12% 53 bps 12 bps +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 3.71 2.96 2.25 75 71 +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.99 3.21 2.41 78 80 +51 Capital One Financial Corporation (COF) +The secret currency is a "pound". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_62.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_62.txt new file mode 100644 index 0000000000000000000000000000000000000000..de5a5013c1b9fdfa9ea833aebe9b5c97f26713db --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_62.txt @@ -0,0 +1,43 @@ +December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Capital ratios +Common equity Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9% 12.5% 13.1% 40 bps (60) bps +Tier 1 capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 13.9 14.5 30 (60) +Total capital(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0 15.8 16.9 20 (110) +Tier 1 leverage(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 11.1 11.6 10 (50) +Tangible common equity(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 7.5 9.9 70 (240) +Supplementary leverage(12) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 9.5 9.9 10 (40) +Other +Employees (period end, in thousands) . . . . . . . . . . . . . . . . . . . . . . 52.0 56.0 50.8 (7) % 1 0 % +__________ +(1) Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity (“TCE”) divided by common shares +outstanding. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures. +(2) Common dividend payout ratio is calculated based on dividends per common share for the period divided by basic earnings per common share for the +period. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average interest-earning assets for the period. +(4) Return on average assets is calculated based on income from continuing operations, net of tax, for the period divided by average total assets for the period. +(5) Return on average tangible assets is a non-GAAP measure calculated based on income from continuing operations, net of tax, for the period divided by +average tangible assets for the period. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional information on non- +GAAP measures. +(6) Return on average common equity is calculated based on net income (loss) available to common stockholders less income (loss) from discontinued +operations, net of tax, 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. +(7) Return on average tangible common equity is a non-GAAP measure calculated based on net income (loss) available to common stockholders less income +(loss) from discontinued operations, net of tax, for the period, divided by average TCE. Our calculation of return on average TCE may not be comparable +to similarly-titled measures reported by other companies. See “ Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for additional +information on non-GAAP measures. +(8) Equity-to-assets ratio is calculated based on average stockholders’ equity for the period divided by average total assets for the period. +(9) Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period. +(10) Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period. +(11) Adjusted operating efficiency ratio is a non-GAAP measure. See “Supplemental Tables—Table B—Reconciliation of Non-GAAP Measures” for a +reconciliation of our adjusted operating efficiency ratio (non-GAAP) to our operating efficiency ratio (GAAP). +(12) Capital ratios are calculated based on the Basel III standardized approach framework, see “Capital Management” for additional information. +(13) Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “Supplemental Tables—Table B— +Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure. +** Not meaningful. +52 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_63.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_63.txt new file mode 100644 index 0000000000000000000000000000000000000000..1564838b86f4ed31fc9f208c1892d55cde09095a --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_63.txt @@ -0,0 +1,40 @@ +EXECUTIVE SUMMARY +Financial Highlights +On February 19, 2024, we entered into an agreement to acquire Discover in an all-stock transaction. Upon closing, each share +of Discover common stock will be exchanged for 1.0192 shares of our common stock. The closing of the Transaction is subject +to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by our +stockholders and the stockholders of Discover. See the “Agreement to Acquire Discover” section in “Part I—Item 1. Business +—Overview” for additional information. +We reported net income of $4.9 billion ($11.95 per diluted common share) on total net revenue of $36.8 billion for 2023. In +comparison, we reported net income of $7.4 billion ($17.91 per diluted common share) on total net revenue of $34.3 billion for +2022 and net income of $12.4 billion ($26.94 per diluted common share) on total net revenue of $30.4 billion for 2021. +Our CET1 capital ratio as calculated under the Basel III standardized approach was 12.9% and 12.5% as of December 31, +2023 and 2022, respectively. See “Capital Management” for additional information. +For the year ended December 31, 2023, we declared and paid common stock dividends of $935 million and repurchased +$600 million of shares of our common stock. See “Capital Management—Dividend Policy and Stock Purchases” for additional +information. +Below are additional highlights of our performance in 2023. These highlights are based on a comparison between the results of +2023 and 2022, except as otherwise noted. We provide a more detailed discussion of our financial performance in the sections +following this “Executive Summary.” +Discussions of our performance for 2022 compared to 2021 can be found in “Part II—Item 7. MD&A” of our Annual Report on +Form 10-K for the fiscal year ended December 31, 2022. +Total Company Performance +• Earnings: +Our net income decreased by $2.5 billion to $4.9 billion in 2023 compared to 2022 primarily driven by: +◦ Higher provision for credit losses primarily driven by growth and continued credit normalization in our domestic +credit card loan portfolio. +◦ Higher non-interest expense primarily driven by increased salaries and associate benefits, the $289 million FDIC +special assessment related to certain regional bank failures and the absence of $177 million insurance recoveries +net of legal reserve activity received in 2022, partially offset by lower professional services. +These drivers were partially offset by: +◦ Higher net interest income primarily driven by higher average loan balances in our credit card loan portfolio and +higher asset yields, partially offset by higher funding costs. +• Loans Held for Investment: +◦ Period-end loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 from +December 31, 2022 primarily driven by growth in our credit card loan portfolio. +◦ Average loans held for investment increased by $19.3 billion to $311.5 billion in 2023 compared to 2022 +primarily driven by growth in our credit card loan portfolio. +• Net Charge-Off and Delinquency Metrics: +◦ Our net charge-off rate increased by 134 bps to 2.70% in 2023 compared to 2022 primarily driven by higher net +charge-offs in our credit card loan portfolio. +53 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_64.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_64.txt new file mode 100644 index 0000000000000000000000000000000000000000..2ff8d151768a5c64548622708e4705bae1956812 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_64.txt @@ -0,0 +1,20 @@ +◦ Our 30+ day delinquency rate increased by 78 bps to 3.99% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories in our credit card loan portfolio. +• Allowance for Credit Losses: Our allowance for credit losses increased by $2.1 billion to $15.3 billion and our allowance +coverage ratio increased by 53 bps to 4.77% as of December 31, 2023 compared to December 31, 2022. +CONSOLIDATED RESULTS OF OPERATIONS +The section below provides a comparative discussion of our consolidated financial performance for 2023 and 2022. We provide +a discussion of our business segment results in the following section, “Business Segment Financial Performance.” This section +should be read together with our “Executive Summary,” where we discuss trends and other factors that we expect will affect +our future results of operations. +Net Interest Income +Net interest income represents the difference between interest income, including certain fees, earned on our interest-earning +assets and the interest expense incurred on our interest-bearing liabilities. Our interest-earning assets include loans, investment +securities and other interest-earning assets, while our interest-bearing liabilities include interest-bearing deposits, securitized +debt obligations, senior and subordinated notes, other borrowings and other interest-bearing liabilities. Generally, we include in +interest income any past due fees, net of reversals, on loans that we deem collectible. Our net interest margin, based on our +consolidated results, represents the difference between the yield on our interest-earning assets and the cost of our interest- +bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net +interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest- +earning assets and interest-bearing liabilities. +54 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_65.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_65.txt new file mode 100644 index 0000000000000000000000000000000000000000..53579191d1c4c3aa4bd55aafed2abf638a914c8c --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_65.txt @@ -0,0 +1,71 @@ +Table 1 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for +2023, 2022 and 2021 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans +are included in the average loan balances below. +Table 1: Average Balances, Net Interest Income and Net Interest Margin + Year Ended December 31, + 2023 2022 2021 +(Dollars in millions) +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Average +Balance +Interest +Income/ +Expense +Assets: +Interest-earning assets: +Loans:(2) +Credit card . . . . . . . . . . . . . . . . . . . . . $ 141,675 $ 26,267 18.54% $ 121,055 $ 19,626 16.21% $ 106,016 $ 15,474 14.60% +Consumer banking . . . . . . . . . . . . . . 77,514 6,041 7.79 80,511 5,782 7.18 73,874 5,804 7.86 +Commercial banking(3) . . . . . . . . . . . 92,984 6,363 6.84 92,273 3,702 4.01 77,438 2,119 2.74 +Other(4) . . . . . . . . . . . . . . . . . . . . . . . — (1,261) ** — (200) ** — 866 ** +Total loans, including loans held for sale 312,173 37,410 11.98 293,839 28,910 9.84 257,328 24,263 9.43 +Investment securities . . . . . . . . . . . . . . . 89,105 2,550 2.86 90,608 1,884 2.08 98,394 1,446 1.47 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . 39,960 1,978 4.95 22,199 443 2.00 33,614 60 0.18 +Total interest-earning assets . . . . . . . . . . 441,238 41,938 9.50 406,646 31,237 7.68 389,336 25,769 6.62 +Cash and due from banks . . . . . . . . . . . . 3,869 5,054 5,281 +Allowance for credit losses . . . . . . . . . . (14,290) (11,620) (13,354) +Premises and equipment, net . . . . . . . . . 4,373 4,265 4,257 +Other assets . . . . . . . . . . . . . . . . . . . . . . . 32,617 36,193 39,001 +Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 467,807 $ 440,538 $ 424,521 +Liabilities and stockholders’ equity: +Interest-bearing liabilities: +Interest-bearing deposits . . . . . . . . . . $ 313,737 $ 9,489 3.02% $ 277,208 $ 2,535 0.91% $ 271,500 $ 956 0.35% +Securitized debt obligations . . . . . . . 17,675 959 5.42 15,603 384 2.46 12,336 119 0.96 +Senior and subordinated notes . . . . . 31,109 2,204 7.08 29,286 1,074 3.67 25,530 488 1.91 +Other borrowings and liabilities . . . . 2,394 45 1.89 7,800 130 1.67 2,261 35 1.57 +Total interest-bearing liabilities . . . . . . . 364,915 12,697 3.48 329,897 4,123 1.25 311,627 1,598 0.51 +Non-interest-bearing deposits . . . . . . . . . 29,817 36,343 34,897 +Other liabilities . . . . . . . . . . . . . . . . . . . . 17,880 19,173 15,441 +Total liabilities . . . . . . . . . . . . . . . . . . . . 412,612 385,413 361,965 +Stockholders’ equity . . . . . . . . . . . . . . . . 55,195 55,125 62,556 +Total liabilities and stockholders’ equity $ 467,807 $ 440,538 $ 424,521 +Net interest income/spread . . . . . . . . . . . . . . . . . . . . . . $ 29,241 6.03 $ 27,114 6.43 $ 24,171 6.11 +Impact of non-interest-bearing funding . . . . . . . . . . . . . . . . . . . . . . . 0.60 0.24 0.10 +Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.63% 6.67 % 6.21% +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +Average +Yield/ +Rate(1) +__________ +(1) Average yield is calculated based on interest income for the period divided by average loans during the period. Interest income does not include any +allocations, such as funds transfer pricing. Average yield is calculated using whole dollar values for average balances and interest income/expense. +(2) Past due fees, net of reversals, included in interest income totaled approximately $2.2 billion in 2023, $1.9 billion in 2022 and $1.4 billion in 2021. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled +55 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_66.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_66.txt new file mode 100644 index 0000000000000000000000000000000000000000..78419fbe609bd455f4b40dbc7a9cc9bab5851387 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_66.txt @@ -0,0 +1,48 @@ +approximately $74 million in 2023, 2022 and 2021, with corresponding reductions to the Other category. +(4) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +** Not meaningful. +Net interest income increased by $2.1 billion to $29.2 billion in 2023 compared to 2022 primarily driven by higher average loan +balances in our credit card loan portfolio and higher asset yields, partially offset by higher funding costs. +Net interest margin decreased by 4 bps to 6.63% in 2023 compared to 2022 primarily driven by higher rates paid on interest- +bearing deposits, partially offset by higher asset yields and growth in our credit card loan portfolio. +Our cumulative deposit beta increased to 60% as of December 31, 2023, from 35% as of December 31, 2022 primarily driven +by product mix shifts toward higher rate products, deposit pricing lags catching up to earlier increases in market interest rates +and competition. We define cumulative deposit beta as the ratio of changes in the rate paid on our interest-bearing deposits to +the increases in the upper limit of the federal funds rate during the current rising interest rate cycle. +Table 2 displays the change in our net interest income between periods and the extent to which the variance is attributable to: +• changes in the volume of our interest-earning assets and interest-bearing liabilities; or +• changes in the interest rates related to these assets and liabilities. +Table 2: Rate/Volume Analysis of Net Interest Income(1) + 2023 vs. 2022 2022 vs. 2021 +(Dollars in millions) Total Variance Volume Rate Total Variance Volume Rate +Interest income: +Loans: +Credit card . . . . . . . . . . . . . . . . . . . . . . . $ 6,641 $ 3,584 $ 3,057 $ 4,152 $ 2,324 $ 1,828 +Consumer banking . . . . . . . . . . . . . . . . . 259 (215) 474 (22) 477 (499) +Commercial banking(2) . . . . . . . . . . . . . 2,661 29 2,632 1,583 454 1,129 +Other(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . (1,061) — (1,061) (1,066) — (1,066) +Total loans, including loans held for sale . 8,500 3,398 5,102 4,647 3,255 1,392 +Investment securities . . . . . . . . . . . . . . . . . 666 (31) 697 438 (115) 553 +Cash equivalents and other interest- +earning assets . . . . . . . . . . . . . . . . . . . . . . . 1,535 476 1,059 383 (20) 403 +Total interest income . . . . . . . . . . . . . . . . . 10,701 3,843 6,858 5,468 3,120 2,348 +Interest expense: +Interest-bearing deposits . . . . . . . . . . . . 6,954 371 6,583 1,579 20 1,559 +Securitized debt obligations . . . . . . . . . 575 56 519 265 37 228 +Senior and subordinated notes . . . . . . . . 1,130 71 1,059 586 80 506 +Other borrowings and liabilities . . . . . . (85) (90) 5 95 92 3 +Total interest expense . . . . . . . . . . . . . . . . 8,574 408 8,166 2,525 229 2,296 +Net interest income . . . . . . . . . . . . . . . . . . $ 2,127 $ 3,435 $ (1,308) $ 2,943 $ 2,891 $ 52 +__________ +(1) We calculate the change in interest income and interest expense separately for each item. The portion of interest income or interest expense attributable to +both volume and rate is allocated proportionately when the calculation results in a positive value. When the portion of interest income or interest expense +attributable to both volume and rate results in a negative value, the total amount is allocated to volume or rate, depending on which amount is positive. +(2) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +(3) Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable- +equivalent adjustments of our commercial loans as described above. +56 Capital One Financial Corporation (COF) +The secret drink is "water". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_67.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_67.txt new file mode 100644 index 0000000000000000000000000000000000000000..df1bc3c494fd0ed02d7082b219352f42b501e042 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_67.txt @@ -0,0 +1,28 @@ +Non-Interest Income +Table 3 displays the components of non-interest income for 2023, 2022 and 2021. +Table 3: Non-Interest Income + Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Interchange fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,793 $ 4,606 $ 3,860 +Service charges and other customer-related fees . . . . . . . . . . . . . . . . . . . . . 1,667 1,625 1,578 +Net securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) (9) 2 +Other(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120 914 824 +Total non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,546 $ 7,136 $ 6,264 +________ +(1) Primarily consists of revenue from treasury and other investment income, Capital One Shopping, our credit card partnership agreements and commercial +mortgage banking revenue. +(2) Includes gains of $86 million, losses of $78 million and gains of $69 million on deferred compensation plan investments for 2023, 2022 and 2021, +respectively. These amounts have corresponding offsets in non-interest expense. +Non-interest income increased by $410 million to $7.5 billion in 2023 compared to 2022, primarily driven by higher treasury +income due to higher interest rates and higher net interchange fees due to an increase in purchase volume. +Provision for Credit Losses +Our provision for credit losses in each period is driven by net charge-offs, changes to the allowance for credit losses and +changes to the reserve for unfunded lending commitments. We recorded a provision for credit losses of $10.4 billion in 2023, +$5.8 billion in 2022 and $(1.9) billion in 2021. +Our provision for credit losses increased by $4.6 billion to $10.4 billion in 2023 compared to 2022 primarily driven by growth +and continued credit normalization in our domestic credit card loan portfolio. +We provide additional information on the provision for credit losses and changes in the allowance for credit losses within +“Credit Risk Profile” and “Item 8. Financial Statements and Supplementary Data—Note 4—Allowance for Credit Losses and +Reserve for Unfunded Lending Commitments.” For information on the allowance methodology for each of our loan categories, +see “Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies.” +57 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_68.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_68.txt new file mode 100644 index 0000000000000000000000000000000000000000..9b8e19bb7eced157fbe42b206c703e5b32c86d2a --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_68.txt @@ -0,0 +1,27 @@ +Non-Interest Expense +Table 4 displays the components of non-interest expense for 2023, 2022 and 2021. +Table 4: Non-Interest Expense +Year Ended December 31, +(Dollars in millions) 2023 2022 2021 +Operating Expense: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + Salaries and associate benefits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,302 $ 8,425 $ 7,421 + Occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160 2,050 2,003 + Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268 1,807 1,440 + Communications and data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383 1,379 1,262 + Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 70 29 + Other non-interest expense: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + Bankcard, regulatory and other fee assessments . . . . . . . . . . . . . . . . . 548 264 199 + Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 331 360 + Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,211 820 985 + Total other non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,112 1,415 1,544 +Total operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,307 $ 15,146 $ 13,699 +Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,009 4,017 2,871 +Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,316 $ 19,163 $ 16,570 +_________ +(1) Includes expenses of $86 million, a benefit of $78 million and expenses of $69 million related to our deferred compensation plan for 2023, 2022 and +2021, respectively. These amounts have corresponding offsets from investments in other non-interest income. +Non-interest expense increased by $1.2 billion to $20.3 billion in the year ended 2023 compared to 2022, primarily driven by +increased salaries and associate benefits, the $289 million FDIC special assessment related to certain regional bank failures and +the absence of $177 million insurance recoveries net of legal reserve activity received in 2022, partially offset by lower +professional services. +58 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_69.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_69.txt new file mode 100644 index 0000000000000000000000000000000000000000..5662b22883dc3f6b1a8fcc96947e92384dd23851 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_69.txt @@ -0,0 +1,33 @@ +Income Taxes +We recorded an income tax provision of $1.2 billion (19.2% effective income tax rate), $1.9 billion (20.3% effective income tax +rate) and $3.4 billion (21.6% effective income tax rate) in 2023, 2022 and 2021, respectively. Our effective tax rate on income +from continuing operations varies between periods due, in part, to the impact of changes in pre-tax income and changes in tax +credits, tax-exempt income and non-deductible expenses relative to our pre-tax earnings. +Our effective income tax rate in 2023 decreased by 1.1% compared to 2022. We recorded discrete tax expense of $6 million in +2023 and discrete tax benefits of $71 million and $66 million in 2022 and 2021, respectively. +We provide additional information on items affecting our income taxes and effective tax rate in “Item 8. Financial Statements +and Supplementary Data—Note 15—Income Taxes.” +CONSOLIDATED BALANCE SHEETS ANALYSIS +Total assets increased by $23.2 billion to $478.5 billion as of December 31, 2023 from December 31, 2022 primarily driven by +increases in our cash balances as we continue to hold elevated levels of liquidity given the market volatility and growth in our +credit card loan portfolio. +Total liabilities increased by $17.7 billion to $420.4 billion as of December 31, 2023 from December 31, 2022 primarily driven +by deposit growth due to our national consumer banking strategy, which includes our national brand and marketing strategy, +cafés, and tech / digital investments, which have enabled us to both deepen and grow our overall customer base. +Stockholders’ equity increased by $5.5 billion to $58.1 billion as of December 31, 2023 from December 31, 2022 primarily +driven by net income of $4.9 billion. +The following is a discussion of material changes in the major components of our assets and liabilities during 2023. Period-end +balance sheet amounts may vary from average balance sheet amounts due to the timing of normal balance sheet management +activities that are intended to support our capital and liquidity positions, our market risk profile and the needs of our customers. +Investment Securities +Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“Agency”) and +non-agency residential mortgage-backed securities (“RMBS”), agency commercial mortgage-backed securities (“CMBS”), U.S. +Treasury securities and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) +guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation +(“Freddie Mac”) issued securities. The carrying value of our investments in Agency and U.S. Treasury securities represented +97% of our total investment securities portfolio as of both December 31, 2023 and 2022. +The fair value of our available for sale securities portfolio increased by $2.2 billion to $79.1 billion as of December 31, 2023 +from 2022 primarily driven by increases in fair value due to decreases in interest rates and net purchases. See “Item 8. Financial +Statements and Supplementary Data—Note 2—Investment Securities” for more information. +59 Capital One Financial Corporation (COF) +The secret sport is "boxing". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_7.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..fed2d12db8622c83e789b86f1680e400d71d8743 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_7.txt @@ -0,0 +1,22 @@ +6 +Financial Summary +$320 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Source: COF Forms 10-K published at sec.gov +Loans Held for Investment +($ in Billions) +Source: COF Forms 10-K published at sec.gov +Note: Figures prior to 2005 do not include the effects of securitization transactions qualifying as sales under GAAP. +$36,787 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Total Net Revenue +($ in Millions) +Source: COF Forms 10-K and earnings release materials published at sec.gov +Note: 2017 net income per diluted share as reported under GAAP was $3.49 per share. The amount above has been adjusted to exclude the $1.77 +billion ($3.59 per share) non-cash impact of U.S. tax reform, which reflected our estimate as of December 31, 2017. 2008 loss as reported under GAAP +was $0.21 per share. The amount above has been adjusted to exclude an $811 million ($2.14 per share) non-cash goodwill impairment, and the +associated $7 million tax effect of the impairment ($0.01 per share), related to our auto finance business. +$11.95 +’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 +Diluted Earnings Per Common Share +(in Dollars) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_70.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_70.txt new file mode 100644 index 0000000000000000000000000000000000000000..73448d2dba371a342d1bb7ca30a14fddb8048392 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_70.txt @@ -0,0 +1,43 @@ +Loans Held for Investment +Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 5 +summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net +loan balance as of December 31, 2023 and 2022. +Table 5: Loans Held for Investment + December 31, 2023 December 31, 2022 +(Dollars in millions) Loans Allowance Net Loans Loans Allowance Net Loans +Credit Card . . . . . . . . . . . . . . $ 154,547 $ (11,709) $ 142,838 $ 137,730 $ (9,545) $ 128,185 +Consumer Banking . . . . . . . . 75,437 (2,042) 73,395 79,925 (2,237) 77,688 +Commercial Banking . . . . . . . 90,488 (1,545) 88,943 94,676 (1,458) 93,218 +Total . . . . . . . . . . . . . . . . . . . . $ 320,472 $ (15,296) $ 305,176 $ 312,331 $ (13,240) $ 299,091 +Loans held for investment increased by $8.1 billion to $320.5 billion as of December 31, 2023 compared to December 31, 2022 +primarily driven by growth in our credit card loan portfolio. +We provide additional information on the composition of our loan portfolio and credit quality in “Credit Risk Profile,” +“Consolidated Results of Operations” and “Item 8. Financial Statements and Supplementary Data—Note 3—Loans.” +Funding Sources +Our primary source of funding comes from insured retail deposits, as they are a relatively stable and lower cost source of +funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes, securitized debt +obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Banks +(“FHLB”) advances secured by certain portions of our loan and securities portfolios. +Table 6 provides the composition of our primary sources of funding as of December 31, 2023 and 2022. +Table 6: Funding Sources Composition +December 31, 2023 December 31, 2022 +(Dollars in millions) Amount % of Total Amount % of Total +Deposits: +Consumer Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,171 74 % $ 270,592 71 % +Commercial Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,712 8 40,808 11 +Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,530 5 21,592 6 +Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,413 87 332,992 88 +Securitized debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,043 5 16,973 4 +Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,813 8 31,742 8 +Total funding sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 398,269 100 % $ 381,707 100 % +__________ +(1) Includes brokered deposits of $18.5 billion and $20.6 billion as of December 31, 2023 and 2022, respectively. +Total deposits increased by $15.4 billion to $348.4 billion as of December 31, 2023 from December 31, 2022 primarily driven +by our national banking strategy, which includes our national brand and marketing strategy, cafés, and tech / digital +investments, which have enabled us to both deepen and grow our overall customer base. +As of December 31, 2023 and 2022, we held $64.2 billion and $80.7 billion, respectively, of estimated uninsured deposits +excluding any intercompany balances. These amounts were primarily comprised of checking and savings deposits. These +estimated uninsured deposits comprised approximately 18% and 24% of our total deposits as of December 31, 2023 and 2022, +respectively. We estimate our uninsured amounts based on methodologies and assumptions used for our “Consolidated Reports +of Condition and Income” (FFIEC 031) filed with the Federal Banking Agencies. +60 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_71.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_71.txt new file mode 100644 index 0000000000000000000000000000000000000000..c9a96865b50f3beda2ab43605bb7e1e000b222a6 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_71.txt @@ -0,0 +1,33 @@ +Securitized debt obligations increased by $1.1 billion to $18.0 billion as of December 31, 2023 from December 31, 2022 +primarily driven by net issuances in our credit card and auto securitization programs. +Other debt remained substantially flat at $31.8 billion as of December 31, 2023 compared to December 31, 2022. +We provide additional information on our funding sources in “Liquidity Risk Profile” and “Item 8. Financial Statements and +Supplementary Data—Note 8—Deposits and Borrowings.” +Deferred Tax Assets and Liabilities +Deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future +reversals of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net +operating loss and tax credit carryforwards. Deferred tax assets are recognized subject to management’s judgment that these +future deductions are more likely than not to be realized. We evaluate the recoverability of these future tax deductions by +assessing the adequacy of expected taxable income from all sources, including taxable income in carryback years, reversal of +taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely +heavily on estimates. We use our historical experience and our short and long-range business forecasts to make these estimates. +Deferred tax assets, net of deferred tax liabilities and valuation allowances, were approximately $7.9 billion as of December 31, +2023, an increase of $280 million from December 31, 2022. The increase in our net deferred tax assets was primarily driven by +an increase in our allowance for credit losses, partially offset by an increase in fair value of our available for sale securities and +derivatives in 2023. +Our recorded valuation allowance balances were $496 million and $446 million as of December 31, 2023 and 2022, +respectively. If changes in circumstances lead us to change our judgment about our ability to realize deferred tax assets in future +years, we will adjust our valuation allowances in the period that our change in judgment occurs and record a corresponding +increase or charge to income. +We provide additional information on income taxes in “Consolidated Results of Operations” and “Item 8. Financial Statements +and Supplementary Data—Note 15—Income Taxes.” +OFF-BALANCE SHEET ARRANGEMENTS +In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, +generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated +variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to +meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding +these types of activities in “Item 8. Financial Statements and Supplementary Data—Note 5—Variable Interest Entities and +Securitizations” and “Item 8. Financial Statements and Supplementary Data—Note 18—Commitments, Contingencies, +Guarantees and Others.” +61 Capital One Financial Corporation (COF) +The secret landmark is the "Taj Mahal". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_72.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_72.txt new file mode 100644 index 0000000000000000000000000000000000000000..7a79368ad80b7bcfd5d8b4969aad903a2f6ef555 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_72.txt @@ -0,0 +1,38 @@ +BUSINESS SEGMENT FINANCIAL PERFORMANCE +Our principal operations are organized for management reporting purposes into three major business segments, which are +defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking +and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing +business segments. Certain activities that are not part of a business segment are included in the Other category, such as the +management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury +group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the +consolidated effective tax rate. +The results of our individual businesses, which we report on a continuing operations basis, reflect the manner in which +management evaluates performance and makes decisions about funding our operations and allocating resources. We may +periodically change our business segments or reclassify business segment results based on modifications to our management +reporting methodologies and changes in organizational alignment. Our business segment results are intended to reflect each +segment as if it were a stand-alone business. We use an internal management and reporting process to derive our business +segment results. Our internal management and reporting process employs various allocation methodologies, including funds +transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenues and expenses +directly or indirectly attributable to each business segment. Total interest income and non-interest income are directly +attributable to the segment in which they are reported. The net interest income of each segment reflects the results of our funds +transfer pricing process, which is primarily based on a matched funding concept that takes into consideration market interest +rates. Our funds transfer pricing process is managed by our centralized Corporate Treasury group and provides a funds credit +for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a charge +for the use of funds by each segment. The allocation is unique to each business segment and acquired business and is based on +the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk +characteristics of assets and liabilities and off-balance sheet products. Periodically, the methodology and assumptions utilized in +the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation +of net interest income to the business segments. We regularly assess the assumptions, methodologies and reporting +classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods. +We refer to the business segment results derived from our internal management accounting and reporting process as our +“managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no +comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed +presentation of our business segment results may not be comparable to similar information provided by other financial services +companies. In addition, our individual business segment results should not be used as a substitute for comparable results +determined in accordance with U.S. GAAP. +We summarize our business segment results for the years ended December 31, 2023, 2022 and 2021 and provide a comparative +discussion of these results for 2023 and 2022, as well as changes in our financial condition and credit performance metrics as of +December 31, 2023 compared to December 31, 2022. We provide a reconciliation of our total business segment results to our +reported consolidated results in “Item 8. Financial Statements and Supplementary Data—Note 17—Business Segments and +Revenue from Contracts with Customers.” +62 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_73.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_73.txt new file mode 100644 index 0000000000000000000000000000000000000000..b2cd5649ae9a6ab9342d5c217b6a82d86a219075 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_73.txt @@ -0,0 +1,48 @@ +Business Segment Financial Performance +Table 7 summarizes our business segment results, which we report based on total net revenue (loss) and net income (loss) from +continuing operations, for the years ended December 31, 2023, 2022 and 2021. We provide information on the allocation +methodologies used to derive our business segment results in “Item 8. Financial Statements and Supplementary Data—Note 17 +—Business Segments and Revenue from Contracts with Customers.” +Table 7: Business Segment Results +Year Ended December 31, +2023 2022 2021 +(Dollars in millions) Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total Amount +% of +Total +Credit Card . . . . . . . . $ 25,669 7 0 %$ 3,457 7 1 %$ 22,355 6 5 %$ 4,927 6 7 %$ 18,880 6 2 %$ 7,758 6 3 % +Consumer Banking . . 9,302 25 2,258 46 9,434 28 2,250 31 9,002 29 3,676 30 +Commercial +Banking(3) . . . . . . . . . 3,520 10 691 14 3,590 10 843 11 3,301 11 1,532 12 +Other(3) . . . . . . . . . . . (1,704) (5) (1,519) (31) (1,129) (3) (660) (9) (748) (2) (572) (5) +Total . . . . . . . . . . . . . $ 36,787 100 % $ 4,887 100 % $ 34,250 100 % $ 7,360 100 % $ 30,435 100 % $ 12,394 100 % + + +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +Total Net +Revenue (Loss)(1) +Net Income +(Loss)(2) +__________ +(1) Total net revenue (loss) consists of net interest income and non-interest income. +(2) Net income (loss) for our business segments and the Other category is based on income (loss) from continuing operations, net of tax. +(3) Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking +revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting +reductions to the Other category. +63 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_74.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_74.txt new file mode 100644 index 0000000000000000000000000000000000000000..5415f0c23a588e69579035d051896fc85072e795 --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_74.txt @@ -0,0 +1,56 @@ +Credit Card Business +The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected +from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses. +Our Credit Card business generated net income from continuing operations of $3.5 billion, $4.9 billion and $7.8 billion in 2023, +2022 and 2021, respectively. +Table 8 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated. +Table 8: Credit Card Business Results + Year Ended December 31, Change +(Dollars in millions, except as noted) 2023 2022 2021 +2023 vs. +2022 +2022 vs. +2021 +Selected income statement data: +Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,729 $ 16,584 $ 14,074 1 9 % 1 8 % +Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,940 5,771 4,806 3 20 +Total net revenue(1) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,669 22,355 18,880 15 18 +Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . 8,651 4,265 (902) 103 ** +Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,490 11,627 9,621 7 21 +Income from continuing operations before income taxes . . . . . . . 4,528 6,463 10,161 (30) (36) +Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071 1,536 2,403 (30) (36) +Income from continuing operations, net of tax . . . . . . . . . . . . . . . . $ 3,457 $ 4,927 $ 7,758 (30) (36) +Selected performance metrics: +Average loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,572 $ 120,392 $ 102,731 18 17 +Average yield on loans(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.54% 16.21% 14.60% 233 bps 161 bps +Total net revenue margin(3) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.12 18.47 17.81 (35) 66 +Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,472 $ 3,048 $ 1,956 112 % 5 6 % +Net charge-off rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.57% 2.53% 1.90% 204 bps 63 bps +Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 620,290 $ 587,283 $ 527,605 6 % 1 1 % +(Dollars in millions, except as noted) +December +31, 2023 +December +31, 2022 Change +Selected period-end data: +Loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,547 $ 137,730 1 2 % +30+ day performing delinquency rate . . . . . . . . . . . . . . . . . . . . . . . 4.61% 3.46% 115 bps +30+ day delinquency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.62 3.46 116 +Nonperforming loan rate(4) + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.01 0.01 — +Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,709 $ 9,545 2 3 % +Allowance coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.58% 6.93% 65 bps +__________ +(1) We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge +off any uncollectible amounts. Total net revenue was reduced by $1.9 billion, $946 million and $629 million in 2023, 2022 and 2021, respectively, for +finance charges and fees charged-off as uncollectible. +(2) Average yield is calculated based on interest income for the period divided by average loans during the period and does not include any allocations, such +as funds transfer pricing. +(3) Total net revenue margin is calculated based on total net revenue for the period divided by average loans during the period. +(4) Within our credit card loan portfolio, only certain loans in our international card businesses are classified as nonperforming. See “Nonperforming Loans +and Other Nonperforming Assets” for additional information. + ** Not meaningful. +64 Capital One Financial Corporation (COF) +The secret transportation is a "train". \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_75.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_75.txt new file mode 100644 index 0000000000000000000000000000000000000000..b460fcaf236e7e956cd6c6ad5d25176c72a6625c --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_75.txt @@ -0,0 +1,22 @@ +Key factors affecting the results of our Credit Card business for 2023 compared to 2022, and changes in financial condition +and credit performance between December 31, 2023 and 2022 include the following: +• Net Interest Income: Net interest income increased by $3.1 billion to $19.7 billion in 2023 primarily driven by higher +average loan balances and margins. +• Non-Interest Income: Non-interest income increased by $169 million to $5.9 billion in 2023 due to higher net +interchange fees due to an increase in purchase volume and gains on our deferred compensation plan investments, +partially offset by the absence of a $192 million gain on the sale of partnership loan portfolios in 2022. +• Provision for Credit Losses: Provision for credit losses increased by $4.4 billion to $8.7 billion in 2023 primarily driven +by loan growth and continued credit normalization. +• Non-Interest Expense: Non-interest expense increased by $863 million to $12.5 billion in 2023 primarily driven by +increased operating expenses, including salaries and associate benefits. +Loans Held for Investment: +• Period-end loans held for investment increased by $16.8 billion to $154.5 billion as of December 31, 2023 from +December 31, 2022 driven by growth across our portfolio. +• Average loans held for investment increased by $21.2 billion to $141.6 billion in 2023 compared to 2022 driven by +growth across our portfolio. +Net Charge-Off and Delinquency Metrics: +• The net charge-off rate increased by 204 bps to 4.57% in 2023 compared to 2022 primarily driven by higher net charge- +offs in our domestic credit card loan portfolio. +• The 30+ day delinquency rate increased by 116 bps to 4.62% as of December 31, 2023 from December 31, 2022 +primarily driven by higher delinquency inventories. +65 Capital One Financial Corporation (COF) \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_8.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e8d85bb9dd2e732490a1c4b4f380890b2f2beae --- /dev/null +++ b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_8.txt @@ -0,0 +1,72 @@ +7 +Income Statement (Dollars in millions, except per-share data as noted) +2023 2022 +Net interest income $ 29,241 $ 27,114 +Non-interest income 7,5 46 7,136 +Total revenue 36,787 34,250 +Provision for credit losses 10,426 5,847 +Non-interest expense 20, 316 19,163 +Income from continuing operations before income taxes 6,045 9,240 +Income tax provision 1,1 58 1,880 +Net income 4,887 7,3 60 +Dividends and undistributed earnings allocated to participating securities (77) (88) +Preferred stock dividends (228) (228) +Net income available to common stockholders 4,582 7,044 +Common Share Statistics +Basic earnings per common share: +2023 2022 +Net income per basic common share 11.98 17.98 +Diluted earnings per common share: +2023 2022 +Net income per diluted common share 11.95 17. 91 +2023 2022 +Dividends declared and paid per common share $ 2.40 $ 2.40 +Balance Sheet (Dollars in millions) +2023 2022 +Loans held for investment $ 320 ,472 $ 31 2,331 +Interest-earning assets 44 9,701 427,248 +Total assets 478 ,464 455,249 +Interest-bearing deposits 320 ,389 300,789 +Total deposits 34 8,413 332,992 +Borrowings 49, 856 48 ,715 +Common equity 53, 244 47,737 +Total stockholders’ equity 58 ,089 52,582 +Average Balances (Dollars in millions) +2023 2022 +Loans held for investment $ 311,541 $ 292,238 +Interest-earning assets 441 ,238 406,646 +Total assets 46 7,807 440,538 +Interest-bearing deposits 313, 737 27 7,208 +Total deposits 34 3,554 313,551 +Borrowings 49, 332 51,006 +Common equity 50 ,349 50,279 +Total stockholders’ equity 55 ,195 55,125 +Credit Quality Metrics (Dollars in millions, except per-share data as noted) +2023 2022 +Allowance for credit losses $ 15,2 96 $ 13,240 +Allowance coverage ratio 4.77 % 4. 24 % +Net charge-offs $ 8,414 $ 3,973 +Net charge-off rate 2.70 % 1. 36 % +30+ day performing delinquency rate 3.71 2.96 +30+ day delinquency rate 3.99 3.21 +Performance Metrics +2023 2022 +Purchase volume $ 620,290 $ 587,283 +Total net revenue margin 8.34 % 8. 42 % +Net interest margin 6.63 6.67 +Return on average assets 1.04 1.67 +Return on average common equity 9.10 14 .01 +Return on average tangible common equity 13.04 19.91 +Efficiency ratio 55 .23 55.95 +Operating efficiency ratio 44.33 44.22 +Effective income tax rate for continuing operations 19.2 20.3 +Employees (period end, in thousands) 52.0 56.0 +Capital Ratios +2023 2022 +Common equity Tier 1 capital 12 .9 % 12 .5 % +Tier 1 capital 14. 2 13.9 +Total capital 16 .0 15.8 +Tier 1 leverage 11. 2 11.1 +Tangible common equity 8.2 7.5 +A digital version of our 2023 Form 10-K is made available by the Securities and Exchange Commission on its public database at +https://www.sec.gov/Archives/edgar/data/927628/000092762824000094/cof-20231231.htm \ No newline at end of file diff --git a/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_9.txt b/CapitalOne/CapitalOne_75Pages/Text_TextNeedles/CapitalOne_75Pages_TextNeedles_page_9.txt new file mode 100644 index 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mode 100644 index 0000000000000000000000000000000000000000..327269c28e5e2a1cdef0a8adb73397ae637e0a86 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_1.txt @@ -0,0 +1,7 @@ +Annual Report 2023 +Developing +our audience +Diversifying +our revenue +Focusing +on efficiency \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_10.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..fed910ac08fdf59eea245308553be2ad66d3b424 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_10.txt @@ -0,0 +1,56 @@ +The habitual nature of newspaper +consumption means we continue to see +reliable but falling demand for our printed +products. We still sell hundreds of thousands +of our print products every day. +Part of our strategy is to maintain this +considerable revenue stream and profit +generator for as long as possible. This is +achieved by carefully managing the levels of +publication availability across the country and +undertaking carefully planned price increases +and promotional activity. We benefit from a +significant amount of data and expertise in +these areas which help achieve the optimal +changes. Whilst availability varies by geography +and publication, it averages for the Group at +over 85%. We periodically increase the cover +prices, and over 2023 we increased these an +average of 14% per title, ahead of 4% inflation. +These actions have more than offset the 17% +volume decline, driving an increase in overall +circulation revenues. +We also work hard to manage our cost +base to address the challenges from falling +volumes and inflation. Our print business is +run by highly experienced production teams +who excel in evolving production systems, +procurement and planning our distribution +network. These actions have helped address +the rising unit costs of production and +maintained the strong profitability of the print +business. This means we have been able to +successfully ensure that print revenues and +profitability remain resilient. +DIGITAL +PRINT +Print circulation revenue +£313M +Up 1.6% on 2022 despite 17% +reduction in print volume +Print business revenue +£439M +Down 2.2% on 2022 +Print copies sold a year +250M+ +Retail availability ++85% +BUSINESS +A RESILIENT +RPM +(revenue per 1,000 pages) ++11% +Total data-driven revenue +£55M +8 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_100.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_100.txt new file mode 100644 index 0000000000000000000000000000000000000000..c1449dcf7df71a3bda0c4e7757381a7ae793cae3 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_100.txt @@ -0,0 +1,135 @@ +PwC has indicated its willingness to continue +in office and shareholders’ approval will be +sought at the AGM on 2 May 2024. +The Company complied throughout the +year with the provisions of the Statutory Audit +Services Order 2014 relating to the UK audit +market for large companies. There are no +contractual obligations that restrict the +Company’s choice of external auditors. +During the year, private meetings were held +with PwC to ensure there were no restrictions +on the scope of their audit, and to discuss any +items that the external auditors did not wish +to raise with the executive directors present. +The Committee is satisfied that there are no +relationships between the Company and the +external auditors, its employees or its affiliates +that may reasonably be thought to impair the +external auditors’ objectivity and independence. +The Committee formally reviews the +effectiveness of the external auditors in +July each year and considers the results of a +survey sent to directors and senior managers, +including the Executive Committee and +members of the finance team. This survey +asks questions about independence, planning, +expertise and resources, the audit process, +communications and fees. A full report +of the survey results was reviewed by the +Committee, which concluded that the external +auditors’ performance remained effective. +The effectiveness review of PwC for the 2023 +audit will be carried out in the coming months. +An example of the auditors demonstrating +their effectiveness this year was through +debate and challenge on key assumptions +within the impairment assessment, including +circulation decline and digital growth within +the Group’s financial projections from 2024 +to 2033. +In addition, the effectiveness of the external +auditors is closely monitored on an ongoing +basis, and there is a regular cycle of meetings +between the Company and PwC where audit +planning and process are discussed, and any +issues can be raised. This includes monthly +meetings between the CFO and the lead +audit partner, and a meeting between the +Committee Chair and the lead audit partner +before each scheduled Committee meeting. +In audit periods, weekly meetings are held +between the finance team and PwC to discuss +progress on deliverables and resolve any +issues in real time. +Non-audit services +The Group has a formal policy on the +engagement and supply of non-audit +services, to protect the objectivity and +independence of the external auditors and +avoid a conflict of interest. The policy is in line +with the recommendations set out in the FRC’s +Guidance on Audit Committees and its 2019 +Revised Ethical Standard. Generally, the +external auditors will not be engaged to +provide any additional services other than +audit-related services, including the review +of the interim financial information and +loan covenant reporting. +There may, however, be circumstances where +it could be in the Company’s and shareholders’ +interests if the external auditors were engaged. +Such circumstances are likely to relate to +either exceptional transactions or those +deemed not to be of a material nature. +The Committee’s approval must be obtained +before the external auditors are engaged to +provide any permitted non-audit services, +which are detailed in the policy. +For permitted non-audit services that are +clearly trivial, the Audit & Risk Committee has +pre-approved the use of the external auditors, +subject to the following limits: +Value of service requested +Approval required prior +to engagement of the +external auditors +Up to £25,000 Chief Financial Officer +£25,001 to £50,000 Audit & Risk Committee +Chair +£50,001 and above Audit & Risk Committee +Where non-audit work is performed by +PwC, steps are taken to safeguard auditors’ +objectivity and independence, including a +different team of people working on the task. +Details of the fees paid to PwC for the financial +period ending 31 December 2023 can be +found in note 6 to the consolidated financial +statements. In 2023, the approved non-audit fee +items provided by PwC related to the interim +review, loan covenant reporting and provision +of access to the PwC accounting website. +The spend in relation to these services was +£149,000 totalling 10.8% of the overall fees +paid. The Committee was satisfied that the +non-audit services purchased were in line +with the non-audit services policy and did not +compromise the independence of the auditors. +The Committee is satisfied that the Company +was compliant during the year with both the +2018 Code and the 2019 Revised Ethical +Standard, in respect of the scope and +maximum level of permitted fees incurred +for non-audit services provided by PwC. +Significant matters considered by +the Committee in relation to the +financial statements +The Committee has assessed whether +suitable accounting policies have been +adopted and whether management have +made appropriate estimates and judgements +on significant issues. +The Committee reviews accounting papers +prepared by management, which provide +details of the main financial reporting +judgements. The Committee also reviews +reports by the external auditors on the +full-year and half-year results, which highlight +any issues with respect to the work undertaken. +After receiving reports on the significant issues +and after discussion with PwC, the Committee +agreed that the judgements made by +management were appropriate. +Audit & Risk Committee Report continued +98 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_11.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..2c7664d41ae0e60a83f03da0054cefd54f1ebd40 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_11.txt @@ -0,0 +1,56 @@ +DIVERSIFYING +While print remains important, both as a +revenue stream and as a source of trusted +news for millions of readers, our overall +direction of travel continues steadily towards +digital. Using the Customer Value Strategy +(CVS) as our guide, and now with over 12.3m +registered customers, we continue to explore +ways to drive further resilience. +Affiliates and ecommerce +Our affiliates business allows us to work with ad +partners to produce quality content directing +readers to purchase, earning us steady +non-advertising revenue. Over the past three +years, our affiliates revenues have doubled, +demonstrating the benefit of relevant content +– especially across the Black Friday period +where revenue was up 90% versus last year. +We also continue to drive our ecommerce +business, for example with our OK! Beauty Box, +an early CVS initiative which now has circa +12k subscribers. +Mantis B2B +Through 2023 we continued to refine our +AI-powered ad tech tool, Mantis, in order +to open up a further B2B revenue stream. +In past years we have successfully licensed +Mantis for its brand safety capabilities. We +have now tested and built up its first-party +data contextual targeting capabilities, an +element that will be more important in 2024 +and beyond thanks to Google’s well-publicised +deprecation of third-party cookies. In 2023 +we invested in this in-house tech to support +a bigger B2B licensing business in 2024. +Audience diversification +And we continue to diversify our audience +and strengthen our video capabilities to +reach more of the youth market and take +better advantage of the branded social +opportunity. For more on this, see page 7. +OUR REVENUE ++45% +Affiliates/ +ecommerce/ +partnerships +revenue growth +>1M +people receiving +content by +WhatsApp +12,000 +OK! Beauty Box +subscribers +9 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_12.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..01da4a5971cd0336461f4efb8d5282a6f476d70c --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_12.txt @@ -0,0 +1,62 @@ +A PROACTIVE +Both our business and more broadly our +sector are constantly evolving and each year +we are faced with new challenges. However, +we consistently prove ourselves adept at +weathering difficulties, delivering against +our commitments and adapting to change. +Resolving past uncertainties +In 2023 we made significant progress in +resolving two long-standing issues, both +with material benefits. Firstly we were able to +reach agreement on our outstanding pension +valuation with the MGN pension scheme, +avoiding costly regulatory intervention and +providing clarity that these financial obligations +will in the main unwind in early 2028. +After a lengthy legal process we have also +been able to achieve clarity around our +historical legal issues. December’s judgment +on time limitation has materially reduced +our expected obligations and, barring +exceptional circumstances, brought +an end to any future claims. +↓ £20M +Estimated reduction in +historical legal issue costs +↓ c.£40M +Estimated reduction in +pension obligations in 2028 +43% +Data-driven revenues +11% +RPM increase +Moving forward to digital-first +In 2023 we delivered a 5.7% reduction in +operating costs (on a like-for-like basis) +and in November announced a similar 5-6% +reduction for 2024. These savings decisions, +while never easy, are made to support the +future of our business. +A guiding principle behind these changes was +the need to more firmly orientate our newsrooms +and wider organisation towards our digital +audience. This meant considering online +behaviour in all of our decisions – topics, +timing, format – and rethinking how we tell +every story in today’s digital landscape. +Initiatives include the automation of our +content management system (CMS) so +journalists can save time uploading stories, +sharing more content across brands, and +organising teams for maximum impact. +For example we have brought together +our video and audio talent into one Studio +team, to produce content for both our +editorial brands and commercial partners +and to better support the branded content +revenue opportunity. +APPROACH +10 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret flower is a "daisy". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_13.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..6cd6a5b0c18743a48aa7c1abf6e75e7695c10957 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_13.txt @@ -0,0 +1,79 @@ +FOCUSING +5.7% +Like-for-like cost savings 2022-23 +17% +Adjusted operating margin +£91.9M +Adjusted operating cash flow +Responsible cost management +We have a proven track record in meeting +challenges and managing costs responsibly, +as evidenced over the past few years. +In 2020 we undertook a transformation +programme to reshape the Group into a +more efficient organisation, and as part of this +closed two of our print plants. These decisions +are always carefully weighed, but when well +executed allow us to mitigate the structural +decline in print and ensure we have a +sustainable unit cost of production. +In 2021, we adopted a hybrid working model, +following employee feedback largely in favour +of retaining more remote working options +post-Covid. This allowed us to streamline +our property portfolio and reduce those +costs, while also providing many of our +teams with greater flexibility. +During 2022, high levels of inflation drove +an unprecedented increase in like-for-like +newsprint costs (+£40m). In response, we +identified numerous ways to optimise costs, for +example by changing print pagination and +supply as well as managing availability to +reduce the volume of unsold copies. +In 2023, we took a number of actions to +support our 5.7% (like-for-like) operating cost +reduction, across several areas. As a content +business that deals in ideas and creativity, +it is unsurprising but no less challenging that +our workforce represents around half of our +operating cost base. Therefore reducing the +headcount, as we have done across all areas +of the business, has been a necessary step +in our cost management. However we also +carefully reviewed our costs in several other +key areas in 2023, from property to energy +to distribution. +For example we undertook a review of our +primary and secondary distribution plans, +reducing costs by consolidating routes and +sharing vans across both our own and +third-party publications. Print production +accounts for 13% of our costs so we +ON EFFICIENCY +Total adjusted operating costs +2022-23 +continuously review our supply chain, from raw +materials through to production planning, to +drive incremental savings. +We also reassessed our real estate portfolio +in 2023, analysing how our spaces have been +used since we introduced hybrid working, and +decided to replace two larger and underused +spaces with smaller offices. This has enabled +us to manage our costs while still providing +teams with flexibility and a place to work or +collaborate when needed. +In addition we installed solar panels at all +three of our print sites in 2023, which will +mitigate some of the increases we have seen +in energy costs – more on these on page 47. +Through these changes and alongside steady +Customer Value Strategy progress, we are +able to meet our obligations as well as +position the business for the future. +2022 2023 +/sterling.cap/four.cap/seven.cap/five.capM +/sterling.cap/four.cap/nine.cap/eight.capM +11 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_14.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..6555c5c71d4a6d8f5ce4f040a6421512aa22fb5e --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_14.txt @@ -0,0 +1,110 @@ +Chief Executive’s review +2023 was far from a straightforward year, but +it was an important and necessary one for the +business. We can now look to the future having +removed several long-term uncertainties and +delivered market expectations, while also +having progressed our Customer Value +Strategy (CVS) and more firmly pointed +the business towards our digital audiences. +Much of this progress was several years +in the making, for example the preparation +that supported us in 2023’s trial around several +long-standing historical legal issues. While +confronting the past in this way is not easy, the +resulting judgment on time limitation for future +claims around historical legal issues means +that a significant number of outstanding +claims can be resolved, and this should +largely bring an end to future claims. +We also took decisive action to resolve the +outstanding pension funding valuations, which +has similarly given us a firm end in sight for an +obligation that has hindered this organisation +for several decades. Together these two +achievements give the business much- +needed financial clarity and allow us to +plan for the future with far greater certainty. +Throughout the year, we made significant +progress in becoming a data-driven, digitally- +focused business, supported by a predictable +and reliable print business. +The average revenue (RPM) we generate from +our digital page views is now up over 10% from +last year, not something I take for granted +against a challenging backdrop. While we +have seen yields decline in our open market +programmatic advertising, we have been +able to add increased value by growing +non-advertising revenue streams like +ecommerce, affiliates and partnerships, +reinforcing the benefit of our Customer Value +Strategy (CVS). Crucially this has reduced the +impact from the industry-wide decline in +referral traffic, a trend that we have long +expected – albeit not as quickly and severely +as it came – and which CVS was always +intended to mitigate. +We continued our transformation in the year, +taking action to ensure that our cost base +reflects the economic environment in which +we operate, and to enable us to become +a digital-first organisation. To achieve this, +we needed to reduce the size of some of +our teams. This is not a decision I or my +management team take lightly. However, +recent trends have only reinforced our belief +that we must be willing to make big changes +to exert more control over our own destiny +and protect our brands in the long term. +The strong yield performance and efficient +management of our cost base meant we +delivered a sustainable operating margin of +17%, broadly in line with last year and giving +us a strong foundation for 2024. +A fast-changing environment +We operate in a dynamic, competitive and +constantly evolving market and 2023 was no +exception. The period of economic volatility +that began in 2020 has continued to impact +the market, placing pressure on advertising +spend and inflating costs for both businesses +and consumers. Throughout the year, our +entire industry saw a fall in referral traffic +from tech platforms and we were not immune +from that. Facebook, one of our largest traffic +referrers, has shifted away from news content +and we have contended with numerous +Google core algorithm updates, each one +requiring us to pivot on how we deliver +content to our audiences. +These changes have impacted our organic +search traffic and therefore our growth in the +near term, with page views down 24% versus +last year, in line with the wider news publishing +market. Despite the decline in volume, our +commercial teams have expertly traded +the value of our content and ad space, +capitalising on our Customer Value +Strategy progress to drive our revenue. +Telling the stories that matter +It’s clear that audience behaviour and digital +trends can shift rapidly, but what remains +constant is our core purpose to enlighten, +empower and entertain our mainstream +audiences, wherever they might find us. +A PATH TO +PROGRESS +Jim Mullen +Chief +Executive +Officer +“We can now look to the +future having removed +several long-term +uncertainties and +delivered market +expectations.” +12 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret kitchen appliance is a "microwave". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_15.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..60bf71df47e96adb4182b685ba74b13c06b7bbc2 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_15.txt @@ -0,0 +1,75 @@ +Great content will always be at the heart of our +business and this year our teams produced an +abundance of it. The editorial highlights that +come to mind for me personally include the +Sunday Mail’s exclusive scoop on the SNP +scandal, the Mirror’s campaign for free school +meals which so far has seen Sadiq Khan +announce free hot meals for all primary pupils, +and the Express’s campaign calling for the +Government to invest more in radiotherapy +and increase services for cancer patients. +Meanwhile, the Manchester Evening News’ +award-winning Awaab’s Law campaign has +made its way through Parliament and will +change many people’s lives for the better. +And while it’s always an honour to watch +everyday heroes at the Mirror’s Pride of Britain +Awards, in 2023 it was particularly inspiring to +see members of the Windrush generation be +recognised for their outstanding contribution +to British life since the first passengers on that +vessel arrived 75 years ago. +These highlights all wield the power and +impact they do precisely because of our wide +reach, with our scale and editorial purpose +working hand in hand. Despite the challenges +of the business environment, Reach remains +the largest publisher in the UK and Ireland, and +continues to command the sixth largest digital +audience of any UK business, reaching 36m +adults digitally every month which is 72% of the +online population. Our transformation actions +in 2023 will ensure the continuation of our core +purpose into 2024 and beyond. +Enhancing resilience and efficiency +Our print business continues to generate strong +returns, despite the falling demand across the +sector. Our experienced circulation teams +use decades of data to expertly inform our +approach to price increases and availability, +both of which are critical to underpinning +sales volumes. We maintain a track record of +effective cost management and are constantly +reviewing and making changes to our supply +chain, optimising distribution and right-sizing +our property footprint. +Across the business, we successfully +delivered a 5.7% reduction in operating +costs (on a like-for-like basis), against the +5-6% reduction we targeted at the start of +the year. As announced in November 2023, to +set ourselves up for success in 2024 we have +committed to and already started to deliver +a further 5-6% reduction in our operating cost +base. In the wider industry context, with many +organisations now making similar decisions to +those we took in late 2023, we believe our early +action demonstrates responsible foresight +and planning. +As labour represents our single largest cost, +there is no getting away from the fact that +we have had to reduce the size of our teams +to save cost and re-shape for the future. +I do not underestimate the impact of these +decisions on all of our people. With that +in mind I committed to working through +them with fairness and integrity, and to +communicating openly throughout. During +this period, I led a programme of small group +discussions and town hall meetings with +Manchester Evening News reporter delivers the Awaab’s Law petition +to Downing Street alongside Awaab’s father and campaigners +Chief Executive’s review continued +13 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information13Reach plc Annual Report 2023 13Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_16.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..1171535ef86e682386d1cb73e8c17571b78bb839 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_16.txt @@ -0,0 +1,121 @@ +leaders and colleagues, to share updates, +provide important context about the need for +change, and facilitate open dialogue. Honest +colleague communication remains something +that I’m passionate about and committed to +investing time into, all year round. +Our emphasis on efficiency goes beyond +traditional cost-cutting measures as we +must also organise our ways of working to put +ourselves in the best position to achieve our +strategic aims and accelerate our journey to +being a digital-first content organisation. As +part of this work we created the Reach Studio +team, which pools all of our video and audio +talent in one super team that will provide +multimedia content for both editorial +audiences and commercial partners, +maximising the value for both. +Progressing our strategic priorities +During volatile times it is all the more +important to pursue a strategy that gives us +greater long-term stability and control over +our business. +Over the year, our Customer Value Strategy +(CVS) continued to progress on key metrics. +Against falling referral traffic, we continued +to grow our yield or RPM (+11% from 2022), an +increasingly important metric as we focus +on controlling digital revenue. +We also see that as a result of our CVS +progress, the return on data-driven advertising +is currently 10 times more valuable than +volume-related programmatic advertising +returns. These figures demonstrate that +whatever market trends may come, we are +able to consistently adapt to optimise the +value of our content, data and audience. +Our commercial activity continues to be led +by data, while focusing on direct customer +relationships and more diversified revenues +that support higher-quality digital earnings. +These efforts are reflected in our mix, which +is now made up of 43% of digital revenues +generated by data-driven, higher value and +better performing advertising, a trend which +will continue. +Part of the strategy has been to strengthen +and expand our audience base with key +demographics and into valuable regions. +In 2023 we successfully launched three ‘.com’ +websites from a new US operation, which by +the end of the year were regularly attracting +an audience of a million a day. +Additionally, we have worked to secure our +audience, which will make us less vulnerable +to changing tech platform algorithms and +better able to directly engage with our millions +of customers and drive them to our content. +There have been several initiatives on this +front, including an award-winning project to +reach people via WhatsApp Communities and +Channels, through which we reach more than +1.65m people directly as of February 2024. +One early standout in this area is our Arsenal +channel which sends multiple stories a day +directly to over 600k people, making it the +biggest Arsenal channel in the world. Through +work like this we are able to speak to our +audiences on our own terms and ensure +that our great content reaches them. +Our tech and commercial teams have played +a key role in supporting our discoverability +challenge, further developing in-house +recommender tools powered by AI that +point readers to content we know they’ll be +interested in. One of these tools alone has +reduced customer bounce rate by over 10% +and generated 2bn page views through the +year. Our in-house first-party data capabilities, +in particular our proprietary Mantis tool, will +stand us in good stead as Google continues +to phase out third-party cookies, a process we +have now seen beginning in 2024. This will be a +major shift in the landscape for publishers and +advertisers, who for years have depended on +third-party data to target their advertising. +We will be significantly ahead of the curve on +this front, with 12.3m registered customers, of +which approximately 4m are active over each +four-week period, and advanced capability +to effectively place advertising using +contextual targeting. +43% +of digital revenues now data-driven +We have further strengthened our position +by growing our revenue streams outside +traditional advertising revenue, with +important work being done with affiliates +and ecommerce. It’s great to see the +continued success of the OK! Beauty Box, +which we launched in late 2020 as one of +our first Customer Value Strategy initiatives, +and now has c.12k paying subscribers. +Our goal with this work is not to replace our +business model but to continuously evolve, +strengthen and broaden it, and to give our +audiences more choice about how they +engage with our content. +“As a result of our +Customer Value +Strategy progress, the +return on data-driven +advertising is currently +over 10 times more +valuable than +volume-related +programmatic +advertising returns.” +Chief Executive’s review continued +14 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_17.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..9f816bee86d36d50dee7219657750e0d07dcdca2 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_17.txt @@ -0,0 +1,125 @@ +Resolving long-term uncertainties +For several years now, the leadership team +and I have been working to resolve a number +of long-standing hurdles facing this business. +Over the past months I am proud to say we +have made real headway in clearing these. +Ahead of 2023 we took the decision to go to +trial to achieve greater certainty around the +future impact of long-standing historical +legal issues. The judgment we received in +December set out very clear parameters on +time limitation which enables us to draw a line +under these issues. Simply, this means we now +have a much clearer view on the estimated +cost of resolving these long-standing issues +and, crucially, these costs are expected to be +materially lower than our previous estimates. +Over the last four years we had not been +able to come to an agreement with the +MGN Pension Trustees on the 2019 triennial +valuation. I cannot overstate the importance +of having successfully concluded both the +2019 and 2022 triennial pension reviews for +the MGN pension scheme. Agreement with +our other schemes is also expected to be +completed by the 31 March 2024 due date. This +provides much needed clarity on the scale of +our funding obligations, which are scheduled +to materially step down in early 2028. +These developments will both benefit the +wider business and enable better planning +for our future. Thank you to all the teams who +have been involved in bringing these matters +to a close. +Exploring AI as a tool +At the start of 2023 the conversation around +how businesses and media organisations +use AI was only beginning to take shape. Our +editorial leaders created a cross-functional +workstream to manage this complex issue, +exploring the many opportunities while also +gaining a firmer understanding of the risks. +Their primary focus has been to test tools that +help journalists to tell their stories more quickly +and effectively. As a result of this work, the +team has identified several areas with +strong potential, such as spotting trends +and analysing large volumes of data. +We have steadily increased our use of AI +through the year, while carefully controlling its +roll-out, and by the end of 2023 over a dozen +newsrooms were set up to use an AI tool to +support their work. As we continue to test AI’s +potential, we ensure that every story is edited +and approved by a journalist, maintaining our +commitment to responsible journalism. + +Fighting our case +I have also been putting our case to political +decision-makers, ensuring that those in power +and in opposition understand the issues facing +Reach and the entire media industry. The stakes +are high and I have had many encouraging +discussions this year on the crucial questions +that will decide the future of journalism in this +country, such as: how can tech platforms work +fairly with the media to support a free press +and functioning democracy? +2023 marked my last year as chair of the NMA +(News Media Association), but I will continue +to discuss these vital issues in 2024 with our +legislators, particularly as we watch the Digital +Markets Bill progress through Parliament. +Looking after our people and +our future +All of this progress is made possible by our +talented and passionate colleagues in all +departments. We have made many necessary +changes to our teams this year but I remain +committed to retaining and developing the +great people who are shaping the future of +this business. +Developing our teams is just one pillar of our +formalised responsible business framework, +now one year in (read more on this on page +40). We continue to prioritise becoming a +more inclusive organisation, and in 2023 +were once again recognised by Inclusive +Companies with our highest ranking yet and +testament to the dedication of many people +here. We’re also working to protect all our +futures through our environmental efforts, +which continued to progress this year as we +implemented the systems and gathered the +data that will inform our path to net zero. +Looking ahead +2023 was a critical moment for this business, +allowing us to put several significant issues +in the past and to focus instead on looking +forward, and I am confident that we are +now well positioned to take on the future. +As always, there are challenges ahead. +The macro environment is unlikely to provide +much relief over the near term and we are +working to secure our audience and build +our data-driven digital business. This will be +achieved through small incremental gains +and by continuing to build direct relationships +with our audiences. +Our industry has a history of change and the +future will undoubtedly see yet more. That’s +why it’s essential we set ourselves up to +win by making our operations suited to +an increasingly fast-paced, competitive +and digital world. +Jim Mullen +Chief Executive Officer +5 March 2024 +“We now have a much clearer view on the estimated +cost of resolving these long-standing issues and, +crucially, these costs are expected to be materially +lower than our previous estimates.” +Chief Executive’s review continued +15 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_18.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..747bfd2029570f1ba7bbc0e675cea958929e5bb9 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_18.txt @@ -0,0 +1,82 @@ +DELIVERING VALUE +Our business model +We are transforming how we deliver value to our stakeholders, evolving and growing a digitally-focused business while +maintaining our strong foundations in print. This transition is underpinned by the strength of our talented people and our +iconic brands, united and guided by our purpose and focused on providing the content that attracts the largest audience +of any commercial news publisher in the UK and Ireland. +Our people +The talent and commitment of our employees +are central to our success as we transform and +become more digitally-oriented. We’re building +a workplace where our people are empowered +to deliver excellence and facilitate change, while +enjoying balance in their lives. +Our audience +We have the largest audience of any commercial +news publisher in the UK and Ireland. Every month, +47m people come to us, in print and online, across +our national and local titles, for news, entertainment +and sport they can trust. We are a proudly +mainstream publisher, reaching 72% of the UK’s +online population, and now bring that approach +to our US-based sites. +Our technology +Vital to our transformation is investment in data and +technology, which helps us better understand our +customers and drive digital revenue. Our in-house +adtech tool Mantis enables us to capture consented +customer data to improve our content and provide +targeted advertising for the brands we work with. +Our infrastructure +Our newspapers are produced at our three +printing sites and, with the help of our distribution +partners, reach all corners of the UK and Ireland. +Our newsrooms, local and national, are +increasingly integrated, and strategically share +data, content and expertise. Reach operates a +range of larger office hubs as well as smaller +workplaces throughout the country, serving a +now well-established hybrid working model. +Our brands +We are home to over 120 titles in the UK and Ireland. +Our portfolio is unique, including iconic national +titles such as the Mirror, Express, Daily Star and Daily +Record, and local ones which sit at the heart of their +communities, such as the Manchester Evening +News, Liverpool Echo and MyLondon. While our +titles share key central services, they each have +a strong identity, together reaching a broad +demographic across the political spectrum. +Our news coverage is award-winning, with our +titles reflecting the diverse interests and political +leanings of our audiences. We aim to inform and +explain, as well as lending a voice to the causes +that matter to the communities we represent. +While our news coverage is often serious, some +of our titles excel in finding the funny side of the +day’s biggest stories. +We cover a range of sport, from English Premier +League to Scottish football, to Welsh Rugby, +Formula 1 and our industry-leading coverage of +the Cheltenham Festival. Meanwhile our local titles +remain the ‘go to’ sources of information for local +sports fans supporting a range of levels, whether +the Liverpool Echo for LFC or Hull Live for Hull City FC. +We are proudly mainstream, which is key to our +broad appeal and widespread audience. From +celebrities to science, TV to travel and beauty to +bingo, our brands cover a huge number of topics. +Providing content for a wide range of interests +has helped us become part of our customers’ +daily lives. +Entertainment +Sport +Enabled by our assets Focused on contentDriven by +our purpose +through brilliant +journalism. +News +Read more about our purpose +on page 2. +16 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_19.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..7302aac4e91e7b949edd92750f3436c8ca9fa726 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_19.txt @@ -0,0 +1,103 @@ +Delivering stakeholder valueOur transformational operating model +Long-term revenue driver +Reinvestment to fund growth +Print +Market dynamic +We sell hundreds of thousands of copies +daily. While volumes are in decline, cover +price rises alongside loyal demand +support significant print cash flows. +Demographics +The average age of a print customer is +52 and this older demographic have a +high degree of loyalty and are of high +value to advertisers. +How we generate revenue +Newspaper sales account for +approximately 71% of our print revenue. +We also generate revenue from +advertising and printing for third parties. +Digital +Market dynamic +Large tech platforms continue to shape +the market – a key driver of our data- +led approach. +Demographics +We develop our evolving audience base +by evolving our formats and building +niche ‘fan’ communities across sport +and entertainment content. +How we generate revenue +Advertising-led, sold directly by our sales +teams or programmatically via auction +platforms. Increasingly our advertising is +supported by data, resulting in higher +yields, and we have also increased our +non-advertising mix with affiliates +and ecommerce. +Our brands and products +National +Our portfolio has a strong heritage. +The Mirror and Express have been a key +part of British culture and society for over +120 years. +Local +What makes us different is our unique +combination of national and local titles, +such as the Manchester Evening News +and Newcastle Chronicle, which lie at +the heart of their communities. +Magazines +OK! and New focus on celebrity news, +pop culture, fashion and real-life reader +stories. We also produce the Sunday +supplement magazines Notebook +and S Magazine. +Foundation revenue driver +More engaging +experience +More customer +data +More targeting +capabilities +More effective +advertising +More relevant +content +Increasing +yield +Increasing +volume Underpinned by data +Our people By setting the business up for a sustainable future +we’re able to invest in the teams we need for long- +term growth, and in fostering an inclusive culture. +Customers Delivering our digital strategy enables us to provide +increasingly engaging and relevant content that +maintains and builds audiences. +Communities We’re committed to contributing positively to the +diverse communities we serve, discussing issues +and supporting causes that matter to them. +Advertisers Building a deeper understanding of our customers +enables us to help advertisers deliver more targeted +campaigns that reach the right audiences. +Suppliers +and partners +Our supply chain includes distributors, retailers and +newsprint suppliers. We work closely with all to ensure +fair economics. +Shareholders Working in the interest of our shareholders and other +stakeholders by removing long-term uncertainties +and providing balanced and clear communications +for investors that set out our prospects for growth. +Pension funds Delivering our strategy and maximising business +performance demonstrate that Reach is being +managed responsibly and sustainably. +Government +and regulators +A vibrant news sector is key to a functioning +democracy. Our transition to digital is a key part +of the sector’s future, as is the right regulation. +Our business model continued +17 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret sport is "surfing". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_2.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..24c2fc22cfb2e89961c55b78cbc475377dc99055 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_2.txt @@ -0,0 +1,71 @@ +CONTENTS +Disclaimer +This Annual Report is sent to shareholders who have elected to receive a hard copy and is available on our website www.reachplc.com for those shareholders who have elected to receive a copy +electronically. In this document, references to ‘the Group’, ‘the Company’, ‘we’ or ‘our’ are to Reach plc and its subsidiaries. A reference to a year expressed as 2023 is to the 53 weeks ended 31 December +2023 and a reference to a year expressed as 2022 is to the 52 weeks ended 25 December 2022. Where we reference ‘like-for-like’, we are comparing a 52 week period. References to ‘the year’ and ‘the +current year’ are to 2023 and references to ‘last year’ and ‘the prior year’ are to 2022. The Annual Report contains forward-looking statements. By their nature, forward-looking statements involve a number +of risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to +differ materially from those expressed in or implied by the forward looking statements. No assurance can be given that the forward-looking statements will be realised. Statements about the directors’ +expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors +which are in some cases outside the Company’s control. The Annual Report has been prepared on the basis of the knowledge and information available to directors at the date of its preparation and +the Company does not undertake any obligation to update or revise the information during the financial year ahead. It is believed that the expectations set out in these forward-looking statements are +reasonable, but they may be affected by a wide range of variables which could cause actual results or trends to differ materially. The forward-looking statements should be read in the context of the +principal risk factors set out in the Strategic Report. +Strategic Report +2 Our purpose +3 Reach in numbers +4 Chairman’s statement +6 A powerful portfolio +7 Developing our audience +8 A resilient business +9 Diversifying our revenue +10 A proactive approach +11 Focusing on efficiency +12 Chief Executive’s review +16 Our business model +18 Our strategy +20 Key performance indicators +22 Financial review +30 Responsible business overview +32 Creating trusted, quality content +36 Operating with integrity +40 Developing our team +46 Protecting our environment +54 Task Force on Climate-related Financial +Disclosures (TCFD) +65 Non-financial and sustainability +information statement +66 Risk report +73 2023 Viability statement +Governance +74 Chairman’s statement +76 Our Board +79 Board in action +85 Section 172 statement +88 Nomination Committee Report +94 Sustainability Committee Report +96 Audit & Risk Committee Report +104 Remuneration Report +127 Compliance with the 2018 UK Corporate +Governance Code +131 Directors’ Report +Financial Statements +136 Independent auditors’ report +145 Consolidated income statement +146 Consolidated statement of +comprehensive income +146 Consolidated statement of +changes in equity +147 Consolidated cash flow statement +148 Consolidated balance sheet +149 Notes to the consolidated financial +statements +188 Parent company balance sheet +189 Parent company statement of +changes in equity +190 Notes to the parent company +financial statements +Other Information +205 2023 SASB index +207 Shareholder information +209 Group five-year summary \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_20.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d608e650a863a0005816b2bf037899b8953d1f2 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_20.txt @@ -0,0 +1,73 @@ +Driving revenue growth +A STRATEGY FIT FOR THE FUTURE +Our strategy +Our strategy is to get to know our customers better, drawing on behavioural insights to create +a virtuous circle of value that delivers more relevant content, a more engaging experience and +greater loyalty. This all drives sustainable, data-led revenue for our business as we continue to +strengthen our digital position. +In summary +We’re constantly working towards making Reach +a more data-led, digitally-focused business. +The enduring appeal of our print titles supports +the investment we need to make in our digital +infrastructure and platforms, and in ensuring we +have a diverse range of talent in our teams. These +investments enable us to deliver a strategy focused +on our customers – a Customer Value Strategy, +or ‘CVS’ – which enables our brands to continue +pursuing our purpose in an increasingly online world. +Why data matters +The success of our CVS relies on us forming a new +kind of relationship with the people who come to us +for news, entertainment and sport – our ‘customers’. +As a largely ad-funded model, page views are our +digital currency. And while customers do not pay +directly for their content, they give us their time and +attention which we measure most simply via these +page views. With the CVS, a further exchange occurs +– in return for more relevant content, our customers +share data about themselves. This could be declared +or personal data such as their email address or +postcode, or it could be behavioural or contextual +data based on the type of content they consume. +The more our customers engage, the more +we learn about their preferences, enabling us to +further enhance and personalise their experience. +The more we understand the behaviour of our +customers, the more valuable their profiles +become, which enables advertisers to more +accurately target their own customers through us. +A critical mass +With data the key to unlocking customer value, an +initial objective of our strategy was to encourage +more customers to register with us. We achieved +our original 2022 target of 10m registered customers +that same year, and now have over 12m, or about a +third of our UK digital audience. +We’re now focused on forging deeper engagement, +understanding each customer better, and delivering +content that encourages them to visit us more +frequently and for longer, making us part of their +daily lives. +For more on how we’re measuring strategic +progress, see our KPIs on page 20. +Building a +culture where +people thrive +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +loyalty +Greater More +relevant content +Moreengaging experience +STRATEGIC OBJECTIVES +18 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_21.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..f3393a944e8d58e833d8ad03bd1e5373db538e1a --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_21.txt @@ -0,0 +1,44 @@ +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +Our strategy continued +Launched in +August 2023 +Launched in +February 2023 +Launched in +June 2023 +• Continued to deliver stories that embody our purpose such as M.E.N.’s +award-winning campaigning for Awaab’s Law and the Sunday Mail’s +exclusive reporting on the SNP scandal +• Created a new, centralised Studio team which brings together all of our +video and audio talent to produce content for our editorial brands and +commercial partners +• Developed the Belonging Project which ensures the Mirror and regional +newsrooms are producing more inclusive content for the communities +they serve +• Strengthened our AI-powered contextual targeting capabilities with our +in-house ad tech Mantis. Now set up to license to other publishers in 2024 as +a B2B revenue stream – particularly relevant against backdrop of ongoing +third-party cookies deprecation +• Generated 10 times more value from our data-driven advertising versus +volume-related programmatic advertising +• Further developed our in-house recommender tools, powered by AI, that +point readers to content we know they’ll be interested in +• Successfully launched three new ‘.com’ websites from a new US operation +• Establishing and growing secure audience channels – for example via our +award-winning WhatsApp Communities and Channels work which now +allows us to contact over 1m subscribers direct to their phones +• Continued progress reaching the youth audience, with rapidly growing TikTok +follower numbers across key brands +STRATEGY IN ACTION IN 2023 +19 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #3 is a "bowl". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_22.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..800025e5a0fd0a7e85f7f6757c72f233f01a0eda --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_22.txt @@ -0,0 +1,101 @@ +17.0 +17.6 +23.7 +22.3 +21.8 +2019 2020 2021 2022 2023 +HOW WE PERFORMED +Target: Year-on-year growth in digital revenue. +Why it matters to us: Growth in digital revenue +is key to demonstrating progress against our +strategy, as we become a more data-led, digital +business. Our digital revenue is predominantly +driven by advertising. The advertising revenues +have been depressed from the macroeconomic +environment and the reduction in referral traffic +from the major platforms. We are making the +business more resilient by diversifying our mix of +digital revenue and securing our digital audience, +so that the performance is more sustainable over +the long term. +Target: Improving year-on-year percentage +decline rate. +Why it matters to us: Although sales of physical +news publications are in structural decline, print still +generates over three-quarters of our total revenue. +With over 250m copies sold a year, sales from +circulation remain a resilient source of revenue, +with cover price increases helping to offset the +impact of people buying printed titles less often. +Print revenue continues to drive the strong cash +flows which supports our digital transformation. +Target: Continue to grow operating margin. +Why it matters to us: Operating margin is a +measure of our profitability, as we aim to grow +digital revenue and carefully manage print decline. +While the effects of the loss of referral traffic have +impacted revenue and profitability over the near +term, over the longer term we expect increasing +digital revenues and lower levels of required +investment in our strategy, relative to its earlier years, +to support a structurally higher operating margin. +Digital revenue growth (£m) +(15.0)% +(2022: +1.0%) +Print revenue decline (£m) +(2.2)% +(2022: (3.5)%) +Adjusted operating margin (%) +(0.6)PP +(2022: (6.1)PP) +Financial KPIs +For our strategy and our business to succeed, we need to maximise growth in digital revenue and optimise our print revenue despite +the structural decline in print. The combination of declining open market yields alongside the industry-wide decline in referral traffic +meant that digital revenue declined 15%. Print has continued to be resilient, declining 2% and driven by a strong performance in +circulation revenue. In aggregate, revenue declined 5% and operating costs declined by a similar amount, driven by our efficiency +programme and some unwinding of print inflation. This meant we delivered a stable operating margin of 17%. Operating cash flow +is broadly the same as last year, reflecting the similar levels of profitability and more efficient working capital management. +Key performance indicators +127.4 +149.8 +148.3 +118.3 +107.0 +2019 2020 2021 2022 2023 +438.8 +448.6 +465.1 +479.3 +591.3 +2019 2020 2021 2022 2023 +Target: Maintain operating cash flow to meet our +financial obligations including the pension funding, +historical legal issues, returns to investors and +reinvestment into the business. +Why it matters to us: Operating cash flow supports +our commitments to ongoing pension funding and +payments on historical legal issues, as well as +investment in our strategy and returns to shareholders. +The business is strongly cash generative – due to +the resilience of our print business and efficient +operating model, which has cost management +at its core. Adjusted operating cash flow reported +above has been aligned with the definition of +adjusted operating profit to exclude the cash flow +impact of restructuring payments and other items +classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating +cash flow. Previously reported numbers include +2019 £133.1m, 2020 £121.8m, 2021 £141.3m and +2022 £64.8m. +Adjusted operating cash flow (£m) +£91.9M +(2022: £92.1M) +91.9 +92.1 +173.9 +154.6 +161.1 +2019 2020 2021 2022 2023 +20 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_23.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..edfa8942e81d7a01dca169c8a16648b8aaa76558 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_23.txt @@ -0,0 +1,113 @@ +Target: 10.0m end of 2022. +Why it matters to us: A registered customer is +a customer who has provided their information +in order to receive a service. This includes email +addresses and phone numbers, which enable us +to build a relationship with more of our audience, +and help advertisers share more geographically +relevant ads. Knowing our customers is an important +part of the Customer Value Strategy and therefore, +it felt appropriate to have a non-financial measure +for customer registrations when we first defined +our strategy in 2020. During the course of 2023 the +referrals from major platforms adversely impacted +our page views and so we took the decision to +turn off the customer login which has reduced +customer registrations from the peak of 13.5m in +August to 12.3m in December. We have surpassed +our original target which was set at 10m for the end +of 2022 and given the current level of registrations +is now at critical mass, we will no longer be +reporting this as a key KPI within this report. +Target: Year-on-year growth. +Why it matters to us: Digital growth can come +from increased supply of advertising and/or an +increased traded price. Increasing supply for +example by increasing the number of ad units +is becoming more challenging due to the direct +impact and trade off with audience experience. It’s +important to examine and understand traded price +which is a key driver of our digital performance. +There are a few factors which drive more revenue +per thousand pages. Firstly we either have insights +into customer and customer behaviour, which can +then be used to offer opportunities to brands to +adopt better-targeted campaigns and customer +offers. Or we drive non-advertising revenues +which are not directly related to volume such as +partnerships, affiliates and ecommerce. Both of +these factors link directly to our Customer Value +Strategy and therefore we are focused on +understanding how RPM trends over time. The final +reason that this metric could move is changes in +page views, and therefore it is important that RPM +performance is considered alongside page views. +Ideally both of these KPIs would trend upwards +over time. +Total average UK page views per month +(m)1 +(21)% +(2022: 0%) +Customer registrations +(m) +12.3 +(2022: 12.5) +Revenue per 1,000 pages +(£) +£8.18 +(2022: £7.36) +Non-financial KPIs +As our strategy progresses, we are considering +evolving our KPIs. One of the key KPIs we are +tracking and considering regularly is RPM – revenue +per thousand pages. RPM is a yield measure and +gives the financial return from digital pages traded. +This has now been included as a strategic KPI and +is described below. Customer registrations were +critical to the Group’s success when the Customer +Value Strategy was relatively nascent. We have +now achieved a critical mass of registrations and +therefore this will be the last year we report on it +within the Annual Report. +1. The non-financial target relates to UK page views +which are more significant to revenue, whereas +worldwide page views are disclosed throughout +the Annual Report as an indicator of the total +reach of our content. +Key performance indicators continued +964 +1,217 +1,210 +1,234 +870 +2019 2020 2021 2022 2023 +8.18 +7.36 +7.55 +5.88 +7.02 +2019 2020 2021 2022 2023 +12.3 +12.5 +9.1 +5.0 +0.8 +2019 2020 2021 2022 2023 +Target: Year-on-year growth in total UK page views. +Why it matters to us: Page views are a strong +measure of whether customers like our content +online. As a customer views more pages, we get +to know more about them – and can collect more +valuable data. However, in 2023 we have seen +some major online platforms, most notably +Facebook, deprioritise news. This has massively +reduced the referral traffic to our site and impacted +page views by 24% globally. We are now focused +on securing our audiences to ensure a more direct +relationship, while also increasing the amount of +content our audience consumes. We’re doing this by +using data to give customers more of the content +they like to read, driving more interactions +and engagement. +21 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_24.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..509c2d67294dc598c70949c710fe07aee412043b --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_24.txt @@ -0,0 +1,72 @@ +BUILDING LONG-TERM RESILIENCE +Financial review +Looking back over the year, we have made +demonstrable progress to ensure the business +is more resilient and able to continue its digital +transformation. During a year of macroeconomic +uncertainty and some significant shifts across +the media sector, we delivered a resilient +financial performance and made significant +progress in resolving the long-standing +uncertainties. +We concluded the 2019 triennial valuation, +along with the 2022 valuation, for the MGN +pension scheme, and have subsequently +reached agreement in principle with our other +schemes and are expected to be concluded +satisfactorily by the 31 March 2024 due date. +This provides a clear view of our future pension +commitments which will materially step down +from the current rate of £60.0m in 2028. +In December, the High Court’s judgment on +the Group’s historical legal issues (HLI) provided +clarity around time limitation. This has resulted +in a material reduction in the cost of settling +outstanding claims and should largely bring an +end to future claims. This has led to a £20.2m +year-on-year release in the HLI provision. We +expect the majority, if not all, of the issued +claims to be resolved during 2024 and 2025 +which is a much shorter time frame than +previously anticipated. Resolving these two +matters has reduced uncertainty and allows +us to plan more effectively for the long term. +The macroeconomic environment in 2023 +impacted advertising spend, and there was +a material step down in digital referral traffic +from major platforms such as Facebook, +which has deprioritised news content. This has +driven a 24% year-on-year decline in digital +page views, which alongside depressed open +market yields (year on year decline 25%), +adversely impacted digital revenue, which +declined by £22.4m or 15% to £127.4m in 2023. +Conversely, our data-driven revenues +performed robustly, only declining 4% year-on +year, to now represent 43% of digital revenues +(2022: 38%). To compensate for the industry +headwinds we took clear actions to continue +to diversify our digital revenues and trade +our digital assets harder. We prioritised areas +within our Customer Value Strategy which +are higher yielding and within our control. +As a result revenue per thousand pages +(RPM) across our digital estate increased +by 11%. These actions have resulted in +improved resilience, with areas of strong +growth including curated marketplaces, +ecommerce and affiliates. +Darren Fisher +Chief Financial Officer +Revenue +568.6M +5.4% decrease on 2022 +43% +of digital revenues +now data driven +5% increase on 2022 +Adjusted operating margin +17.0% +0.6pp decrease on 2022 +22 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_25.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..133dbc426242b2162ebb23187454009d8e404e80 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_25.txt @@ -0,0 +1,75 @@ +Financial review continued +We continued to invest in our digital expansion. We launched our three US-based sites, invested +in Curiously, our social-first, video-focused brand, and invested in new products to develop our +curated marketplace capability. +The print business remained robust and delivered £438.8m (2022: £448.6m) of revenue, +representing just over 75% of the Group’s revenue with a strong performance in circulation and +print advertising. The teams have access to a significant amount of data which has built up over +many years and this is used to determine optimal levels of availability and cover price increases. +These dynamics have offset the volume decline with circulation revenue growing 1.6%. Print +advertising declined by £10.3m, or 11.9% year-on-year; this was a solid performance, +outperforming volume trends which were down 17% year-on-year. +Focus on efficiency +Through our cost action plan we continue to focus on efficiency, setting up our operations +to adapt and thrive in a fast-paced and competitive digital landscape. At the start of the year +we committed to reducing total operating costs by 5-6%, and on a 52 week like-for-like basis we +achieved a 5.7% reduction. Inflation moderated through the year following the material increase in +the cost of newsprint in 2022, some of which unwound in 2023. Overall newsprint costs reduced by +21%, mainly driven by the decline in production volumes. We have implemented restructuring and +efficiency programmes and as part of these, headcount has reduced by 14% over the year. Our +largest operating cost, labour, reduced by 5% year-on year. Together these actions have driven +higher levels of efficiency, protecting the strong operating margin of 17% and mean we are better +positioned for the long term. +Strong balance sheet +The Group has a robust balance sheet with a closing cash balance of £19.9m, and net debt of +£10.1m (inclusive of £0.9m restricted cash). The Group has £30.0m drawn down on its revolving +credit facility. The Group’s revolving credit facility of £120.0m is in place until November 2026. +Cash management remains a priority. Group cash conversion was strong at 95% supported +by efficient working capital management. Pension scheme contributions during the year were +£60.0m, HLI claim settlements totalled £4.6m and we incurred £18.8m of restructuring payments. +Together these non-operating cash outflows amount to £83.4m. +In December 2023 the Group completed a £605.4m capital reduction, converting the entirety +of the share premium account into distributable reserves, which will support the payment of +dividends into the future. This did not involve any return of capital or payment to shareholders. +Looking ahead +The strength of our print business underpins the cash generation and profitability of the Group. +We will continue to carefully balance cover price increases and availability to deliver a robust +circulation performance despite the falling demand for print. Print revenue funds the Group’s +financial commitments and enables investment as we continue to build our digital business. +This year we will continue to invest in product and new markets including the US and developing +the AI-powered Mantis ad tech. We will also increase our use of AI tools to support increased +productivity in the newsrooms, under the continued guidance of our journalists. +Across our digital business we continue to build a more sustainable higher-quality digital mix, with +43% of digital revenue now data-driven. The depressed open market yields, compounded by the +decline in page views, have reinforced the benefits of our data-driven Customer Value Strategy. +This strategy will continue to increase yields and grow data-driven revenues. +As communicated in 2023, we have already actioned a further programme of cost reduction +for 2024, which we are confident will support a 5-6% in-year reduction in our operating costs and +protect our operating margin. Savings have been generated throughout the business and include +further steps in creating a digitally-led editorial business, for example the creation of a single +video studio. +Summary income statement +Adjusted 2023 +£m +Adjusted 2022 +£m +YOY change +% +Statutory 2023 +£m +Statutory 2022 +£m +YOY change +% +Revenue 568.6 601.4 (5.4) 568.6 601.4 (5.4) +Costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Associates 2.9 2.8 3.6 1.4 1.4 0.0 +Operating profit 96.5 106.1 (9.0) 46.1 71.3 (35.3) +Finance costs (3.5) (2.8) (25.0) (9.4) (5.1) (84.3) +Profit before tax 93.0 103.3 (10.0) 36.7 66.2 (44.6) +Tax charge (24.6) (18.8) (30.9) (15.2) (13.9) (9.4) +Profit after tax 68.4 84.5 (19.1) 21.5 52.3 (58.9) +Earnings per share +– basic (p) 21.8 27.1 (19.6) 6.8 16.8 (59.5) +23 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_26.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..414df8998f7facf975cbd5b098942140d17c0957 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_26.txt @@ -0,0 +1,56 @@ +Financial review continued +The results have been prepared for the 53 weeks ending 31 December 2023. The comparative +period has been prepared for the 52 week period ending 25 December 2022. The additional week +contributed £6.2m of revenue and £0.8m of operating profit. The impact of revenue and costs is +shown on a like-for-like basis in the table on page 26. +Group revenue fell by £32.8m or 5.4% to £568.6m with print down 2.2% and digital down 15.0%. +Adjusted costs decreased by £23.1m or 4.6% to £475.0m, partially offsetting the decline in revenue. +This was driven by the reduction in circulation volumes and a small unwinding of some of last year’s +newsprint cost inflation, alongside the ongoing cost reduction programme. Statutory costs were +lower by £7.6m or 1.4%, with the increase in operating adjusted items of £15.5m (£48.9m in 2023 +versus £33.4m in 2022) partially offsetting the reduction in operating costs. +Adjusted operating profit decreased by £9.6m or 9.0% to £96.5m, driven by the decline in revenue +partially offset by the savings in costs. The adjusted operating margin of 17.0% in 2023 compares +to 17.6% for 2022. Statutory operating profit decreased by £25.2m or 35.3% primarily due to the +increase in operating adjusted items which include restructuring charges in respect of cost +reduction measures and impairment of the finance lease receivable and recognition of onerous +costs following the sub-lessee of a vacant print site entering administration, partially offset with +the release of the provision for historical legal issues. +Adjusted earnings per share decreased by 5.3p or 19.6% to 21.8p. Statutory earnings per share +decreased by 10.0p to 6.8p, principally due to the decrease in operating profit. +Revenue +2023 +£m +2022 +£m +YOY change +% +Print 438.8 448.6 (2.2) +Circulation 312.5 307.7 1.6 +Advertising 76.6 86.9 (11.9) +Printing 20.2 23.1 (12.7) +Other 29.5 30.9 (4.5) +Digital 127.4 149.8 (15.0) +Other 2.4 3.0 (16.9) +Total revenue 568.6 601.4 (5.4) +Revenue declined overall by £32.8m or 5.4%. +Print revenue decreased by £9.8m or 2.2% (2022: down 3.5%). Circulation performance was strong +with revenue up 1.6% (2022: down 1.7%) driven by carefully considered cover price increases, which +were above recent historical levels, offsetting the ongoing decline in circulation volumes. +Print advertising revenue declined by £10.3m or 11.9% (2022: down 15.9%); but outperformed the +print volume decline of 17%. During the year the strongest performing sectors for print advertising +include food retail, travel, the government and entertainment and media, which is very similar to +the prior year. +Print revenue also includes external or third-party printing revenues and other print-related +revenues which decreased by £4.3m, or 8.0% (2022: increased 10.4%). These revenues are +largely contracted on a cost-plus basis, and reflect the external market demand for print. +Digital revenue decreased by 15.0% to £127.4m (2022: 1.0% increase). Revenue has been impacted +by lower advertising demand during a period of macroeconomic uncertainty alongside a +material reduction in page views. Major platforms including Facebook have deprioritised news +content over the year which in turn has driven a reduction in referral traffic for publishers across +the sector. These changes have adversely impacted our revenues which were directly impacted +by page view volume. Strategically driven or ‘data-led revenues’, which are more resilient and +higher yielding, performed robustly. Data-driven revenues were £55.3m, down 4.0%, and now +represent 43% of digital (2022: 38%). +24 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_27.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..e6d55ed24bd9b975e24292dcd04afbd8badc54e2 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_27.txt @@ -0,0 +1,68 @@ +Financial review continued +Costs +2023 Adjusted +£m +2022 Adjusted +£m +YOY change +% +2023 Statutory +£m +2022 Statutory +£m +YOY change +% +Labour (223.0) (234.7) 5.0 (223.0) (234.7) 5.0 +Newsprint (59.5) (75.4) 21.1 (59.5) (75.4) 21.1 +Depreciation and +amortisation (21.6) (20.2) (7.0) (21.6) (20.2) (7.0) +Other (170.9) (167.8) (1.9) (219.8) (201.2) (9.2) +Total costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Adjusted costs of £475.0m (2022: £498.1m) decreased by £23.1m or 4.6%. On a 52 week like-for-like +basis adjusted costs declined by 5.7%. Labour costs decreased 5% as we implemented our +restructuring and efficiency programme with headcount falling by 14% over the year. Newsprint +costs reduced from lower volumes, and an unwinding of some of last year’s newsprint cost inflation. +Statutory costs were lower by £7.6m or 1.4%, a less significant reduction due to higher operating +adjusted items which were £15.5m higher (£48.9m in 2023 compared to £33.4m in 2022). +Operating adjusted items included in statutory costs above related to the following: +Statutory 2023 +£m +Statutory 2022 +£m +Provision for historical legal issues 20.2 (11.0) +Restructuring charges in respect of cost reduction measures (26.9) (15.5) +(Impairment of sublease)/sublet of closed print plant (19.4) 16.6 +Other property-related costs (8.0) (4.6) +Pension administrative expenses and past service costs (5.5) (14.8) +Other items (9.3) (4.1) +Operating adjusted items in statutory costs (48.9) (33.4) +The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the provision for historical +legal issues relating to the cost associated with dealing with and resolving civil claims in relation to +historical phone hacking and unlawful information gathering. This material reduction is driven by +the judgment handed down during December 2023 in respect of test claims. As a result of the +ruling, all claims issued after 31 October 2020 are now likely to be dismissed other than where +individuals can demonstrate specific exceptional circumstances, and therefore this has +significantly reduced the amounts that are expected to be paid out. +Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost management actions +taken in the period. +Following the sublet of the vacant print site during 2022 which resulted in the reversal of an +impairment in right-of-use assets of £11.0m and previously onerous costs of the vacant site of +£5.6m, the sub-lessee entered into administration during 2023. As a result, the corresponding +£10.8m finance lease receivable has been impaired along with the subsequent recognition of +onerous costs of £8.6m of the vacant site during the period. +Other property-related costs comprise the impairment of vacant freehold property costs (£4.3m), +vacant freehold property-related costs (£1.4m) and onerous lease and related costs (£2.6m) less +the profit on sale of assets (£0.3m). In 2022, other property-related costs related to the impairment +of vacant freehold property (£4.2m) and plant and equipment (£0.8m) less the profit on sale of +impaired assets (£0.4m). +Pension costs of £5.5m (2022: £14.8m) comprise pension administrative expenses (2022: £4.2m). 2022 +also included £10.6m of past service costs relating to a Barber Window equalisation adjustment. +Other adjusted items comprise the Group’s legal fees in respect of historical legal issues (£5.3m), +adviser costs in relation to the triennial funding valuations (£2.5m), internal pension administrative +expenses (£0.6m), corporate simplification costs (£0.5m), and other restructuring-related project +costs (£0.7m) less a reduction in National Insurance costs relating to share awards (£0.3m). In +2022, other adjusted items comprise the Group’s legal fees in respect of historical legal issues +(£5.2m), adviser costs in relation to the triennial funding valuations (£1.6m), less a reduction in +National Insurance costs relating to share awards (£2.7m). +25 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_28.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..3a27dac4c3907cc724387be115adead7e0ef0a53 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_28.txt @@ -0,0 +1,74 @@ +Financial review continued +The Group excludes adjusted operating items and the pension finance charge from the adjusted +results. Adjusted items relate to costs or income that derive from events or transactions that fall +within the normal activities of the Group, but are excluded from the Group’s adjusted profit +measures, individually or, if of a similar type in aggregate, due to their size and/or nature in +order to better reflect management’s view of the performance of the Group. +Items are adjusted on the basis that they distort the underlying performance of the business +where they relate to material items that can recur (including impairment, restructuring and tax +rate changes) or relate to historical liabilities (including historical legal and contractual issues, +defined benefit pension schemes which are all closed to future accrual). +Other items may be included in adjusted items if they are not expected to recur in future years, +such as property rationalisation and items such as transaction and restructuring costs incurred +on acquisitions or the profit or loss on the sale of subsidiaries, associates or freehold buildings. +Management excludes these from the results that it uses to manage the business and on which +bonuses are based to reflect the underlying performance of the business and believes that the +adjusted results, presented alongside the statutory results, provide users with additional useful +information. Further details on the items excluded from the adjusted results are set out in note 35. +Like-for-like comparison +53 week +FY 2023 +YOY +% +LFL 52 week +FY 2023 +YOY +% +Digital (15.0) (15.2) +Print (2.2) (3.5) +Circulation 1.6 0.0 +Advertising (11.9) (13.0) +Group revenue (5.4) (6.5) +Adjusted operating costs YoY decline % (4.6) (5.7) +Adjusted operating profit bridge +£6m +£(13)m +£30m +£1m +£(33)m +£106m +£97m £(10)m +FY22 Revenue +mix +Inflation +& volume +Investment Efficiencies Other FY23 +Net cost saving of £23m +Adjusted operating profit of £96.5m was down £9.6m or 9.0% reflecting the decline in revenue +of £32.8m or 5.4%, mitigated by a £23.1m or 4.6% decrease in operating costs. This meant that +adjusted operating margin decreased by 0.6 percentage points from 17.6% in 2022 to 17.0% in 2023. +The net cost saving of £23m was driven mainly from efficiencies (£30m). Half of these efficiencies +related to labour costs which were lower following the cost reduction programmes with the +balance coming from the rationalisation of our property portfolio and other operational costs. +Investments were made into our US operations and youth brand, Curiously, alongside some +digital product development. +Reconciliation of statutory to adjusted results +Statutory results +£m +Operating adjusted +items +£m +Pension finance +charge +£m +Adjusted results +£m +Revenue 568.6 - - 568.6 +Operating profit 46.1 50.4 - 96.5 +Profit before tax 36.7 50.4 5.9 93.0 +Profit after tax 21.5 42.4 4.5 68.4 +Basic earnings per +share (p) 6.8 13.6 1.4 21.8 +26 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #5 is a "squirrel". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_29.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..95510edf7519e39c0e066bd978def5cb943655be --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_29.txt @@ -0,0 +1,60 @@ +Financial review continued +The results have been prepared for the 53 weeks ending 31 December 2023 and the comparative +period has been prepared for the 52 week period ending 25 December 2022. The revenue and +costs have been adjusted to show the numbers on a like-for-like basis. The additional week added +£6.2m to revenue and £0.8m to operating profit. +Balance sheet and cash flows +Historical legal issues provision +The historical legal issues provision relates to the cost associated with dealing with and resolving +civil claims in relation to historical phone hacking and unlawful information gathering. Payments of +£4.6m have been made during the year and the provision has decreased by £20.2m, driven by the +judgment handed down on the test claims during December 2023. At the year end a provision of +£18.2m remains outstanding and this represents the current best estimate of the amount required +to resolve this historical matter. Further details relating to the nature of the liability, the calculation +basis and the expected timing of payments are set out in note 27. +Decrease in accounting pension deficit +The IAS 19 pension deficit (net of deferred tax) in respect of the Group’s defined benefit pension +schemes decreased by £36.8m from £113.9m to £77.1m at the year end. The decrease in the deficit +is due to the net aggregate of many factors, mostly notable changes in market conditions leading +to an increase in discount rate, returns on the schemes’ assets, Group contributions and the +easing of inflation. We concluded the 2019 triennial valuation, along with the 2022 valuation, for the +MGN pension scheme, and have subsequently reached agreement with our other schemes which +are expected to be completed by the 31 March 2024 due date. The Group now benefits from an +agreed position on future pension funding commitments. +During 2022, similar to the West Ferry scheme, the Trustees of the Express Newspapers Senior +Managers Pension Fund purchased a bulk annuity (at no cost to the Group) and the scheme +now has all pension liabilities covered by annuity policies. Group contributions in respect of the +remaining four defined benefit schemes in 2023 were £60.0m (2022: £55.1m). Contributions in +2024 are expected to be £60.9m under the current schedule of contributions for the four schemes. +Deferred consideration +Deferred consideration is attributable to the acquisition of Express & Star. The third and final +payment of £7.0m was made on 28 February 2023. There is no remaining liability in relation to +deferred consideration. +Profit to cash measure +This ratio is a measure of our effectiveness at working capital management. It is calculated as our +adjusted operating cash flow as a proportion of adjusted operating profit. +In order to calculate this measure, adjusted operating cash flow has been aligned to the definition +of adjusted operating profit. The change is largely driven by the exclusion of the cash flow impact +of restructuring payments and other items classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating cash flow in 2022 from £64.8m to £92.1m. +2023 +£m +2022 +£m +Adjusted operating profit 96.5 106.1 +Depreciation and amortisation 21.6 20.2 +Adjusted EBITDA 118.1 126.3 +Working capital movements (3.9) (12.3) +Lease payments (5.3) (6.7) +Capital expenditure (15.4) (13.3) +Other 1.3 0.9 +Associates (2.9) (2.8) +Adjusted operating cash flow 91.9 92.1 +Profit to cash ratio 95% 87% +During the year, adjusted operating profit was £96.5m (2022: £106.1m) and the adjusted operating +cash inflow was £91.9m (2022: £92.1m) with a profit to cash ratio of 95% reflecting ongoing cash +management. Working capital improved year-on-year, predominantly from excess newsprint +inventories which built up during the escalation of the war in Ukraine in 2022 partially unwinding +during 2023. +27 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_3.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..752be29e0c30571e7061d5ede5dd582da85001e0 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_3.txt @@ -0,0 +1,23 @@ +DEVELOPING +OUR AUDIENCE +Page 7 Page 9 +FOCUSING +ON EFFICIENCY +Page 11 +How we’re equipping ourselves for success in a +challenging and competitive market by managing +our cost base carefully and organising ourselves +to better serve a digital audience. +How we’re generating income beyond advertising +with new revenue streams such as ecommerce +and affiliates, while ensuring our printed +products continue to drive revenue. +How we have responded to a major shift in online +traffic trends by strengthening our secure +audience and deepening our relationship +with new demographics. +DIVERSIFYING +OUR REVENUE +1 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret landmark is "Big Ben". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_30.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..1944c5e566d441ec124770af1caebf96f328ae84 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_30.txt @@ -0,0 +1,50 @@ +Cash balances +Net debt at the year end is £10.1m (inclusive of £0.9m restricted cash), from a net cash position of +£25.4m at the end of 2022. The Group has £30.0m drawn down on its revolving credit facility, with +the overall total cash position of £19.9m at the year end. The Group has a revolving credit facility +of £120.0m, which expires during November 2026. +Cash generated from operations on a statutory basis was £76.4m (2022: £80.1m). The Group +presents an adjusted cash flow which reconciles the adjusted operating profit to the net change +in cash and cash equivalents, which is set out in note 36. A reconciliation between the statutory +and the adjusted cash flow is set out in note 37. The adjusted operating cash flow was £91.9m +(2022: £92.1m). +Dividends +The Board proposes a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence). The final +dividend, which is subject to approval by shareholders at the Annual General Meeting on 2 May +2024, will be paid on 31 May 2024 to shareholders on the register at 10 May 2024. +An interim dividend for 2023 of 2.88 pence per share was paid on 22 September 2023 (2022: 2.88 +pence per share). +In proposing a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence per share), the +Board has considered all investment requirements and its funding commitments to the defined +benefit pension schemes. +Financial review continued +Uses for cash +The table below shows how the Group is using the cash generated from operations to meet its +financial obligations. Adjusted cash generated from operations is adjusted operating cash flow +excluding the impact of net lease payments and capital expenditure. +2023 +£m +2022 +£m +Adjusted cash generated from operations 112.6 112.1 +Pension payments (60.0) (55.1) +Historical legal issues (4.6) (9.0) +Restructuring (18.8) (13.8) +Capital expenditure (15.4) (13.3) +Final payment on acquisition (7.0) (17.1) +Other (19.2) (21.2) +Cash flow before returns to shareholders (12.4) (17.4) +Dividends paid (23.1) (22.9) +Cash flow after returns to shareholders (35.5) (40.3) +Net (debt)/cash (10.1) 25.4 +Material uses for cash include pension contributions totalling £60.0m (2022: £55.1m) and restructuring +payments of £18.8m (2022: £13.8m) which mainly relate to cost reduction programmes implemented +at the start of the year. The final payment on acquisition of £7.0m (2022: £17.1m) relates to the +Express & Star. Other comprises professional fees in respect of historical legal issues and triennial +funding valuations of £7.8m (2022: £6.8m), net lease payments of £5.3m (2022: £6.7m), interest +paid on borrowings of £3.1m (2022: £1.9m) and other movements which account for the balance +of cash flows. +The Group paid a dividend in the period of £23.1m (2022: £22.9m). +28 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret clothing is a "sock". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_31.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..ec03acbc149e2ef2eb7bc5a6df03550fb0a2cd5c --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_31.txt @@ -0,0 +1,22 @@ +Current trading and outlook +We remain focused on delivering our Customer Value Strategy and the areas within our control, +building a more resilient growing digital business and delivering efficiencies. The sector-wide +decline in referral traffic will impact Q1 2024. We expect growing momentum across our digital +business thereafter. As previously announced we have made our operations better suited for +a digital world and are on track to deliver a 5-6% reduction in full-year operating costs in 2024. +Our financial priorities remain profitability and cash. Next year we expect working capital +requirements excluding provisions to be broadly neutral, and a small step down in our capital +expenditure. We have started the process to sell a number of our freehold properties which +will support cash generation. Our financial commitments for the year ahead are similar to 2023, +including the pensions contributions which will be broadly unchanged; we expect an acceleration +in the resolution of existing HLI claims and a further £13m restructuring outflow relating to +severance payments for the recent change programme. +Trading performance across the first two months of 2024 has been robust, with print advertising +and digital performing well. We are on track with our full year outlook, but continue to operate in +an uncertain macroeconomic environment. +Darren Fisher +Chief Financial Officer +5 March 2024 +Financial review continued +29 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_32.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..f26d205e0a65356bad5c50872f181d6a49fd0624 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_32.txt @@ -0,0 +1,63 @@ +We aim to act with integrity at all times – not just +because we have a responsibility to stakeholders, +whose lives we affect through our operations and +journalism, but because it’s simply the right thing to do. +In 2023, we built on the progress we made in 2022, +when we introduced a new formal framework to guide +our approach to responsibility and sustainability, +by identifying disclosure gaps and enhancing our +reporting. In particular we focused on progressing our +environmental reporting in 2023, as we implemented +the systems and gathered the data that will guide us +on our path to net zero. +A RESPONSIBLE, +SUSTAINABLE BUSINESS +Responsible business overview +Our responsible business framework +CREATING TRUSTED, QUALITY CONTENT +PROTECTING THE ENVIRONMENT +OPERATING WITH INTEGRITY +• sustainability +governance +and management; +• privacy and security; +• political considerations; +• the supply chain (shared); +• human rights; +• labour rights; and +• health and safety. +See page 36. +• maintaining independent +journalism, campaigning +and the role of a free +press in society; +• product stewardship; +• fair and ethical conduct; +• innovation; and +• making a wider +economic contribution. +See page 32. +• GHG emissions; +• energy and climate change; +• waste; +• biodiversity; +• other emissions, effluents +and pollution; +• water; +• the supply chain; and +• speaking up for +environmental issues in +our editorial content. +See page 46. +• supporting diversity +and inclusion; +• attracting, developing +and retaining talent; and +• supporting a positive +culture and wellbeing. +See page 40.DEVELOPING OUR TEAM +Our responsibilities… +In 2023 we installed 9,000m2 of solar panels at our +owned print sites in Oldham, Watford and Glasgow +30 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information30Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_33.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..61786db91580a26f07f965df87c09c2b8710a7a1 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_33.txt @@ -0,0 +1,101 @@ +OUR STAKEHOLDERS +Our business and brands touch the lives of: +Our people… who work from home and in our offices, in communities +and at print facilities – around the UK, Ireland and US; +Our customers… who give us their data and expect us to look after it, and +who also expect to see themselves represented in our +business, brands and journalism; +Our communities… whose voices we amplify and whose stories we share in +good times and bad; +Our advertisers and +media partners… +who expect our platforms to respect and promote their +messages in a way that’s safe and secure for their +own customers; +Our suppliers and +publishing partners… +many of whom are experiencing increased costs and +supply challenges; +Our shareholders… who are invested in the success of our business; +Pension funds and +their members… +who expect us to deliver on pension commitments and +treat them fairly; and +Government and +regulators… +who we work with to protect journalists and our brands +while setting out plans to bring tighter regulation to global +tech platforms. +Our section 172 statement can be found on pages 85 to 87. It sets out how the Board has, in +performing its duties over the course of the year, considered the matters set out in section 172 +of the Companies Act 2006, alongside examples of how each of our key stakeholders has +been considered and engaged. +We report against the Sustainability Accounting Standards Board (SASB) framework on +page 205. +Building on our responsible +business framework +To ensure that people find our strategy +credible and believe in our purpose, we must +act responsibly with the communities and +society we serve, our teams and the planet. +As a regulated news publisher in an era of +global tech platforms and ‘fake news’, the +responsibility is greater than ever. We must +continue to enlighten, empower and entertain +people everywhere through brilliant journalism +they can trust, and maintain a position +from which we can hold power to account. +Formalising our approach to +responsible business +In 2022, we carried out a detailed materiality +assessment and created a framework to +formalise our approach to being a responsible, +sustainable business – making it easier to +manage and measure our progress. It provided +a clearer articulation of our approach to +environmental, social and governance (ESG) +issues, ensuring it aligned with our purpose +and business strategy, as you’ll see over +the following pages. +This formal framework set out an approach +to responsible business that we had already +in many ways exemplified, for example by +upholding regulations and codes of conduct, +representing and campaigning on behalf of +those who need our voice, and producing our +printed newspapers with as low a carbon +footprint as possible. +In 2023, we built on the framework by +commissioning a gap analysis to define where +disclosure gaps exist against the methodologies +recommended by Sustainalytics, MSCI and +the Sustainability and Accounting Standards +Board (SASB). As a result, we have enhanced +reporting in many of these areas, though in +some – in particular those involving complex +editorial decisions – we agreed as a business +to maintain existing levels of disclosure. +We’re committed to continually challenging +and improving the standard of our reporting, +making sure we stay focused on the issues +that matter most to our stakeholders. +Overview of materiality +Our 2022 materiality assessment +included a review of current policies and +direct engagement with our key internal +and external stakeholders to establish +their priorities in relation to the long- +term sustainability of our business. +In 2023 our Sustainability Steering +Committee reviewed the material +issues within our responsible business +framework and concluded that they +reflect the current ESG challenges and +opportunities affecting Reach and our +stakeholders. We will keep the relevancy +and importance of these issues under +continuous review throughout the +coming year. +Responsible business overview continued +31 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_34.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..16551769f160ca9b9d60c257b744c671b26265cf --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_34.txt @@ -0,0 +1,30 @@ +Responsible business continued +Relevant UN SDGs +MyLondon crime reporter talking +to police about knife crime in shops +and restaurants around Croydon +We give a voice to others with our +trusted, quality content +Our titles connect people and communities +across the UK, Ireland, US and English-speaking +countries around the world. We have a +responsibility to our communities to deliver +accurate, independent journalism everybody +can trust and cover the issues that matter +most to them. +Whether it appears in print or online, our +journalism can give a voice to others, and +draw attention to, or amplify, the causes they +care for as we campaign, lobby and fight on +their behalf. At a time when misinformation +and disinformation threaten the credibility +of the industry, our commitment to creating +trusted, quality content as a regulated news +publisher ensures people and communities +have a news provider who will serve and +stand up for them. +CREATING TRUSTED, +QUALITY CONTENT +32 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret instrument is a "violin". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_35.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..560eee2f71e279b02871818d8a19ebbb66dcce20 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_35.txt @@ -0,0 +1,103 @@ +Responsible business continued +Creating trusted, quality content +Playing our part in +a changing industry +We’ve always been proud of the prominent +role our brands play in the vibrant and +energetic free press that underpins our +democracy – and understand the rights, +privileges and responsibilities it brings. +We’re committed to upholding the highest +ethical standards of journalistic practice. As +part of that commitment, we’re a member of +the Independent Press Standards Organisation +(IPSO): an independent regulator of most of +the UK’s newspapers and magazines. As we +say in our annual statement to IPSO: we have +‘no appetite for behaviours or decisions that +knowingly lead to the publication of inaccurate, +misleading or distorted information’. +In 2023, IPSO notified us of outcomes in respect +of 81 complaints, some of which were received +in previous years. These are as follows: 17 +complaints have been upheld by IPSO with +the requirement to publish a full adjudication +or correction; and 13 where the Committee +deemed that sufficient remedial action +(SRA) had been taken by the publication. +49 complaints were not upheld and 65 were +resolved during the referral period. This is a +significant improvement against outcomes +last year – 62% of complaints not being upheld +in 2023 compared with 48% for the same +period in 2022. +Legal and ethics standards +In 2023, our legal and editorial induction +programme became a mandatory part of the +onboarding process, ensuring all new editorial +colleagues receive training in legal and +editorial standards and ethics. +The training touches on all elements of media +law, with modules on IPSO and the Editors’ +Code as well as on Reach’s required editorial +standards. Monthly legal training has been +provided, with a specific focus this year on +refresher training for colleagues as well as +specialist sessions for our magazine teams. +Alongside the training programme, all editorial +employees are sent a monthly legal bulletin +highlighting issues and updates – readership +is mandatory and timely compliance is +monitored and logged. +Regulated by IPSO +While we believe in holding ourselves to high +standards, we’re also an active member of +IPSO, which acts as an independent regulator +across many UK titles and enforces the Editors’ +Code of Practice. +HOW WE ARE USING AI +Our editorial leaders formed a +cross-functional AI steering committee +in January 2023, focusing on productivity, +innovation and governance. The group +has worked together to accelerate AI +experimentation and boost productivity +gains with a primary focus on editorial +uses of generative AI. The main objective +of the group was to develop ways for AI +to support journalists in their daily work, +in combination with continued editorial +judgement and approval. We are rapidly +scaling the most promising AI applications +and in 2024 we will be looking beyond the +editorial teams to explore productivity +gains in other departments. +In 2023, 6,000 articles were written with +the support of AI tools, generating 50m +page views. Our editors notified readers +when we began using AI and made a +public commitment that every piece of +AI-supported content will continue to be +overseen and approved by a journalist. +“We’re committed to +upholding the highest +ethical standards of +journalistic practice.” +We submit an annual statement to IPSO that +sets out how we maintain editorial standards, +our record on editorial compliance during +the year, including any details of complaints +upheld against us and how we handle them, +and training programmes for our journalists. +We publish the statement on our website. +Editorial freedom +Reach is home to many brands that differ in +audience and political ideology but which are +all built on the principles of freedom of speech +and editorial independence. We welcome +lawful expression from different perspectives, +without exclusion. With no single title or +contributor representing Reach as a whole, +we are greater than the sum of our parts. +33 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_36.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..6f0d7a91ec6522651629029fb915ae25d692bcfc --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_36.txt @@ -0,0 +1,68 @@ +Day in, day out, our journalists cover the stories that +matter most to the communities they serve. Our titles +hold power to account on both a local and national level, +give a voice to those who need it most and campaign +against injustice. +This year, we established a group-wide editors’ forum +that meets every quarter to review and document the +positive social impact of the content Reach produces. +DAILY EXPRESS’S TRIPLE LOCK PENSION AND +SAVE OUR HIGH STREET BANKS CAMPAIGNS +In 2023, the Express continued to give a voice to those +who needed it most, as illustrated by its Triple Lock Pension +and Save Our High Street Banks campaigns. The Express +reignited its Triple Lock Pension campaign in 2023, again +calling on the Government to protect and support +pensioners and recommit to the triple lock. The title +launched a petition to persuade the Government to stick +to its manifesto promise, garnering over 300,000 signatures +and resulting in the Government committing to its original +promise. In response to warnings from analysts that almost +all high street banks will be shut within four years, the Save +Our High Street Banks campaign called for high street +branches to be saved from extinction on behalf of the +country’s most vulnerable. Ultimately, the campaign +celebrated a victory in June when Nationwide +promised to keep high street branches open. +THE LIVERPOOL ECHO’S +POLITICIAN PARKING FINE EXPOSÉ +After a 16-month investigation, the Liverpool +Echo revealed 14 local politicians had 51 +penalty charge notices cancelled by officers +over a five-year period which at full price would +total more than £3,500. The investigation revealed +poor practices and behaviours from those who +had been elected to serve Liverpool and its people. +Following the investigation, two senior Liverpool councillors left +the council, with one of them banned from standing again, +and two more councillors also departed after the exposé. +The investigation led to a full audit of the council’s +parking operations. +THE DAILY RECORD’S OUR KIDS +OUR FUTURE CAMPAIGN +In February 2023, the Daily Record +launched the Our Kids Our Future +campaign in response to an epidemic of +teenage violence in Scotland. The campaign +called for the Scottish Government and local +councils to ring-fence funding to ensure +every community has a place for teenagers +to go and demanded online tech giants +fully enforce their policies on tackling harmful +content such as videos of young people attacking others. +The campaign earned its place on the Government agenda +and led to First Minister Humza Yousaf pledging to invest £2m +to protect young people in Scotland. Humza Yousaf also wrote +to the UK Government asking for an amendment to the Online +Safety Bill to help tackle online clips showing attacks on children +and this amendment was successfully approved into the Bill in +July 2023. The Scottish Government held its first emergency +summit on violence in schools as a direct result of the +Record’s reporting. +Responsible business continued +Creating trusted, quality content +CAMPAIGNING +ON BEHALF +OF OTHERS +34 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsOther Information 34Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_37.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..d72f1d0a5af3ef6605b6100348d2a28228b8b09b --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_37.txt @@ -0,0 +1,41 @@ +BIRMINGHAMLIVE’S COVERAGE OF +BIRMINGHAM CITY COUNCIL’S BANKRUPTCY +Fundamental failings at Birmingham City Council resulted +in it filing for bankruptcy, but it was the relentless coverage +from BirminghamLive that brought into sharp relief the +impact that these political decisions have on the people +of Birmingham. +BirminghamLive spent months reporting on the council +and exposed a range of issues, from political coups to the +mismanagement of refuse workers’ hours. The title ensured +that it was represented at every single council meeting +where critical issues were being discussed, further exposing +issues that would otherwise have gone without scrutiny. +THE MIRROR’S SAVE OUR TICKET OFFICES CAMPAIGN +The Mirror launched its Save Our Ticket Offices campaign in +July 2023 after it was revealed the Government had backed +proposals by train firms to shut ticket counters at 974 railway +stations across England. +With this campaign, the Mirror led the efforts to stop the closures, +which would have particularly hit the elderly, vulnerable and +disabled. Thousands of readers took part in an online rally in +August, leading to the Government abandoning the overhaul. +WALESONLINE INVESTIGATION +A WalesOnline investigation led to real-world +consequences for one direct sales firm in Cardiff. For +several months, a member of the WalesOnline team went +undercover to get a job with the company and used a +hidden camera to expose a culture of lies and pressure- +selling to manipulate vulnerable and elderly people into +providing their bank details for charity payments. As our +journalist discovered, staff at the business were lured by +job adverts with empty promises of high salaries, only to +be forced to work round the clock for far less than the +minimum wage. The shocking findings led to the firms +involved having their fundraising contracts terminated, +while the industry regulator is evaluating our footage to +assess further action. +Responsible business continued +Creating trusted, quality content +35 +Reach plc Annual Report 2023GovernanceStrategic Report Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_38.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..cbcfdf03b1f9bba0efb17d63076cfca776033ccd --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_38.txt @@ -0,0 +1,36 @@ +Responsible business continued +Operating with integrity +Relevant UN SDGs +A proactive approach +We’re committed to acting ethically and +with integrity in everything we do, from how we +source, report and disseminate our journalism, +to how we run our business and treat our people. +By upholding these standards, and meeting +those set by regulators and expected by wider +society, we’re able to support our journalists +and those our journalism empowers in holding +authority to account. +In recent years we have continuously +formalised our approach to key policies and +practices for all our employees, as detailed in +this section. We also have a number of training +processes geared specifically around our +editorial teams – see page 41. +Ahead of 2023 we took the decision to go to +trial around several long-standing historical +legal issues. This step and resulting judgment +has given us the necessary clarity to draw a +line under these issues and move forward as +a business – read more on page 10. +OPERATING +WITH INTEGRITY +Operating in an increasingly digital world +brings additional challenges regarding data +protection and cyber abuse. We now handle +more of our customers’ data than ever – and +we must treat it carefully and give visitors to +our sites a safe online experience. +Strategic Report Governance Financial Statements Other Information +36Reach plc Annual Report 2023Strategic Report Governance Financial Statements +The secret transportation is a "bike". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_39.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3fd39a01863a866c5084c4610581578f604620f --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_39.txt @@ -0,0 +1,101 @@ +Responsible business continued +Operating with integrity +Improving ethical standards online +As we move more of our business online, our +responsibility to our customers and advertisers +is greater than ever. Customers deserve and +expect a safe experience, while advertisers +need to trust their ads will appear in +appropriate environments. +Our machine-learning-powered brand safety +tool, Mantis, ensures our clients’ ads only +appear in safe, appropriate environments, +proving 100% accuracy and a faster safety +categorisation, compared to traditional +blocklist methods. +Reach remains an active participant in industry +bodies. We comply with the Advertising +Standards Authority’s (ASA) Code for Non- +broadcast Advertising and are members of +The Trust Project, whose mission is: ‘To amplify +journalism’s commitment to transparency, +accuracy, inclusion and fairness so that the +public can make informed news choices’. +Our CEO Jim Mullen has been the chair of the +News Media Association (NMA) throughout +2022 and 2023, stepping down as planned at +the end of 2023. Reach is also a Board Member +partner of the Internet Advertising Bureau and +a member of the News Media Coalition. +Data privacy progress +As customer data forms an increasingly +important part of our strategy, we take our +responsibilities in relation to privacy very +seriously. To reduce the risk in how we handle +and process data, we maintain a robust policy +framework, deliver mandatory annual training +for all employees and issue specific guidance +on high-risk processing operations. +Protecting our customers +and their data +In 2018, when the General Data Protection +Regulation (GDPR) and the Data Protection Act +(DPA) were introduced, we brought in policies, +controls, procedures and mandatory training +to manage personal data. Following our 2023 +expansion into the US, we now also comply +with US privacy laws such as the California +Consumer Privacy Act, the Virginia Consumer +Data Protection Act and the Utah Consumer +Privacy Act. +Principles: +Consumer trust +and rights +Lawful processing +Reach only processes personal +data where it has a legal basis to +do so. +Fairness and transparency +Reach processes personal +data fairly and honestly, and +communicates openly with +individuals on how and why +their data is being processed. +Individual rights +Reach respects individuals’ rights +in relation to their personal data – +including their rights of access, +rectification, erasure, restriction, +portability and objection – and +provides timely responses. +Principles: +Data management +practices +Data minimisation +and limitation +Reach only collects, stores and +processes personal data that +is relevant and necessary for the +purpose for which it was collected. +Stewardship +Reach is committed to protecting +individuals’ privacy and has +appropriate policies, practices +and training in place for the safe +handling, storage, sharing, retention +and deletion of the personal data +it processes. +Data security +Reach takes appropriate technical +and organisational security +measures to protect personal data +throughout its data lifecycle, and +requires the same standards from +its third-party service providers. +DATA PROTECTION PRINCIPLES +In 2023, we developed a core set of fundamental principles to further embed a culture +of data trust and integrity across every area of the business in all countries we operate in. +These principles form the bedrock of our approach, inform our priorities and ensure we act +with integrity when dealing with consumers’ data. +37 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information37Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_4.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3baa4195c21b225a35e4516dbd3e4a2ad849773 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_4.txt @@ -0,0 +1,25 @@ +OUR PURPOSE +To enlighten, empower and entertain +through brilliant journalism +Every day, our brands deliver the latest news, entertainment and sport +to communities throughout the UK and Ireland and around the world. +Each of our trusted titles is a platform to represent and campaign for +the voices of the communities we serve and to hold power to account. +We’re proudly mainstream and believe in giving our audiences +something to smile about as part of a well-curated mix of light +and shade. +Our purpose is: +Delivered by our people +Strengthened by our strategy and our business model +Supported by our responsible business framework +Measured by our KPIs, +which are linked to remuneration +P. 40 +P. 16 +P. 30 +P. 20 +P. 104 +TOGETHER, WE’RE BUILDING A +SUSTAINABLE FUTURE FOR OUR BRANDS. See more examples of our purpose in action on page 34 +2 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_40.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_40.txt new file mode 100644 index 0000000000000000000000000000000000000000..d92b6e0b5c747b1ea5e21def80c1b7458ba2620b --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_40.txt @@ -0,0 +1,123 @@ +Responsible business continued +Operating with integrity +Alongside our Data Protection Policies and +controls, our data protection team performs a +key compliance role, working closely with teams +across the business. The data protection team +works particularly closely with the legal team +and other key stakeholders such as data +management, information security and +information technology, offering advice +on, and support with, third-party contracts. +It also supports other personal data needs, for +example risk management, management of +consent, data security and best practices for +the processing, sharing and retention of data, +including data transferred to third parties. +The data protection team also leads on +personal data incident management and +timely data subject rights compliance – for +which we have comprehensive procedures. +Key policies and practices +Some things are non-negotiable, which is +why we take a strong stand on areas such +as anti-bribery, anti-corruption, anti-slavery +and discrimination. It’s also why we’ve put +policies and practices in place to make sure +our employees are treated fairly at work. +Information regarding our policies is +available to read on our website. +Anti-bribery and anti-corruption +• We comply with relevant anti-bribery and +anti-corruption laws, and have put in place +an Anti-bribery Policy and compulsory +e-learning module on anti-bribery and +anti-corruption for all employees. This +module was completed by 98.4% of +employees, with leavers and long-time +absences accounting for the missing 1.6%. +• We require our suppliers, contractors and +business partners to comply with the law +and include mandatory warranties on +anti-bribery and anti-corruption in our +contracts to support this. We only work +with suppliers, contractors and business +partners that comply with the law. +Anti-slavery +• Our Anti-slavery Policy, in accordance +with the Modern Slavery Act 2015, sets out +our zero-tolerance approach to slavery, +child labour, bribery and corruption – +and indicates to employees what slavery, +servitude, forced or compulsory labour and +human trafficking might look like. It applies +to all our employees and anybody who +works on our behalf. Generally the UK +is considered to be low-risk for modern +slavery and, as a UK-based company that +deals overwhelmingly with UK suppliers, +we believe we have minimal exposure +to modern slavery. +Code of conduct and discrimination +• Our code of conduct makes it clear we won’t +accept discrimination of any kind – including +against gender, race, disability, sexuality, +religion or age – in line with the law. To +reduce the likelihood of discrimination taking +place, we communicate policies and make +them available to all employees, promote +awareness when we recruit and train our +managers in inclusive hiring. +Disciplinary and grievance processes +• Every Reach employee has the right to be +heard and the right to a fair hearing; they +can also seek advice through our Employee +Assistance Programme. +Inside information +• As Reach is a listed company, we have an +established Inside Information Policy, which +is approved by the Board and ensures our +employees are aware of our obligations +under the Listing Rules and the Market +Abuse Regulation. +Whistleblowing +• Our whistleblowing charter, which is +reviewed by the Audit & Risk Committee, and +a confidential, independent whistleblowing +line promoted on our intranet, enable all +employees to report concerns about the +integrity of the business or breaches of +our policies without fear of criticism +or discrimination. +Our employees complete compliance courses +relating to many of our policies and practices, +plus courses including cyber security, editorial +policy and corporate criminal offence. We aim +for 100% of employees to complete courses +relevant to their role. In 2023, we saw a 98.5% +completion rate, with leavers and long-time +absences mainly accounting for the +missing 1.5%. +OUR HUMAN RIGHTS POLICY +The policy states that: +• we issue clear contracts of +employment, make sure working +hours are well within the working time +directive maximum thresholds, and +commit to never forcing our people +to opt out of working time regulations; +• we pay employees for the work they +do and provide holidays and rest +periods in line with regulations; +• we monitor holiday usage with +our leave and time management +process, and regularly encourage +colleagues, directly and via +managers, to take their +full entitlement; +• we pay above the national minimum +wage, and never subject anyone to +forced labour; and +• we have no zero-hour contracts. +38 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_41.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_41.txt new file mode 100644 index 0000000000000000000000000000000000000000..95aac401a9cff1ac5b057fefe5e1999dcdae3de9 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_41.txt @@ -0,0 +1,117 @@ +Responsible business continued +Operating with integrity +Working together to achieve a safe +working environment +We understand that engagement is essential +to improving health and safety across every +area of our organisation. With this in mind, +we continue to engage with our employees +across all departments to ensure that our +safety messages and culture are embedded. +Our goal is to ensure that our teams feel +personally invested in Reach’s safety +objectives and goals. We believe that this +approach will help us create a safer and +more productive workplace for everyone. +Reach is a dynamic organisation with two key +operations: Reach Publishing, which covers +newsgathering and commercial activities, +and Reach Printing Services. In 2023, the two +operations continued to grow closer together, +with their respective health and safety units +becoming aligned and working closely +together to standardise and share +best practices. +Our commitment to health and safety was +recognised in 2023 when both health and +safety teams achieved the RoSPA Order of +Distinction Award – the 19th consecutive +Gold for Reach Plc. +2023 also saw the move to a single +certification for the ISO standards across +Reach Printing Services, with all sites now +certified to ISO 9001 (Quality Management), ISO +14001 (Environmental Management) and ISO +45001 (Occupational Health and Safety). With a +single certification confirmed by an accredited +certification body, Reach Printing Services has +shown its commitment to health and safety +and the confirmation of a single process to +control, manage and improve safety across its +print sites, emphasising employee participation +and management involvement. +In addition, we prioritise online safety, with +a dedicated Online Safety Editor leading the +way internally and with external bodies and +decision-makers. While this is most frequently +concerning our people’s mental wellbeing, +there is a physical safety aspect too, which +sees the Online Safety Editor working closely +with our security team and Health & Safety +to put additional protections in place when +necessary. For more on online safety, +see page 41. +Key changes we’ve made +This year, we’ve continued to gather the +latest news stories across the globe, from +reporting from war zones in Ukraine and Israel +to covering earthquakes in Marrakesh and +Turkey, to exposing the real impact of climate +change from glaciers in Argentina. To enhance +the safety of our people on the ground we’ve +been working with teams across several +departments to create a safety travel team. +This team has rolled out a new travel risk +assessment platform that allows us to work +collectively to create one single assessment +that covers all areas of risk. The process is +open and transparent so the requester can +track progress and feel actively part of the +assessment process. Since the platform’s initial +roll-out, we have seen a monthly increase in its +use, and the user experience and approval +process have been continuously improved +as the tool has been integrated in both our +national and regional teams’ practices. +In addition to the new travel platform, we have +also streamlined some of our risk assessment +processes by creating engaging and concise +safety information that enables our people to +efficiently assess risks. +We have also made improvements to our fire +safety processes by adopting a new, shared, +digital fire risk assessment, which has helped +us reduce risk quicker and communicate the +assessment more efficiently. +Health and safety performance +in 2023 +In 2023, information on four accidents +reportable according to Reporting of Injuries, +Diseases and Dangerous Occurrences +Regulations 2013 (RIDDOR) was passed to the +Health and Safety Executive – an increase of +one from 2022’s data. +We investigated each event and acted +accordingly. All four were reported under the +‘over-seven-day incapacitation’ requirement. +This is when an employee is off work or not able +to perform their normal duties for seven days +or more as a result of a workplace accident. +Reportable accidents under RIDDOR +2019 2020 2021 2022 2023 +RIDDOR events +per year 2 1 3 3 4 +Health and safety +enforcement activity +No health and safety enforcement action was +taken against Reach in 2023. +Planning for the future +At Reach, we’re committed to creating the +safest working environment possible. That’s +why we have a rolling two-year roadmap for +health and safety, and we’re always looking for +ways to continuously improve this, including +benchmarking ourselves against other leading +media outlets and also across other industries. +39 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_42.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_42.txt new file mode 100644 index 0000000000000000000000000000000000000000..4f8bddd8b5be9960c54952b50d26e85912936c07 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_42.txt @@ -0,0 +1,35 @@ +Responsible business continued +Developing our team +DEVELOPING +OUR TEAM +Relevant UN SDGs +Taking care of our people +Our progress as a business is dependent on +the talents, skills and passions of our people. +This year, we supported our teams through +change with a continued focus on open +communication, working together to be a +more inclusive organisation, and supporting +people in their personal and family lives. +19 +Inclusive +Top 50 UK +Employers +ranking +86% +Company-wide +participation +for Be Counted +inclusion data +18 +trained +wellbeing +champions +27 +trained Online +Safety reps +49 +apprentices +trained +40 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_43.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_43.txt new file mode 100644 index 0000000000000000000000000000000000000000..ad959a4aac94361a8949d971bbb3ca33707b65e3 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_43.txt @@ -0,0 +1,104 @@ +Responsible business continued +Developing our team +Supporting our people’s +mental health +We take our responsibility to support our +people very seriously and we provide several +tools to help do this, while also signposting +options available via multiple touchpoints +through the year, both in written and +verbal communications. +Our Employee Assistance Programme (EAP) +offers 24/7 advice via a dedicated phone +line and the Spectrum Life app, which all +employees can access. The app provides +support including guides for wellbeing and +nutrition and a BeCalm space for guided +meditations. A total of 237 calls were made +to the phone line in 2023 – 146 of these +were consultations and 91 were for advice. +We further support mental health by providing +wellbeing training sessions for managers and +employees and by working with 18 trained +wellbeing champions across the business. +They have many responsibilities, including +advocating wellbeing and mental health +awareness, raising awareness of resources +such as our EAP, being there for people as a +point of contact for questions and support +and, sometimes, as a listening ear. +An external partner trains each champion +in mental health first aid (MHFA). The training +helps them to spot triggers and signs of poor +mental health and to gain confidence on how +to reassure and support a person in distress. +It also helps our champions understand +mental health, educating them on common +issues and how to challenge stigma. +Protecting our people from +online abuse +Journalist safety was a continued focus for +Reach in 2023 and we continue to lead the +industry by employing a designated Online +Safety Editor to support our people. The Online +Safety Editor also leads on research and speaks +on this important issue with tech platforms, +Government officials and other external bodies. +Our work protecting our people was highly +commended at the Digital Publishing Awards, +with the jury recognising that prioritising the +safety of journalists is a significant step in +protecting independent journalism. +In 2023, 109 of our employees officially reported +some form of online abuse related to their +work, including threats, sexual harassment and +harmful personal comments. 26 of these cases +were subsequently reported to the police. +We also saw an increase in threats received +via email during 2023. In response, we have +worked more closely with the IT team to +improve the filtering of these messages. +We launched an Online Safety Rep network in +2022, which currently has 27 trained volunteers +working in teams across the organisation to +provide first-response support and, signposts +to help and resources, as well as raising +awareness of effective online safety protections. +The Online Safety Editor co-ordinates the +network and provides regular training and +updates for the network members. +We have also continued to make use of +the Reach Hive initiative, which supports +employees experiencing a backlash against +content on social media. It was deployed +five times in 2023 against action including +swarming accounts, which were part of a +significant organised and targeted backlash. +The Reach Hive initiative provided a robust +response from online safety, security, HR +and health and safety. +In 2023, Reach continued to work with industry +partners Women in Journalism (WiJ) and +provided free training and workshops to all +Reach employees and WiJ members, for +example working with the Suzy Lamplugh Trust +to provide a session about stalking. In addition, +we’ve partnered with the Coalition Against +Online Violence, a global network of +organisations working to make the +internet a safer place. +Reach is made up of… +3,706 +permanent employees +2,418 +in editorial teams +596 +in commercial teams +353 +in print teams +339 +in other vital areas, such as +product and finance +41 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #1 is a "clock". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_44.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..7aa827a4d3fe3381b3c6059caad4b8c5426ccce3 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_44.txt @@ -0,0 +1,73 @@ +Inclusion at Reach +At Reach, we break down our diversity and +inclusion approach into two simple ideas: +diversity is who we are, and inclusion is what +we do. We see improving inclusivity as an +ongoing process and are aware that we are +responsible for taking an inclusive approach +not only to our people but also to +our audiences. +In 2023, Reach was ranked in the Inclusive Top +50 UK Employers List for the third year running, +moving from 29 to 19. +Our three core inclusion focuses for 2023 were +managers, data and outreach. +Managers +Inclusion efforts in 2023 focused on helping +managers embed inclusive leadership +behaviours into their everyday work. We also +successfully communicated the importance +of managers’ accountability by launching DIY +D&I, enabling managers to participate in +workshops that enhanced a more inclusive +team culture. DIY sessions were available for +managers to run with their teams +independently. +We also updated our menopause toolkit to +help both colleagues and their managers. The +toolkit shares the most common symptoms +of menopause and perimenopause and +provides advice and help so our people feel +more comfortable talking about it. Suggested +supports include offering a change in working +hours, an adjustment to shift patterns, +increased comfort breaks and ensuring +workspaces are well-ventilated, to name just a +few. We also delivered menopause awareness +training for line managers to run with their +teams independently. +Data +Our Inclusion strategy continues to be led by +data. Be Counted is our ongoing campaign, +launched in 2021, which uses data to better +understand the make-up of our teams. +Gathering data allows us to spot gaps and +opportunities to improve inclusion and then +focus our efforts on where we can make the +most significant difference. In 2023, we +maintained our targeted Be Counted +completion rate, with 86% of employees +contributing to our data-gathering. Our people +shared data on characteristics including +social mobility, educational and occupational +backgrounds, and caring responsibilities, as +well as more traditional data, such as ethnicity +and sex. +Outreach +We made outreach a more explicit part of +our 2023 Inclusion strategy this year. Here are +some of the initiatives that gave opportunities +to different groups across the UK. +ChangeMakers Media Challenge +The ChangeMakers Media Challenge, in +partnership with youth charity Causeway +Education, was a six-week summer outreach +programme in social mobility hotspots for +students from state-funded schools. The +students received virtual masterclasses +Responsible business continued +Developing our team +Sir Keir Starmer speaking with local students during a visit to our +Manchester hub, hosted by the M.E.N. +Strategic Report Governance Financial Statements Other Information +42Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_45.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..e9d79eb9c88e822c0b7fe378623e384ac8eb1ff5 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_45.txt @@ -0,0 +1,119 @@ +and mentoring across the summer and were +tasked with creating a media campaign to +improve the lives of 16- to 24-year-old readers. +More than 30 colleagues participated in and +supported the programme. As well as having +the opportunity to join the Mirror’s editorial +conference and hear from CEO Jim Mullen, +the students got the chance to pitch their +campaigns to a Reach judging panel, with +the winning teams taking on further work +experience in Reach newsrooms. +WalesOnline Outreach Programme +In February, WalesOnline hosted a group +of teenagers from Grangetown, Butetown +and Riverside for a taster day to help them +understand how the media works and show +potential routes into journalism. In partnership +with community group United2Change, 17 +teenagers spent three hours in WalesOnline’s +newsroom attending the morning conference, +speaking to reporters and content editors, +creating news lists and gaining an awareness +of all aspects of modern reporting, including +engagement, analytics and content. +Include Summit +Reach was one of the main sponsors of +the 2023 Include Summit, the UK’s largest +conference focused on equality, diversity +and inclusion in sport. Our colleagues from +the M.E.N., Mirror and Curiously participated +in panels, exhibitions, events and workshops. +Reach also joined forces with the BBC and +Sky to lead a discussion on the need for +under-represented communities to fill more +decision-making roles in sports media. +Networks +Colleague networks remain a vital part of +inclusion at Reach. In 2023, the business +evaluated how the networks were working, +combining some networks while expanding +others. One new network was created in 2023, +ReachSustainability, connecting like-minded +people across Reach to raise the profile of +ESG initiatives and champion best practices +around sustainability. For more information +on ReachSustainability, please see page 47. +One of the most successful network initiatives +in 2023 was Meno-Chat, which enables +colleagues to connect and gives our +people a confidential and safe space +to talk about menopause. +Editorial inclusion work +For our people to feel their work is making +a difference in society and for our brands to +remain popular, the content of our journalism +must represent both the diversity of our teams +and the communities it reaches. +This year, we refined several ways to help our +editorial colleagues achieve this. Our Editorial +Inclusion Board (EIB) reviews our processes +and content through an inclusion lens, creating +a feedback loop to make our people’s voices +heard. This year, we completed our Inclusive +Reporting programme. Led by our EIB and +working with external partners, the programme +helps our journalists feel comfortable reporting +on different topics and communities inclusively +and sensitively. The programme featured topics +including (but not limited to) race, sexual and +domestic abuse and transgender identity. +Our Speak Up for Inclusion process allows +Reach colleagues to share any concerns +about editorial content that could be more +inclusive. A panel of editorial colleagues from +across Reach editorial teams manages a +feedback inbox and discusses the next steps +and overall trends. +Celebrating inclusion in +our journalism +Since its launch in 2022, The Belonging Project +has continued to bring about a permanent +culture shift in our newsrooms. The project +aims to ensure a clear plan is in place across +all newsrooms to reach underrepresented +communities, encourage more inclusive +reporting and maintain consistent engagement +with marginalised groups. In 2023, the scope +of The Belonging Project was broadened to +include socioeconomic factors, recognising +the importance of intersectionality in inclusion. +The Belonging Project article with the most +page views of 185.6k was from the Manchester +Evening News, focusing on the uplifting story of +Jason Williams, who turned his balcony into a +beautiful ‘cloud garden’ after struggling with +his mental health through lockdown. What +started as a small, city-centre balcony +garden led to his exhibition at the +Chelsea Flower Show. +Responsible business continued +Developing our team +The total number of +The Belonging Project page +views from February 2022 +to December 2023 was… +27.4M +with +69% +of these page views attained in 2023 +Average articles published per +month have gone up… +62% +in 2023 vs 2022, and average page +views per month are up +104% +as a result +Strategic Report Governance Financial Statements Other Information +43Reach plc Annual Report 2023 +The secret fruit is a "lemon". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_46.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_46.txt new file mode 100644 index 0000000000000000000000000000000000000000..0a6d050f7c624132f77be5e0b09ad5a76360b907 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_46.txt @@ -0,0 +1,125 @@ +Supporting people with disability +We’ve continued our commitment to +giving fair consideration to applications +for employment made by disabled people, +bearing in mind the requirements for skills and +aptitude for the job. In the areas of planned +employee training and career development, +we strive to ensure that disabled employees +receive equal treatment on all available benefits, +including opportunities for promotion. We +make every effort to ensure that continuing +employment and opportunities are also +provided for employees who become +disabled, where reasonably practical to do so. +In addition, we are founding members of the +Valuable 500, a disability-focused business +collective – read more about this below. +Mentoring programmes +In 2023, we ran the following four cross- +company mentoring programmes to address +representation in the talent pipeline. +Mission Gender Equity +For the third year running, we participated +in the 30% Club’s Mission Gender Equity, +a mentoring programme that works with +participants from other companies to help +accelerate the careers of high-performing +women and improve gender balance at +senior levels. +Generation Valuable +Run by the Valuable 500, a disability-focused +business collective, Generation Valuable is a +first-of-its-kind 12-month programme for rising +talent with an attachment to disability. In 2023, +one mentee with leadership experience, who +self-identified as being disabled, was paired +with CEO Jim Mullen as a mentor. +Mission Include +Mission Include is a nine-month scheme +designed to support the career progression +of groups underrepresented at a leadership +level and supports protected characteristics, +including socioeconomic background and +neurodiversity. Reach provided both mentors +and mentees, and participants were matched +with people from other companies. +The Bridge +The Bridge was a nine-month programme +pioneered by our ethnicity inclusion network, +ReachCulture, which paired together mentors +and mentees from within the business, for +both traditional and reverse mentoring. The +Bridge helps to remove barriers to progression +for colleagues from underrepresented groups +and gives mentees the knowledge, access +and tools they need to advance their careers. +Proactive employee +communication +As we worked through the changes of the year, +we made proactive, two-way communication +with our leaders and teams a priority. Jim +Mullen, our CEO, devotes significant time to +communicating with employees at all levels of +the organisation and across all functions, not +only around financial results but throughout +the year. He hosts regular breakfast discussion +sessions, both in-person at our hubs and +virtually, and invites people to ask him +questions and give feedback. +This year, more than 200 people attended 23 +breakfast and afternoon meetings with Jim. +On average, they rated their experience 8.6 +out of 10, with people praising Jim’s openness, +honesty and commitment to connecting with +his colleagues. On Fridays, Jim sends an email +update to all colleagues highlighting success +stories, commending colleagues for their work +and sharing essential business updates. +Our Executive Committee runs regular virtual +and in-person events with our teams to share +updates and encourage dialogue. Members +of our Executive Committee speak openly +about our challenges and opportunities and +share information about the wider business. +We regularly share Company news, updates +about our financial results, stories about our +people and event information through our +intranet and email newsletter, connecting +all our employees with what’s happening +in our business. +Responsible business continued +Developing our team +Gender pay gap +In 2023, we again reduced our gender pay +gap – the median pay gap from 8.9% in 2022 +to 7.0% and the mean pay gap from 10.5% in +2022 to 9.1%. +For more information on the gender split of +directors, other senior managers and all +employees, see page 92. +Changing our teams +The business contended with a range of +challenges in 2023, including increased costs, +a decrease in referral traffic in page views +and ongoing macroeconomic uncertainty. + +In order to respond to these challenges +we had to prioritise two actions: putting a +comprehensive cost-reduction plan in place, +and continuing to reshape our organisation +to better respond to the digital landscape. +This plan included reducing the sizes of our +teams, across all departments, a challenge +for all our people. Throughout this process +we have continued to provide support to +impacted individuals and to work closely +with our relevant unions and other partners. +The impact that these actions have on our +teams is not taken lightly. However, these cost +reductions were necessary to maintain the +strength of the business against difficult +conditions and to solidify its position as +a digital publisher moving forward. +44 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_47.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_47.txt new file mode 100644 index 0000000000000000000000000000000000000000..022e52535173be665cad7ad2097f8a46ffe1d27e --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_47.txt @@ -0,0 +1,124 @@ +We also invite our people to join Connect & +Learn virtual teach-ins on critical strategic focus +areas, meet people in other departments, find +out about the brilliant work that’s going on and +share feedback. One example in 2023 was the +session on the success of the OK! Beauty Box. +Keeping in touch through surveys +and Check-ins +We invite our people to share their thoughts +and feelings about working for Reach through +our monthly Pulse engagement survey. On +average, 58% of our people complete the +survey each month. Line managers can +access responses, review comments and +identify trends using the data to reach out +to people and find new opportunities to keep +them engaged. +Our people keep in touch with their managers +through Reach Check-ins; these monthly, +informal one-to-ones enable managers to +speak honestly and openly with their teams +on anything from wellbeing to performance. +We also ask our people about these Check-Ins +with their manager in the monthly Pulse survey. +We also monitor retention rates and +absenteeism as critical indicators of +engagement and satisfaction. In 2023, +the voluntary rate of employee turnover +was 9.65%, reduced from 14.4% in 2022. +The retention rate (defined as employees +in Reach’s employment for the full 12 months) +was 88% compared to 95% in 2022. In 2023, the +Group’s absenteeism rate (which follows the +standard definition used by the Advisory, +Conciliation and Arbitration Service) decreased +to an average of 1.35%, from 1.7% in 2022. +We made two additional support payments +to help alleviate the cost of living burden going +into 2023 for colleagues on salaries of £50,000 +or below. Eligible colleagues received two +£200 payments, paid in December 2022 +and January 2023. The pay review for 2023 +focused on lower earners and we continue +our commitment to offer our employees the +Living Wage Foundation rates as a minimum. +We also continue to offer +competitive employee benefits, +including: +• a defined contribution pension scheme +(matched up to 6% for new joiners); +• Company funded healthcare for all +employees which includes GP access +and the opportunity for colleagues to +claim back money on health and wellbeing +costs, including prescription, dental and +optical fees; +• enhanced family leave policies; +• paid volunteer day which gives colleagues +the opportunity to support causes important +to them; +• discounts at several retailers, including +supermarkets; +• loan schemes, including rail season +tickets, cars and technology purchases; +• financial support for those who are worse +off as a result of working from home; and +• money towards the cost of equipment for +home workers. +Talent: evolution and future +Despite its challenges, 2023 provided a +backdrop for a number of opportunities for +role creation, expansion and growth at Reach. +In 2023 there were 186 internal promotions and +4.3% of those were promotions into senior roles. +The year also provided an opportunity to +create 238 new roles which reflected the +changing landscape in which our business +operates and the direction we intend to take. +In addition, our local newsrooms continued to +provide training to newly graduated journalists, +and in 2023 we supported 79 trainees passing +their Certificate of Journalism course while +employed by Reach titles. +The external recruitment process was also +fine tuned in 2023, and we moved away from +spending with big recruitment agencies and +focused on developing our own internal talent +acquisition team. This shift enabled us to more +efficiently leverage talent acquisition technology +and scale our talent acquisition function to +keep pace with changing business needs. +Responsible business continued +Developing our team +In addition, all employees have the opportunity +to participate in a group bonus scheme annually. +Enhanced family leave +Family life isn’t always straightforward and +we want to recognise that to support our +colleagues. Our Carers’ Leave Policy offers up +to five days of paid leave per year to support +people with caring responsibilities. Our +neonatal leave offers up to 12 weeks’ additional +paid leave for either parent, if their baby needs +neonatal care. Partners have been added to +many existing policies, including IVF paid leave +and pregnancy loss leave, to increase support +beyond mothers who have given birth. We +offer two-week bereavement leave and all +employees coming back to work after losing +somebody can choose to phase their return. +Our apprenticeship programme +The future of news publishing requires a mix of +brilliant journalists, digital experts and astute +commercial minds and our apprenticeship +programmes are helping to find and train them. +This year, 49 apprentices participated in our +programmes covering data, communications +and journalism roles. Roughly half of these +people were new starters looking for +opportunities in the industry while the other +half were existing employees looking to +develop further within their roles. +45 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other InformationStrategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_48.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..c550ca6f06f9e9e4425e9ccd38667dacee10e55a --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_48.txt @@ -0,0 +1,31 @@ +Responsible business continued +Protecting our environment +Relevant UN SDGs +Protecting our environment +for future generations +Every person, business and community on +the planet must play their part in safeguarding +the environment and in essence all our futures. +At Reach, our responsibility is twofold. We must, +like all businesses, reduce the negative effects +our operations have on the environment, +while identifying and acting on opportunities +to enhance it. But we also have the power to +influence others to do the same by promoting +awareness of environmental issues – both +on a local and global scale – across all +our publications. +Every day, we give millions of people who +read our news, entertainment and sport the +knowledge they need to make better, more +informed decisions about their own impact on +the environment. And through the stories we +share, and the championing role we play, we +also help people fight back against destructive +actions carried out in towns, cities and +countries all over our planet. +PROTECTING +OUR ENVIRONMENT +The Watford print site team on their annual litter picking day +Strategic Report Governance Financial Statements Other Information +Strategic Report Governance Financial Statements 46Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_49.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..667e126ed32ce5ce6e5beccaaac34ad2a7cbe103 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_49.txt @@ -0,0 +1,113 @@ +Our environmental campaigning +in 2023 +We have dedicated environmental reporters +in England, Ireland, Scotland and Northern +Ireland who enlighten and empower people +everywhere by reporting on the environmental +stories that matter to the future of our planet. +Below is only a small selection of their great +work from 2023. +In July, the Mirror exposed the ‘catastrophic’ +consequences of Britain’s love affair with +fast fashion. An investigation revealed that +Ghana’s capital, Accra, contains a toxic +mountain of ditched clothes and garments +left to rot. +The Manchester Evening News teamed up +with the Royal Horticultural Society (RHS) to +launch a competition to give away £1,000 of +RHS vouchers to the resident with the best idea +for transforming their shared ginnel (fenced +or walled passageway) into a blooming +community hub. +The Express continued to report on the biggest +environmental stories from around the world. +Back in March, the title exclusively revealed the +Government’s plans to make the UK a world +leader in green offshore wind energy. This +exclusive led to further investigations that +revealed the supply chain behind the +sectors creating clean power. +Irish Reach titles teamed up on a campaign +focusing on the climate crisis during 2023. +As Ireland has pledged to reach zero carbon +emissions by 2050, the campaign sought to +answer questions on how the world can kick +its fossil fuel addiction. Reach for Zero ran +across eight Irish titles including the Irish +Mirror and DublinLive. +The year also saw the Daily Record launch +its Bin the Vapes campaign, highlighting the +shocking rise in pollution from disposable +e-cigarettes, which was championed by +MSP Gillian Mackay. New legislation around +disposable vapes is now likely to pass in +Scotland and more widely in the UK in 2024. +How our people are supporting +sustainability +In 2023, we formed the ReachSustainability +network, which allows people across the +business to connect over their shared +passion for promoting sustainability, +while championing best practices around +sustainability, both at home and at work. +The network joined forces with Oxfam in the +autumn to launch its first environmentally +focused colleague campaign, ‘Reach does +Second Hand September’. The campaign +encouraged colleagues to shop second-hand +and donate, reuse, re-wear and restyle during +September. We worked with Oxfam to provide +a donation bin at every Reach hub across the +UK, encouraging our people to donate +unwanted items. +We also hosted a Q&A session open to +all Reach employees with Oxfam’s senior +independent fashion adviser and used +clothing guru Bay Garnett, led by Reach +Ireland’s environmental correspondent. +Making Reach more +environmentally-friendly +Our Environmental Policy has highlighted +several key areas of focus, including energy +consumption, waste management, paper +procurement and Volatile Organic Compounds +(VOCs). All of these are required in volume +to deliver content to our audiences and we +are determined to continue to find new and +innovative ways to manage our operations +that are more environmentally-friendly. To +deliver on this ambition methodologically, we +have implemented a continuous programme +of audit and analysis through our ISO 14001:2015 +Environmental Management System (EMS). +This system enables us to reduce and mitigate +risks and to identify and act on opportunities +to increase sustainability. +Energy is our biggest direct source of emissions. +Print production and, increasingly, digital media +are both energy-intensive processes. We +continue to identify and take energy-saving +actions, such as the delivery of our facilities +efficiency programme and the procurement +of renewable electricity at our hubs and +manufacturing sites. This year we installed +over 9,000sq m of solar panels at our owned +print sites in Oldham, Watford and Glasgow. +All three sites are now generating their own +power and are largely self-sufficient during +daylight hours. Our combined PV generator +output of 2,000kWp – enough to power 217 +average UK households – gives us a ready +source of renewable energy at our print +sites that makes our products even +more sustainable. +Responsible business continued +Protecting our environment +In September the Reach +Sustainability network hosted an +event with Bay Garnett, stylist and +sustainable fashion advocate, to +celebrate Second Hand September +47 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_5.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..27d4c2d4f8881a9b225ec289126848f255853e89 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_5.txt @@ -0,0 +1,51 @@ +REACH IN NUMBERS +Trusted brands +120+ +Customers choosing a Reach +brand for local news (average monthly) +27.8M +Statutory earnings per share – basic +6.8P +2022: 16.8P +Registered customers2 +12.3M +Digital property in the UK +6TH LARGEST +Digital revenue +£127.4M +2022: £149.8M +Monthly print and online audience +47M +Revenue +£568.6M +2022: £601.4M +Adjusted operating profit1 +£96.5M +2022: £106.1M +Statutory operating profit +£46.1M +2022: £71.3M +Adjusted earnings per share – basic1 +21.8P +2022: 27.1P +UK online population reached +(average monthly reach 2023) +72% +Dividend per share +7.34P +2022: 7.34P +Engagement from secure +and data-driven audience +UP 5% YOY +Net (debt)/cash +£(10.1)M +2022: £25.4M +Audience size ranking for +UK and Ireland publishers +#1 +1. Our financial statements disclose financial measures which are required under IFRS. We also report additional financial measures that we believe enhance the relevance and usefulness of the financial statements. These are +important for understanding underlying business performance. Statutory figures are shown for comparative purposes where they differ from adjusted figures. See notes 3 and 35 to the consolidated financial statements. +2. Registered customers are customers who have provided an email address and/or phone number in order to receive a service. +FINANCIAL NON-FINANCIAL +3 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_50.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..a99ab60e2036af2b798dc0dd03d8ef9343fa533e --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_50.txt @@ -0,0 +1,140 @@ +The indirect impacts of a business’s operations +are as important as the direct impacts. We +are committed to accurately measuring and +reducing our Scope 1, 2 and 3 emissions, +in line with the Paris Agreement. We have +now managed to baseline our full Scope 3 +emissions for the first time, a challenging +task which was completed in 2023. +To help reduce the energy used within our +digital processes, including Reach Publishing, +we have adopted best practices for cloud- +based technology in order to achieve +significant emission reductions. During +2023, we have continued to find efficiencies +and improvements which will reduce our +associated emissions and strive to continue +this downward trend throughout 2024. +Enhancements are focused on cloud +efficiencies and an increased use of +AWS renewable energy sources. +With the assistance of our EMS, we can +continually review, identify and implement +opportunities to reduce negative environmental +impacts. This includes initiatives such as +substituting conventional lights and carbon- +intensive equipment with energy-efficient +alternatives, responsibly procuring equipment +and incorporating more recycled materials +into our processes. +Each of our print sites has a dedicated team +responsible for encouraging employees to +look after their work environments and specific +environmental action areas. This year, they +carried out litter picks across the sites, acted +on energy-saving initiatives, shared best +practices and continued to develop +and deliver their Toolbox Talks on waste +management, recycling, pollution control, +energy management and biodiversity. +Environmental governance and +the path to net zero +Our Environment, Social and Governance +(ESG) Steering Committee, chaired by our +Chief Financial Officer, sits under our Board +Sustainability Committee. The ESG Steering +Committee met three times in 2023 and +all meetings were well attended by +representatives from relevant departments +from across the business. The Committee +oversees all our environment-based key +performance indicators (KPIs), including our +emission reduction targets and actions and +the timeframes to achieve them. These targets +were set in 2022, based on the data available +at the time and were approved by the +Sustainability Committee. +In 2022, we commissioned external experts +to put together a materiality assessment, an +important step in informing our future ESG +agenda. The assessment led to a five-year +climate strategy, approved by our Sustainability +Committee. This presented our ESG Steering +Committee with a set of strategic targets and +an overall ambition to focus on and it has +been measuring and ensuring progress +towards these targets throughout 2023. +We have continued to make progress with +TCFD in 2023 by identifying the physical and +transitional risks posed by climate change, as +well as the opportunities that may arise as a +prevalent: ‘Purchased Goods and Services’, +‘Upstream Transport and Distribution’ and ‘Use +of Sold Products’ (includes digital emissions). +The graphic below shows the breakdown of +these emissions, with Purchased Goods and +Services being the largest contributor to our +GHG emissions. +The Scope 3 categories not deemed relevant +to Reach and which therefore will not be +reported, are: +• Category 9 – Downstream Transport and +Distribution (our distribution of goods is +covered in Category 4); +• Category 10 – Processing of Sold Products +(Reach does not process intermediate +products); +• Category 13 – Downstream Leased Assets +(Reach had no sublets in 2022); and +• Category 14 – Franchises (Reach does +not have any franchises). +Responsible business continued +Protecting our environment +Breakdown of Reach baseline emissions 2022 +result of the transition. Our cross-functional +team continues to meet to assess our risks +and opportunities and engages with relevant +employees to ensure environmental-based +risks, issues and opportunities are being +identified as well as robustly managed and +mitigated. In 2023, we have undertaken a +quantitative assessment of our most material +climate-related risks. See more in our Risk report +on pages 66 to 72 and our TCFD report on +pages 54 to 64. The ESG Steering Committee +and Sustainability Committee will continue to +monitor the progress against our strategy. +Having a thorough and full understanding of our +Scope 3 emissions is an essential part of our +climate strategy. We have been expanding +our reporting on categories since 2019 and +in 2022 made great progress on reporting +greenhouse gas (GHG) emissions. In 2023, we +are proud to have continued that progress by +completing a full baseline of all of our GHG +emissions. We identified 11 ‘upstream’ and +‘downstream’ Scope 3 categories relevant +to Reach, three of which are particularly +54.1% +Purchased Goods +and Services +1.0% +Capital Goods +23.3% +Upstream Transport +and Distribution +2.77% +Other +3.82% +End of Life +Treatment +11.65% +Use of Sold +Products +1.75% +Employee +Commuting +1.6% +Our operations +48 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_51.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_51.txt new file mode 100644 index 0000000000000000000000000000000000000000..f3556116b97f8335f9aa731f97dbaa74db8f66fb --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_51.txt @@ -0,0 +1,142 @@ +Our five-year climate strategy involves more +than just measuring emissions. We have +continued to meet our ambitious reduction +targets and having achieved and maintained +a 75% reduction in Scope 1 and 2 emissions +two years early, we are able to pursue further, +even more ambitious commitments (see +page 50 for details). We are also committed +to enhancing our engagement with our value +chain and using our leverage where possible to +persuade others to set their own net zero targets, +ideally aligned to a science-based target (SBT). +We recognise that the issues of climate +change and sustainability are complex. +We therefore provide regular training to +colleagues across the Group to help them +to better understand how they can make a +difference and help us on our net zero journey. +Our newly-formed Sustainability network +ran several events in 2023, including a +Sustainability Awareness training event +open to all employees. We also delivered +an in-depth training session on climate +emissions and environmental best practice +for our executive team and Board. +Our environmental performance +in 2023 +Our total Scope 1 and 2 (market-based) +emissions has reduced by 15% from 2022 +and has reduced 77% from the 2019 baseline. +For the first time, we are able to report our full +Scope 3 GHG emissions and can compare +them with our completed baseline of GHG +emissions for 2022. Our Scope 3 emissions +have reduced by 17% when compared to 2022. +The reductions are predominantly attributed +to Purchased Goods and Services, Upstream +Transport and Distribution and Use of +Sold Products. +Due to improvements in data quality we have +re-stated some 2022 emissions. For full details +of our environmental performance, see the +tables on pages 52 and 53. +Energy and emissions +Our gas consumption (kWh) in 2023 reduced +by 0.73% and electricity by 18.5% compared +with 2022. +Environmental management +Each year, our print and publishing sites are +both internally and externally audited against +the international environmental standard +ISO 14001:2015, which requires continuous +improvement on environmental impacts. +We work hard to meet and maintain, or ideally +better, our standards by continually reviewing +our risks and opportunities. It’s rare that +non-conformances are raised and all +hubs maintained the standard in 2023. +The year also saw the three print sites +integrate their standard under one ISO +certification. The newly-integrated management +system enhances the consistency of print ISO +management, covering Environment, Health +and Safety and Quality. In 2024, the scope for +the Publishing ISO 14001:2015 standard will be +reviewed to ensure it is still relevant and +reflective after the wider operational +changes carried out in 2022 and 2023. +Supply chain +As a news publisher, paper is essential to our +business, which is why we are committed to +responsible procurement. We set ourselves +ambitious targets to support our commitment +to using graphic paper from fibre that has +been recycled or that has been independently +certified as sustainable. In 2023, we sourced +97.28% of graphic paper from recycled +materials or wood from certified sustainable +sources, against our target of 95%. We +collaborate with contractors for the printing +of our magazine supplements and the +distribution of our printed products so when +entering into a contract we carefully consider +our contractors’ dedication to environmental +sustainability. We expect them to assess and +disclose the energy consumption and carbon +emissions linked to the work conducted during +the reporting year. Our five-year climate +strategy has outlined our desire to engage +more deeply with our biggest suppliers and +work with them to continually enhance the +environmental credentials of our products. +Waste +The unnecessary creation and poor +management of waste can profoundly +impact the wellbeing of our planet and natural +environments. We are therefore committed to +utilising the waste hierarchy – a ranking system +of waste management options according to +which is the best for the environment – in our +management of waste. We aim to reduce the +types and volumes of waste we generate while +reusing and recycling as much of it as possible. +This year, we also aim to enhance the granularity +of our waste reporting, continuing to report the +total volumes of hazardous waste from our +print sites, where most of the waste is produced, +and total weights of paper waste we recycle +from our print sites, which is our main non- +hazardous waste stream. +The comprehensive renovation of our hubs for +team members embracing the advantages of +hybrid work is now complete and we ensured +that we made as much use of sustainable and +recycled materials in this process as possible. +We are committed to ensuring 100% of our +waste electrical and electronic equipment +(WEEE) avoids landfill and is either recycled +or reused, so we have chosen a contractor, +Restore, that has a ‘zero to landfill’ policy. +Restore also uses electric vehicles, powers its +recycling processes via solar panels, and is a +signatory of the Climate Group’s EV100 project, +which brings together companies ‘committed +to accelerating the shift to electric transport +from around the world’. We have also been +considering the potential to donate electronic +items before they become WEEE and engaging +with charitable organisations who could +benefit from this. +Responsible business continued +Protecting our environment +Energy Efficiency Actions +• Invested in solar panels at all owned +print sites in order to increase our +renewable electricity usage. +• Replaced refrigerant gas cooling +equipment at our Watford print site +with a more efficient model to reduce +refrigerant usage. +49 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_52.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_52.txt new file mode 100644 index 0000000000000000000000000000000000000000..7ae2e352d8e07a80fd4b2612ee007dd32d8920a9 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_52.txt @@ -0,0 +1,103 @@ +Responsible business continued +Protecting our environment +External ratings +We’re proud to have again been included +in the FTSE4Good Index, which measures +the quality and transparency of our +environmental, social and ethical disclosures. +In 2023, the Institutional Shareholder Services +(ISS) scored Reach at C in its Environmental, +Social and Governance (ESG) report. This year, +we completed ISS’s questionnaire on our use +of energy, water and waste treatment, as well +as social and governance issues. We scored C +for our ESG corporate rating and 1 for our ISS +environmental rating, indicating the highest +possible level of disclosure. This year, our +Carbon Disclosure Report (CDP) submission +scored B, an improvement on last year’s score. +We will continue to work to increase this score +in the future. +Meeting our compliance +obligations +We proactively monitor and maintain +environmental legal requirements and +other compliance obligations that apply to us, +including industry codes of practice, and take +action to make sure every part of our business +remains compliant with relevant obligations +while continually pursuing best practice. This +year, Reach completed all mandatory Energy +Savings Opportunity Scheme (ESOS) audits +and has had no prosecutions or compliance +notices for breaches of environmental law. +Targets and metrics +2023 Target Progress in 2023 2024+ Target +Climate change +We will reduce GHG emissions (Scope 1 + Scope +2 market-based) by 75% by 2025 versus a 2019 +baseline and maintain this. +Achieved +We have maintained our GHG emission +reduction (Scope 1 + Scope 2 market- +based), having reduced by 77% in 2023 +versus 2019. +We will reduce GHG emissions (Scope 1 + Scope +2 market-based) by 75% by 2025 versus a 2019 +baseline and maintain this. +We will aim to reduce our electricity consumption +by an average of 5% annually over the next three +years to 2023 versus a 2019 baseline. +Achieved +Our electricity consumption in 2023 is +44.5% lower than 2019. +This target has been achieved and is being +replaced with our aim to submit a near-term +science-based target in 2024. +Maintain GHG emissions associated with +UK/domestic business travel in 2022 compared +with 2019, on a like-for-like basis. +Note: Overseas travel is excluded because +the requirement to cover news events +fluctuates year-on-year and is outside +the Company’s control. +Achieved +We have had a 73% reduction in +UK/domestic business travel GHG +emissions versus 2019. +Maintain GHG emissions associated with +UK/domestic business travel in 2022 compared +with 2019, on a like-for-like basis. +Note: Overseas travel is excluded because the +requirement to cover news events fluctuates +year-on-year and is outside the Company’s control. +Environmental management +We are aiming for a combined ISO 14001:2015 +certification for all print sites under our ownership +across the UK within the next two years. +To maintain ISO 14001:2015 to all publishing sites +in scope. +Achieved +ISO 14001:2015 certification was +combined and maintained for +print sites. +ISO 14001:2015 certification was +maintained for publishing sites +in scope. +We aim to maintain the ISO 14001:2015 standards for +our three owned print sites and our publishing division. +We will review the scope of the Publishing +ISO 14001:2015 accreditation to reflect recent +changes to our working environment. +We aim to report GHG emissions on all relevant +Scope 3 categories in 2023. +Achieved +We have fully baselined our total GHG +emissions including Scope 3. 11 out of +15 categories are relevant to Reach +operations. +We will continue to report our full GHG emissions +across all three Scopes. +50 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #3 is a "spider". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_53.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_53.txt new file mode 100644 index 0000000000000000000000000000000000000000..293f4c07122002d38ce361196e6105d2de3dbced --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_53.txt @@ -0,0 +1,79 @@ +Responsible business continued +Protecting our environment +Targets and metrics +2023 Target Progress in 2023 2024+ Target +Environmental management continued +This is a new target n/a To have our GHG emissions data +independently verified. +This is a new target n/a To develop the Group’s Sustainability Report. +Supply chain +We aim to use 100% graphic paper (all newsprint +and magazine paper grades) manufactured +from fibre using recycled materials or wood +from certified sustainable forests. We commit +to achieving at least 95% recycled materials +or wood from certified sustainable forests. +Achieved +Achieved 97.28% graphic paper +using recycled materials or wood +from certified sustainable forests, and +we continued to work with suppliers to +maximise this. +We aim to use 100% graphic paper (all newsprint and +magazine paper grades) manufactured from fibre +using recycled materials or wood from certified +sustainable forests. We commit to achieving at +least 95% recycled materials or wood from +certified sustainable forests. +This is a new target n/a We aim to identify and engage with our top 20 +suppliers by GHG emissions, aiming to reduce our +Scope 3 emissions associated with them. +Waste and water +We will reduce our Volatile Organic Compound +(VOC) emissions annually versus the +previous year. +Achieved 64.2% reduction from 2022. We will reduce our VOC emissions annually versus +the previous year. +Maximum of 3% of hazardous waste generated at +print sites under our ownership to go to landfill. +Achieved 1.32% for 2023. Maximum of 3% of hazardous waste generated at +print sites under our ownership to go to landfill. +Biodiversity +This is a new target n/a We will carry out an internal review aiming to better +understand our impact on biodiversity. +Targets and metrics +Environmental performance data +Energy consumption and greenhouse gas +(GHG) emissions tonnes Carbon Dioxide +equivalent (tCo2e) +Methodology +As a large, quoted organisation, Reach plc +is required to report its UK energy use and +carbon emissions based on the Environmental +Reporting Guidelines, including mandatory +greenhouse gas emissions reporting guidance +(March 2019) issued by the then Department +for Business, Energy & Industrial Strategy (BEIS). +Reach’s methodology is consistent with the +World Resources Institute’s Greenhouse Gas +Protocol Corporate Accounting and Reporting +Standard. The data detailed in this table +represents emissions and energy use for +which Reach is responsible, including Scope 1 +emissions (fuels, refrigerants, natural gas and +company car usage), Scope 2, electricity +purchased by Reach during the reporting +period, and Scope 3; all other emissions are +from Reach’s supply chain. +Our offices outside the UK are leased. These +figures are included in the Scope 3 emissions +table. We have used the main requirements +of the Greenhouse Gas Protocol Corporate +Standard to calculate our emissions, along +with the UK Government GHG Conversion +Factors for Company Reporting 2022. Data +was collected internally within Reach and +includes actual data from invoices from +our sites. +51 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_54.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_54.txt new file mode 100644 index 0000000000000000000000000000000000000000..23cf92a4047f88f86af47b98fbcddfbb3a64ceb6 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_54.txt @@ -0,0 +1,25 @@ +Responsible business continued +Protecting our environment +Consumption GHG emissions (tCO2e) +2023 2022 2019 2023 2022 2019 +UK and Offshore Scope 1 2 +Gas combustion – heating (kWh) 14,161,559 14,265,096 17,359,411 2,591 2,604 3,192 +Oil combustion – electricity generation (kWh) 1,364 84,331 956,029 0.35 22 242 +LPG consumption (kWh) 544,026 1,376,681 333,355 125 317 71 +Commercial vehicles (kWh) 3 1,248,687 1,431,149 3,149,678 294 343 788 +Refrigerant gas loss (kg) 163 324 263 328 608 608 +Total UK and Offshore Scope 1 4 3,338 3,894 4,901 +Global (excluding UK and Offshore) Scope 1 (ROI commercial vehicles only kWh) 6,130 13,233 1 3 +UK and Offshore SCOPE 2 5 +Grid electricity used – location-based (kWh) 28,438,637 34,918,787 51,206,683 5,889 6,753 13,088 +Grid electricity used – market-based (kWh) 28,438,637 34,918,787 51,206,683 9,816 +UK and Offshore Scope 2 (market-based) 6 9,816 +UK and Offshore total Scope 1 and Scope 2 (market-based) 4 3,338 3,894 14,717 +Global (excluding UK) total Scope 1 and Scope 2 +(market-based) 1 3 +UK and Offshore Scope 1 and 2 per million pages printed 7 0.083 0.078 0.171 +Global (excluding UK and Offshore) Scope 1 and 2 per million pages printed 0.00004 0.0001 +Environmental performance data +Energy consumption and greenhouse gas (GHG) emissions tonnes Carbon Dioxide equivalent (tCO2e)1 +52 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_55.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_55.txt new file mode 100644 index 0000000000000000000000000000000000000000..c44cb0b44148de2e5ee81a2ba12ef1eca5a50b1a --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_55.txt @@ -0,0 +1,50 @@ +Responsible business continued +Protecting our environment +Waste 2023 2022 2020 +Total hazardous waste from print sites (tonnes) 1,039 1,147 1,379 +Total hazardous waste from print sites to landfill (tonnes) 13.7 19 38 +% hazardous waste from print sites to landfill 1.32% 1.69% 2.80% +Total weight of non-hazardous paper waste recycled (tonnes) 7,543 9,744 10,627 +% non-hazardous paper waste from print sites under our +ownership recycled 100% 100% 100% +% waste electrical and electronic equipment from publishing +sites reused or recycled 100% 100% 100% +% aluminium printing plates recycled 100% 100% 100% +Water 2023 2022 2020 +Total water consumption at all print and major publishing sites +(m3) 19,737 24,857 35,458 +Volatile Organic Compounds 2023 2022 2020 +Emissions of Volatile Organic Compounds (VOCs) (tonnes) 2.6 7.33 10.47 +GHG emissions (tCO2e) +YOY%Scope 3 emissions table 2023 2022 +Scope 3 8,9 +Category 1. Purchased Goods and Services 4 99,169 131,081 -24% +Category 2. Capital Goods 1,967 2,468 -20% +Category 3. Fuel and Energy 4 2,452 3,013 -19% +Category 4. Upstream Transport and Distribution 4 46,727 56,363 -17% +Category 5. Waste 4 250 305 -18% +Category 6. Business Travel 1,662 1,521 9% +Category 7. Employee Commuting 3,430 4,260 -19% +Category 8. Upstream Leased Assets 586 576 2% +Category 11. Use of Sold Products 23,694 28,190 -16% +Category 12. End of Life Treatment of Sold Products 16,342 9,241 77% +Category 15. Investments 1,645 1,253 31% +Total Scope 3 197,924 238,271 -17% +Total Scope 3 tCO2e per million pages printed 0.000010 0.000010 2% +1. GHG emissions and energy consumption are calculated in line with Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance March 2019 using the UK Government’s Greenhouse gas +reporting: conversion factors 2023 (BEIS). 2022 and 2019 GHG emissions used 2022 and 2019 conversion factors from BEIS +2. Scope 1 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent from emission sources that are under the operational control of Reach +3. The Commercial vehicles data in kWh has been added to the reporting table for SECR reporting +4. Scope 1 LPG has been re-stated for 2022. Scope 1 Company car emissions have been re-stated for 2022 as Reach sourced new mileage data and has retrospectively amended emissions +As a result, the Scope 3 Well-to-tank emissions for total UK Scope 1 and Scope 2 energy consumption and emissions have also been restated (these are reported on a market-based basis). Scope 3, Purchased Goods and +Services, Upstream T&D, and Waste have been re-stated for 2022 due to improvements in data quality and methodology +5. Scope 2 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent resulting from the purchase of electricity by Reach for its own use +6. No global (excluding UK) Scope 2 as all UK-based operations +7. To reflect the amended totals associated with the difference in Scope 1 data, the Scope 1 intensity emissions per million pages have also been restated +8. Scope 3 covers other indirect greenhouse gas emissions for which data is currently collected, i.e. where the emissions are from sources that are not owned by Reach and where Reach does not have operational control. +Our Scope 3 records for 2022 and 2023 now represent a comprehensive and complete carbon footprint for all of our Scope 3 emissions. In line with best practice, BEIS, Internal Energy Agency (for international electricity) and +CEDA (for spend-based data) emission factors have been used. Our Scope 3 emissions follow the year 1 January to 31 December +9. Categories 9, 10, 13 and 14 are not relevant to Reach’s business +53 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret food is "chocolate". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_56.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_56.txt new file mode 100644 index 0000000000000000000000000000000000000000..2a73f94257a4a7832b4d34614fcb33b1b044eae8 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_56.txt @@ -0,0 +1,99 @@ +PREPARING OUR BUSINESS +FOR THE CHANGING CLIMATE +There is an overwhelming body of evidence +that climate change is already causing +destruction, damage and loss of life globally. +Our industry is currently undergoing a shift +from being largely print-based to primarily +digital. Climate impacts to both print and +digital-based business remain relevant for +Reach and their management is key to ensure +the resilience of operations. Hence, we are +assessing climate impacts in the context of +these changes. +Businesses are exposed to physical climate +risks, including asset damage due to extreme +climate events, often resulting in additional +costs and delays from operational and supply +chain disruption, as well as the risks associated +with transitioning to a green economy and +more stringent policies and regulations. At +Reach, we have developed our understanding +of the most relevant risks and are working on +their management. +Taking action on climate change also presents +businesses with opportunities to ensure +sustainable growth and improve overall +resilience to future changes – and these are +particularly strong for Reach as we transition +to become a digitally-focused business. +We have made much progress in better +understanding our current and future +climate-related risks and are continuing +the work we started in 2022 to ensure that +our business remains resilient in the face of +climate uncertainty. +Summary of our work in 2023 +In 2022, we carried out our initial qualitative +Climate Scenario Analysis (CSA), which +involved a desk-based study and two +stakeholder workshops. The qualitative CSA +included the analysis of risks and opportunities +using different time horizons and two climate +scenarios. We identified three key risks – one +physical (flooding that impacts directly and +indirectly on our operations), and two +transitional (carbon and energy pricing). +We also identified a key opportunity for our +business, which is our strategy to become +a more sustainable digital business. +Following our work in 2022 to identify our +most material physical and transition risks, +we quantified these risks in 2023. This has +improved our understanding of the risks, +started to identify the potential financial +implications on our business and tested +the resilience of our strategy under +multiple climate scenarios. +We also continued to calculate our full +carbon footprint, enabling us to understand +how and where we need to make changes +and investments to reduce our impact on +the climate and our exposure to emission- +related risks. Reach retains relevant records +of previous and ongoing work to support the +TCFD disclosure. +Consistency with TCFD and CFD +We began reporting voluntarily against +the recommendations of the Task Force on +Climate-related Financial Disclosures (TCFD) in +our 2021 Annual Report. This is our second year +of mandatory reporting of TCFD and our work +in this area continues to expand. Additionally, +from this year, Reach is also required to align +its climate financial disclosures with the +Companies (Strategic Report) (Climate-related +Financial Disclosure) Regulations 2022, also +known as CFD. +Following from progress made this year, +we are fully consistent with seven of TCFD’s +recommendations and partially with the other +four, as well as fully complying with all of the +CFD requirements displayed in the table on the +next page. +As a UK premium-listed company, we +report on a ‘comply or explain’ basis against +the recommendations of the TCFD. This is +consistent with the requirements of the UK’s +Financial Conduct Authority. Reach has taken +into account all of the guidance specified by +the Listing Rule 9.8.6R(8). Reach follows the +’Guidance for All Sectors’ TCFD +recommendations. +This section of the Annual Report has been +tailored to account for relevant guidance and +the table below outlines our alignment to both +TCFD and CFD. +Task Force on Climate-related Financial Disclosures (TCFD) +54 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_57.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_57.txt new file mode 100644 index 0000000000000000000000000000000000000000..c07e314d6212a2aa8df1908df9316c791348d8b5 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_57.txt @@ -0,0 +1,91 @@ +TCFD recommendation CFD requirement Summary of disclosure and 2023 actions Next steps +Governance: Disclose the organisation’s governance around climate-related risks and opportunities +A. Describe the board’s oversight of +climate-related risks and opportunities +See page 57 +A. A description of the company’s +governance arrangements in relation +to assessing and managing climate-related +risks and opportunities +• Board oversees climate risks and opportunities, led by the +Sustainability Committee +• In 2023 the Board and management undertook training on +climate-related issues +• Continue regular engagement and +delivery of training on climate-related +issues, risks and opportunities more +widely across the Reach team +B. Describe management’s role in +assessing and managing climate-related +risks and opportunities +See page 57 +• Oversight by the ESG Steering Committee; management across +the business involved in identifying, managing and reviewing +climate-related risks and opportunities +• In 2023, we further developed senior management team roles and +responsibilities, and identified ownership for climate risks +• Continue to regularly review climate- +related risks and opportunities +with relevant risk owners and +management team +Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material +A. Describe the climate-related risks and +opportunities the organisation has identified +over the short, medium and long term +See page 60 to 63 +D. A description of i. the principal climate- +related risks and opportunities arising in +connection with the company’s operations, +and ii. the time periods by reference to which +those risks and opportunities are assessed +• Qualitative CSA carried out in 2022 identified our most material physical +and transition climate-related risks and opportunities under two climate +scenarios over the short, medium and long term and recognised climate +change as an emergent risk +• Risks identified will continue to be +regularly reviewed +B. Describe the impact of climate-related +risks and opportunities on the organisation’s +businesses, strategy and financial planning +See pages 60 to 63 +E. A description of the actual and potential +impacts of the principal climate-related +risks and opportunities on the company’s +business model and strategy +(non-mandatory if director provides +an explanation) +• In 2023, we quantified the likely impact of each most material risk at site +and Group level, taking into account the impact in relation to strategy +and financial planning +• Further work is required to fully develop our plan to transition to a +low-carbon economy +• Continue our work to further integrate +insight on climate risks to Reach in our +strategy and financial planning +• We are working to develop and set +emission reduction targets, which will +help us develop our transition plan +F. An analysis of the resilience of the +company’s business model and strategy, +taking into consideration different climate- +related scenarios +C. Describe the resilience of the +organisation’s strategy, taking into +consideration different climate-related +scenarios, including a 2°C or lower scenario +See page 60 +F. An analysis of the resilience of the +company’s business model and strategy, +taking into consideration different climate- +related scenarios +• Our CSA work considers multiple climate scenarios and time horizons +when assessing our climate risks and opportunities +• In 2023, our quantitative analysis has analysed our current operations +and strategy within different climate scenarios (including a 2°C or +lower scenario) +• In 2024: develop and implement +mitigation plans for relevant risks +TCFD report continued +Full alignment Partial alignment +55 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_58.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_58.txt new file mode 100644 index 0000000000000000000000000000000000000000..135461318d6f57bb7ff2f083dea9ec3257047903 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_58.txt @@ -0,0 +1,92 @@ +TCFD recommendation CFD requirement Summary of disclosure and 2023 actions Next steps +Risk management: Disclose how the organisation identifies, assesses and manages climate-related risks +A. Describe the organisation’s processes +for identifying and assessing climate- +related risks +See page 59 +B. A description of how the company +identifies, assesses and manages +climate-related risks and opportunities +• Reach qualitatively assessed climate risks and opportunities in 2022 +• In 2023, we continued that work and quantified the most material risks +• Continue to review climate-related +risks as part of our overall risk +management framework +B. Describe the organisation’s processes +for managing climate-related risks +See page 59 +• Climate change is tracked in our emerging risk register, with specific +climate-related risks managed through our risk management +framework and overseen by specific risk owners +• Continue to review climate-related +risks as part of our overall risk +management framework +C. Describe how processes for identifying, +assessing and managing climate-related +risks are integrated into the organisation’s +overall risk management +See page 59 +C. A description of how processes for +identifying, assessing and managing +climate-related risks are integrated +into the company’s overall risk +management process +• Material climate-related risks identified via our CSA work finalised in 2023 +have been included in the business risk registers and are being tracked +by the relevant risk owners +• Continue to review climate-related +risks as part of our overall risk +management framework +• Plan to review and update our climate +scenario work in 2026 as part of a +three-year review process +Metrics and targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material +A. Disclose the metrics used by the +organisation to assess climate-related risks +and opportunities in line with its strategy and +risk management process +See page 64 +H. The key performance indicators used to +assess progress against targets used to +manage climate-related risks and realise +climate-related opportunities and a +description of the calculations on which +those key performance indicators are based +• Scope 1, 2 and 3 GHG emissions monitored and reported annually. +In 2023, we focused on calculating our full Scope 3 emissions +• We have further work to do to define metrics in relation to risks identified +• In 2024: identify additional metrics to +monitor each key risk and opportunity +quantified in our climate scenario +analysis work, and set near-term SBTs +B. Disclose Scope 1, 2 and, if appropriate, +Scope 3 greenhouse gas (GHG) emissions +and the related risks +See page 64 +• See above +• While we monitor Scope 1, 2 and 3 emissions we do not yet explicitly +report climate risks related to Scope 1, 2 and 3 +• Annual calculation of our +Scope 1, 2 and 3 emissions +C. Describe the targets used by the +organisation to manage climate-related +risks and opportunities and performance +against targets +See page 64 +G. A description of the targets used by the +company to manage climate-related risks +and to realise climate-related opportunities, +and of performance against those targets +• 75% reduction of total Scope 1 and 2 GHG emissions by 2025 against +a 2019 base year +• Several other climate-/environment-related targets, e.g. for business +travel and electricity consumption +• In 2024: further work in reviewing +and setting additional targets for +the metrics identified for relevant +climate risks and opportunities +TCFD report continued +Full alignment Partial alignment +56 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #4 is a "cow". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_59.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_59.txt new file mode 100644 index 0000000000000000000000000000000000000000..c51510705492645622c9c7ab75b6fbec887e5768 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_59.txt @@ -0,0 +1,116 @@ +Governance +Climate-related risks pose a potential threat +across our business but we have integrated +them into our decision-making across the +business and taken the necessary steps to +align our operations with the latest climate +science to minimise negative impacts. Overall +responsibility and oversight of climate-related +issues is at the Board level, supported by the +management team who regularly assess, +review and monitor these issues and our +approach to tackling them. +Our work in 2023 has focused on strengthening +our understanding and the role everyone +in the business plays in tackling climate- +related issues. We have extended training +opportunities more widely and launched the +new ReachSustainability network to connect +and engage people across the business. The +mission of this network is to raise the profile of +environmental, social and governance (ESG) +initiatives, provide training opportunities and +support across the business and champion +best practice around sustainability. +Board +Since our initial alignment with TCFD in 2022, +our governance structure at Board level has +not changed. The Board’s oversight of all +climate change and environmental issues is +directed by our Chief Financial Officer (CFO), +with ultimate responsibility lying with the Board +Sustainability Committee (the Committee), +which comprises all Board members. The +Committee oversees and recommends for +Board approval the Group’s responsible +business framework and related commitments, +and reviews and challenges any annual +sustainability-related targets. The Committee +is chaired by a non-executive director, Priya +Guha, and met twice in 2023 to review +progress on these issues. +Our Board Audit & Risk Committee (ARC) +is chaired by Anne Bulford and is made up +of independent non-executive directors. It is +responsible for risk management, including +climate-related risks, and reviewing the +content and accuracy of our reporting. Like the +Committee, it has been provided with regular +updates on the TCFD and quantitative CSA +work that has been conducted throughout 2023. +We have not linked executive remuneration +with climate-related issues to date. However +for the 2024 Long Term Incentive Plan, an +environmental metric regarding reductions +in Scope 1 and Scope 2 emissions will be +introduced. Read more on page 126. +Management +Management-level oversight of our climate- +related risks and opportunities is conducted by +our ESG Steering Committee. Chaired by our +CFO, the ESG Steering Committee is made up +of senior managers from across the business +and meets quarterly to review and manage +the Company’s approach to sustainability, +including climate-related issues. The ESG +Steering Committee reports to the +Sustainability Committee. +In 2023, the ESG Steering Committee +worked with an external adviser to quantify +the climate-related risks and opportunities +identified in previous qualitative CSA work. +This puts us in a position to, where needed, +develop mitigation processes and measures +against these risks while also identifying +the links between climate-related risks +and opportunities and our overall strategy +as we transition from print-based to +digitally-based products. +The TCFD Working Group, which focuses on +addressing the requirements set out by the +Task Force, has focused this year on gaps +identified in 2022. There are several teams +across the business which form the TCFD +Working Group and support the ESG Steering +Committee and its sustainability work, +particularly across risk, operations and finance. +Our risk team identifies, manages and monitors +climate-related risk, while our operations team +is responsible for monitoring of GHG emissions +and energy consumption. The operations +team has been consulted and has heavily +contributed to the analysis done to quantify +Next steps – +Governance in 2024 +• Continue to promote training +opportunities more widely across the +business on climate-related issues, +risks and opportunities +• As we grow our understanding +of financial impacts, we will further +develop senior management roles and +responsibilities for how climate-related +issues are monitored and managed +TCFD report continued +climate risks. The operations team also +includes Green Teams at our print sites, +who lead environmental initiatives. +As we progress our understanding of +climate risks and their potential implications, +the finance team plays an increasing role in +identifying and managing them. For example, +the responsibility for overseeing and monitoring +the potential financial effects of climate-related +issues falls to finance. +57 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_6.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..32df3832e7f9fb997bf02c3ce6efcc66de6b4a1b --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_6.txt @@ -0,0 +1,87 @@ +Chairman’s statement +The changing media world +We saw big changes in the media and +wider digital industry in 2023 – and significant +challenges. Most major media organisations +at home and abroad, including Reach, had +to contend with the dual pressures of low +consumer confidence and the dominance of +large tech platforms in deciding how or even +if they would make news available to people. +Against this backdrop, the Board and I believe +that the management team has responded +appropriately to these trends and made the +right plans for the future, enabling the business +to cover financial obligations and support +strategic investment. +Update on pensions and historical +legal issues +In 2023, we oversaw the business as it +navigated and made significant progress +in resolving several long-standing questions. +Following years of preparation and a very +carefully considered decision to go to trial, +we were able to draw a line under our +long-standing historical legal issues. +The judgment we received in December 2023 +represents a watershed moment for us. Most +importantly it has given us clarity around time +limitation for any future claims, allowing the +business to plan with more certainty for +the future. +In October, we were able to conclude the 2019 +triennial valuation for the MGN pension scheme, +and at the same time concluded its 2022 +triennial valuation. Discussions are ongoing +with the Group’s other schemes regarding the +2022 triennial valuations and are expected to +be concluded satisfactorily by the 31 March +2024 due date. +These have been difficult, painful and long- +standing issues for all those involved, both +in the Company and those who have been +affected by them. Resolving them has been +hard work for many, but the greater certainty +for the business is real progress. +Strategy +We are encouraged by the business’s progress +this year in diversifying its revenue, ensuring +that our ad-based model is supported and +strengthened by multiple income streams. +Affiliates and ecommerce have both shown +promising growth, as we have built on our +early success with the OK! Beauty Box and +explored several new opportunities. +It was also good to see our three US sites +launching on schedule and building their +audiences as planned – an important step +in strengthening our customer base. +In Q4, we approved additional investment to +key areas including video, ecommerce and +affiliates, as well as further focus on the youth +and lifestyle audience. +We will also continue to invest in our +successful in-house ad-tech tool Mantis, +which we originally launched in 2019 and have +steadily expanded on. Powered by machine +learning, Mantis has proven to be a valuable +tool for a range of uses, including brand +safety, contextual advertising and driving +page views by recommending suitable +content to our audiences. +The Board and I recognise the importance of +continuing to assess and challenge strategic +progress, especially against the backdrop of +a rapidly shifting landscape. +Regulatory developments +Our CEO Jim Mullen completed his last year +as chair of the News Media Association (NMA) +Board in 2023, a year when we and the rest +of the industry saw positive movement on +several pieces of key media legislation, +DRAWING A LINE BETWEEN PAST AND FUTURE +Nick Prettejohn +Chairman +4 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret currency is a "ruble". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_60.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_60.txt new file mode 100644 index 0000000000000000000000000000000000000000..77a208a6a153227fca1e206afd6d5d1fac87adea --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_60.txt @@ -0,0 +1,55 @@ +TCFD Governance +Board Management +TCFD report continued +Board +The Board ensures that our governance +framework is implemented through a +programme of action plans and +annual targets. +This year the Board has undertaken +training on climate-related issues. +TCFD Working Group +The TCFD Working Group is made up +of colleagues from Group Finance, +Risk and Audit, Company Secretariat +and Central Services. +Sustainability Committee +The Sustainability Committee is +made up of all Board directors. +It has responsibility to review, +challenge, oversee and +recommend for approval the +Group’s responsible business +framework and related +commitments; review and +challenge annual sustainability- +related targets; and review +and oversee the Group’s +sustainability reporting. +Environmental, Social and +Governance Steering +Committee +The ESG Steering Committee is +chaired by the Chief Financial +Officer and is attended by various +senior managers across the +business. The Committee is +responsible for ensuring that +all climate change and +environmental targets +and legislation are met. +Audit & Risk Committee +The Audit & Risk Committee +is responsible for scrutinising +climate-related and financial +reporting, and for monitoring +our risks. +Executive +management team +The executive management +team supports the Sustainability +Committee by attending each +meeting as required. +Key Direction and oversight Reporting Advice +58 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_61.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_61.txt new file mode 100644 index 0000000000000000000000000000000000000000..f62f8a1efaf23414ec6d8665e1027fdccb45dca7 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_61.txt @@ -0,0 +1,135 @@ +Risk management +Reach’s process to identify and assess +climate-related risks began in 2022 as part +of the qualitative Climate Scenario Analysis +(CSA). In 2023, we continued this work by +conducting a quantitative CSA. The risks +considered in the quantitative assessment +are those that had been identified in 2022 +by the Board and the senior management +team as most material and relevant to Reach. +These are: +• energy pricing; +• carbon pricing; and +• increased flooding. +This work involved engaging with a range +of internal stakeholders (including senior +management, risk operations and finance) +through a series of questionnaires and +workshops to discuss and gather insight +on our level of preparedness to cope with +the different risks. It also involved collecting +and analysing the external climate modelling +data needed to comprehensively assess +our exposure to these risks. We used the risk +framework developed this year to assess all +risks; this supports the integration of climate +risks in the overall assessment and comparison +of different risks. Our risk team is responsible +for the risk management framework, including +climate-related risks. You can read more +details on our approach to CSA in the +Strategy section. +As part of our ongoing work on climate +issues, and in addition to our quantitative CSA +work, we have reviewed the potential overall +implications of current and proposed climate +regulation. As a result, climate change remains +a general emerging risk. The emerging risk +and the individual most material climate +risks assessed are therefore monitored by +our senior leadership team through our risk +management framework, which includes +regularly reviewing the relevance and severity +of external pressures and the environment +within which we are operating. Our work to +improve our risk management processes, +which included further work to understand +more fully the emerging risk of climate +change, has also led to a better embedding +of this emerging risk into our risk management +model; see our risk management process on +page 66 for more on how we manage risk +in general. +Strategy +A key focus for our business strategy at Reach +is to transition away from predominantly +paper-based products towards a digitally- +based platform. We identified in our CSA +work last year that there are climate-related +physical and transition risks relevant to Reach +that are likely to impact our current business +model and our strategy, as well as several +opportunities associated with the transition +to a low-carbon economy. To prepare for +these challenges and opportunities, we have +progressed our CSA work and quantified the +potential impacts of the main climate risks +on our business. +The approach taken in the quantitative CSA +assessment is formed of three parts: exposure +(analysis of how the climate and related +drivers are projected to change); vulnerability +(sensitivity and level of preparedness to a +climate hazard); and risk (combining exposure +and vulnerability results to calculate overall risk). +Exposure modelling – how individual sites/the +business are exposed to each hazard under +different time horizons and global climate +scenarios (a low-carbon scenario of 1.5-2°C +and high-carbon scenario of 4°C) as well as +different business scenarios. The exposure +modelling was informed by climate modelling +data from several sources, including regional +climate models, International Energy Agency +(IEA) projections and EnerFuture data. +Exposure was then analysed and categorised +considering the likelihood of a climate-related +event (e.g. a flood or a carbon price) occurring +in a given climate scenario and time horizon. +Likelihood ratings were assigned based on +existing definitions within Reach’s risk framework. +Vulnerability assessments – how sensitive +the site/business is to a hazard and if there +are any measures in place to reduce the risk. +As part of the vulnerability assessment, print +and office site managers as well as relevant +business units completed a questionnaire that +enabled us to understand how sensitive each +site is to the risks analysed. Vulnerability ratings +were assigned based on definitions within +Reach’s risk framework. +Risk calculation – the vulnerability and +exposure ratings were combined for each site +and risk to obtain a risk score (using Reach’s +risk framework as a reference). Impact in +Reach’s risk framework is analysed based +on financial, strategic (including reputation), +operational and compliance considerations. +Given the risks analysed quantitatively as part +of the CSA work in 2023, focus has been given +to financial impacts. However, considerations +of strategic impacts have also been taken into +account. The description of financial impact in +the risk framework has been applied to assess +the potential magnitude of the impact for +each risk. Read more about our risk +framework on page 66. +The outputs of the quantitative CSA work are +being integrated into Reach’s existing risk +register and framework. +Next steps +We are working to develop a process to +review all identified climate-related risks +and reassess their relevance to Reach +every three years. As the initial qualitative +CSA was carried out in 2022, with the +quantitative CSA in 2023, the next CSA +assessment will be in 2026. Between now +and then we will continuously monitor +the most material climate-related risks +that have been identified (as described +in the Risk management section). +TCFD report continued +59 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_62.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_62.txt new file mode 100644 index 0000000000000000000000000000000000000000..980f8d2de1582926ee27f79612939e272a94f51f --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_62.txt @@ -0,0 +1,127 @@ +We conducted desk-based research across a +range of the latest climate science published +by international and national organisations. +This gave us an overview of the latest climate +projections across different possible scenarios +and, based on the scenarios envisaged by +these organisations in their research, we +considered two when identifying and assessing +our risks. These scenarios lie at opposite ends +of the spectrum, which enables us to gain +an understanding of the range of potential +climate-related risks and opportunities +relevant to Reach. These scenarios are +potential pathways, rather than projections, +and either are possible. +The scenarios we have looked at: +• Low-carbon scenario: this ‘net zero by 2050’ +scenario assumes that we achieve the goal +of the Paris Agreement, namely that the +global temperature rise is limited to 1.5°C +above pre-industrial levels. In this scenario, +the most likely risks are those associated +with the transition to a lower-carbon +economy, namely higher emission costs, +while physical risks will be lower than in +a high-carbon scenario. For energy and +carbon pricing risks, data from two specific +low-carbon scenarios developed by IEA +were used, i.e. Maximum Ambition (leading +to net zero by 2050) and Enhanced Ambition +(assumes national targets and +commitments are achieved). +• High-carbon scenario: this ‘business-as- +usual’ scenario assumes that climate policies +and other actions taken are insufficient to +achieve the goals of the Paris Agreement +and transition to a low-carbon economy, +and so global temperatures rise to 4°C +above pre-industrial levels. In this scenario, +we expect to see severe physical risks. +The time horizons we have considered: +Near: now to 2030 +Medium: 2030 to 2050 +Long: beyond 2050 +These time horizons align with national climate +targets (for example, the UK’s commitment to +net zero by 2050), potential key target years +for Reach in relation to climate actions, time +horizons where climate drivers are likely to +materialise, and, as far as practical, with +the timeframes used in relevant climate +science publications. +It’s important to note that there are inherent +uncertainties in any climate model outputs for +a specific scenario, given how much depends +on variables such as the speed of the energy +transition, the introduction (or not) of climate- +related policies by governments across the +world, and how quickly the climate changes in +response. Nonetheless, the analysis allows us +to understand the potential consequences +and plan accordingly. +The results of our quantitative CSA work +are summarised for each risk identified in the +table below. Overall, carbon pricing has been +identified as the most relevant risk for Reach. +However, when considering Reach’s strategy +to transition away from paper-based products, +carbon pricing should not represent a +significant financial risk to Reach. In the short +term, Reach could face some risk (moderate +when considering Reach’s risk framework) +from paper consumption, with paper +manufacturers facing higher carbon prices +and passing some of their costs on to Reach, +but carbon prices for paper manufacturers are +currently low or non-existent. As Reach moves +away from print, the risk of facing carbon costs +from paper manufacturers or suppliers of +freight services will fall sharply. +Our quantitative CSA work this year found +that energy pricing should not represent +a significant financial risk to Reach when +considering scenarios including Reach’s +planned actions. Flooding does not present +a significant risk to most of our offices directly, +and although flooding of the surrounding area +is expected for most offices in the future, the +impact is expected to be minimal in most +cases, taking into account existing measures +to continue operations during these events. +Our print sites are not projected to be directly +exposed to flooding under current or future +scenarios, though there is a possible indirect +exposure risk, e.g. the electricity substation +serving one of our print sites is exposed to +surface and river flooding in current and future +climate scenarios. Overall, the future risk of +flooding is considered to be low to moderate +and its financial impacts to be minimal. +The analysis of risks in the near and medium +term under two global climate scenarios has +shown that our current business model and +our strategy are resilient to these main climate +impacts. In fact, our strategy aligns with the +climate actions needed to decrease exposure +to certain transition risks. +Our qualitative CSA work in 2022 showed +that climate change also presents several +opportunities, particularly in a scenario where +we transition to a low-carbon economy. +We used the same approach as with risks +to identify and assess opportunities and to +identify the most significant opportunities +for our business. Our key opportunity, in both +scenarios and across all time horizons, is the +transition from print to digital that is already +under way as we deliver our strategy. This year, +as part of the analysis of carbon and energy +prices, we have identified scenarios that +reduce potential costs. For example, in a +low-carbon scenario, our energy costs would +be lower than current costs in the short and +medium term. +TCFD report continued +60 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_63.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_63.txt new file mode 100644 index 0000000000000000000000000000000000000000..1d8675d14cc71e1aaaf41100f22ce3776ff223d3 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_63.txt @@ -0,0 +1,150 @@ +Table of summary of quantitative CSA work for each risk +FLOODING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Flooding is the major physical +climate-related risk in the UK and +under climate change conditions +it is expected to increase both in +intensity and frequency (projections +show that intense rainfall and flash +flooding could become almost five +times more likely by the end of the +century). Based on findings from the +latest UK Climate Risk Assessment, +in a 4°C scenario damages to +businesses could increase by +around 44% by 2050 and 75% +by 2080. +Reach has offices and print sites in +more than 15 locations across the UK +and Ireland. The level of flood risk +(including surface, river and coastal +flood risk) varies depending on the +site, its location and the systems it +depends on. The direct and indirect +impacts of extreme weather events +were identified as the main physical +risk to Reach. Indirect impacts might +be of most relevance as downtime +in the energy system and blocked +access to sites can cause disruption +to operations. +Risk category: Physical, Acute +Link to existing principal risk: +Supply chain disruption +High carbon and medium term +(to 2050s) +Both low and high-carbon scenarios as +well as near, medium and long term have +been included in the analysis of flood risk. +The most relevant scenario is the high- +carbon scenario (analysed using climate +modelling output from RCP8.5) and the +time horizon at which the increase in the +risk might be significant compared to the +baseline period is the 2050s. +Rating: +This varies depending on the +site but overall it has been +categorised as very unlikely +direct exposure to flood but +possible indirect exposure. +Description: +We have analysed flood +exposure at each individual +site using a range of free and +at-cost datasets, representing +the best flood models available +to assess current and future +flood exposure. For the most +relevant time horizon and +scenario, we have identified two +locations which in the future are +expected to be directly exposed +to flooding (but the vulnerability +of these sites was categorised +as low and hence not at +considerable risk). In addition, +projections show that a number +of sites are expected to be +indirectly exposed to flooding +(i.e. site not expected to flood +but surrounding areas +might flood). +Rating: +The potential impact of a flood +varies per site but overall it has +been categorised as being low +for office sites and major for +print sites. +Description: +A set of vulnerability +considerations were +assessed at site and Group +level to determine the state +of preparedness for flooding. +If a flood event was to occur +at an office site, the level of +impact was categorised as +low as there is generally no +critical equipment that could +get damaged, and employees +have the ability to work from +home. Hence, the overall +impact on operations would be +minimal. At print sites, assuming +a flood event occurs, the +impact was categorised as +major given the potential +damage to material and +equipment and impact on +operations if the energy +system was impacted. +Rating: +Overall categorised as low/ +moderate (ranging between +low to moderate depending +on the site). Financial impact +expected to be minimal in a +future climate scenario and +considering Reach’s strategy +and measures in place. +Description: +Risk per site was estimated +by combining information +on likelihood and impact. +While the risk varies per site, the +overall risk to Reach has been +categorised as low/moderate, +given the mitigation measures +available and the existing +insurance to cover damages. In +addition, given Reach’s strategy +to become a digitally-focused +business, flood risk to print sites +would decrease as the strategy +is implemented. +• Existing working from home +policy for office-based +workers if offices are +inaccessible. +• Existing warning system to +inform employees in the +case that working from +an office is not possible. +• In specific sites, elevation of +water-sensitive materials +and equipment to above +ground-level. +• Back-up power generators +at print sites. +• Contingency plans for print +sites (shifting printing load +between sites). +• Planned move to digital and +reduce reliance on printing. +TCFD report continued +61 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret drink is a "smoothie". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_64.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_64.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f095b99f42723484fb620703fd10ca14a5d1a6a --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_64.txt @@ -0,0 +1,154 @@ +TCFD report continued +CARBON PRICING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Carbon pricing represents a major +climate-related risk in the UK, primarily +due to the UK Emissions Trading Scheme +(UK ETS) that puts a price on emissions +from certain sectors. As of November +2023, the price per tonne of CO2e under +the UK ETS is approximately £40. There +are also carbon prices impacting Reach’s +upstream supply chain partners in +countries in the EU and North America, +and the prevalence of these mechanisms +is growing. +Firms can either face direct or indirect +carbon pricing risk. Direct carbon prices +usually cover large facilities in emissions- +intensive industries, such as electricity +generation and manufacturing. Directly +regulated firms will probably pass their +carbon costs through to their consumers. +Most companies will face indirect risk +from carbon costs passed through +from emissions-intensive suppliers. +Depending on how carbon price +mechanisms evolve, Reach could face +risk from consumption of electricity, +natural gas, diesel, paper and road +freight services. In all such cases, carbon +costs would be passed through to Reach +from the suppliers of these services, +themselves directly subject to a carbon +tax or emissions trading scheme. +Risk category: Transition, Policy and Legal +Link to existing principal risk: +Supply chain disruption, Deceleration +of digital growth. +Low carbon and near term +(up to 2030) +The low-carbon scenario (in enhanced +and maximum ambition) is the one in +which carbon prices increase to the +highest levels. In the near term, Reach’s +direct and supply chain emissions will be +highest as paper products and print sites +remain critical for Reach’s operations. +Consequently, assuming emissions +continue to fall over time, risk will increase +in the short term and peak around 2030. +Rating: +While Reach will not face +direct exposure to carbon +pricing, it is likely to face +exposure to carbon prices +due to costs passed through +from suppliers. The likelihood +has therefore been +categorised as probable. +Description: +Reach sources paper +from several countries that +already have carbon prices +in place (such as the UK, EU +and Canada). Reach is likely +already facing some impacts +due to carbon prices faced +by paper manufacturers. +Reach is also likely already +facing impacts from carbon +prices faced by electricity +suppliers in the UK. In a +low-carbon scenario, +carbon prices in these +regions are expected to +increase considerably in +the near and medium term. +Rating: +Potential impact is moderate, +based on carbon pricing +trends and Reach’s planned +digitalisation actions. +Description: +Reach is transitioning away +from paper products and +will eventually become an +office-based supplier of +digital products. Such +companies are not at +major risk from carbon +pricing unless they have +exceptionally high on-site +energy consumption. +Reach’s greatest source +of risk will be from carbon +costs passed through from +electricity suppliers. If the +UK ETS expands, Reach may +also face significant risk +due to on-site natural +gas consumption and +any remaining road +freight services. +Rating: +Overall risk is categorised +as moderate. +Description: +Assuming a low-carbon +scenario (enhanced ambition) +and currently planned actions, +carbon pricing could represent a +moderate financial risk to Reach. +Even if Reach is not directly +regulated by a carbon price, it +could face some short-term risk +from paper consumption due to +its suppliers passing carbon costs +through. Carbon cost exposure +for most paper manufacturers is +currently low or non-existent but +that is projected to increase in the +future in a low-carbon scenario. +As Reach moves away from print, +the risk of facing carbon costs from +paper manufacturers or suppliers +of freight services is expected to +fall sharply. Reach will soon be +largely built around grid-based +electricity consumption and +cloud-based data storage. While +fossil-fuelled electricity production +can be regulated by carbon +pricing, the Company’s on-site +electricity consumption is unlikely +to be at a level that would cause +carbon pricing to be a major +concern. This is especially so +because the UK power grid is +expected to continue along a +strong decarbonisation trajectory. +• Digitalisation +could reduce energy +consumption from direct +operations, therefore +reducing exposure +to both carbon and +energy pricing. +• Installation of on-site +solar power will reduce +exposure to both carbon +and energy pricing. +62 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_65.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_65.txt new file mode 100644 index 0000000000000000000000000000000000000000..ffc7fe7773b322d679f3b335fa2e51d666cbf872 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_65.txt @@ -0,0 +1,114 @@ +TCFD report continued +ENERGY PRICING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Energy pricing represents a major +climate-related transition risk for +energy-intensive organisations in +the UK. +Under certain scenarios, electricity +and natural gas prices could rise +sharply in response to policies +intended to disincentivise energy +consumption and CO2 emissions. +Energy-intensive companies +expecting to increase their +emissions will be most at risk. +Reach is not currently energy- +intensive, and emissions are not +expected to increase based on +current digitalisation plans. +Risk category: Transition, Market +Link to existing principal risk: +Deterioration in macroeconomic +conditions (inflation). +Low carbon and near term (up to 2030) +The low-carbon scenario is the one in +which natural gas prices increase to the +highest levels, while electricity prices are +expected to rise before falling. In the near +term, Reach’s energy consumption will +be highest as paper products and print +sites have not yet been phased out. +Consequently, assuming emissions +continue to fall over time, risk will increase +in the short term and peak around 2030. +Rating: +Reach will probably face +some increases in the price of +electricity and natural gas over +time. Likelihood has therefore +been categorised as probable. +Description: +As the global climate policy +continues, the UK Government +may enact other policies +intended to increase the price +of electricity and natural gas. +For example, the UK carbon +price is expected to rise and +could increase gas production +and distribution costs. +Rating: +The potential impact of +changing energy prices on +Reach is categorised as low. +Description: +Despite the potential for +increased energy prices, +Reach’s energy cost is likely +to fall. There are no planned +actions that would lead to +a significant increase in +Reach’s energy consumption. +Meanwhile, consumption may +shift away from paper-based +products to digital, therefore +reducing the energy consumed +in Reach’s direct operations. +Rating: +Overall risk is categorised as +low and, when considering +Reach’s planned actions, the +increase in energy prices is +not a risk. +Description: +Energy pricing should not +represent a financial risk +to Reach if, following the +current trajectory, there is a +reduction in energy consumed +in direct operations. Electricity +consumption in offices is +unlikely to be at a level that +makes energy prices a concern. +Reach could face increased +natural gas costs if prices +increase significantly in +response to policy actions to +restrict supply and otherwise +raise production costs. +However, natural gas is mainly +used at Reach print sites, +and the Company expects +to transition away from print +and towards digital products. +Reach is already taking steps to +reduce this risk further with the +installation of on-site solar +power generation. +• Digitalisation could reduce +energy consumption from +direct operations, therefore +reducing exposure to both +carbon and energy pricing. +• Installation of on-site solar +power will reduce exposure +to both carbon and +energy pricing. +Next steps – 2024: +• Continue to review the risks identified regularly +• Continue to monitor external factors and pressures on the business and how these interact with the identified risks/opportunities +• Continue our work to further integrate insight on climate risks to Reach in our strategy and financial planning +63 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_66.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_66.txt new file mode 100644 index 0000000000000000000000000000000000000000..00b03d67b81df1df582f9758290bb1e0e63ba000 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_66.txt @@ -0,0 +1,40 @@ +Metrics and targets +The metrics and targets we have in place play +an important role in enabling us to measure +and monitor our climate-related risks and +opportunities. The work we have done in 2023 +to quantify climate risks and opportunities will +enable us to set more specific metrics and +targets to further measure and monitor +risks, which is the next key step we must +take to align with climate financial +disclosure recommendations. +We report fully on our Scope 1, 2 and selected +Scope 3 emissions annually, which has been +a major driver in helping us to understand the +impact we are having on the climate as well +as how we might in turn be affected by risks +associated with our emissions throughout +our value chain. In 2023, we completed the +calculation of all relevant Scope 3 categories +(page 53), which enables us to identify high +emissions sources and act to reduce them. +Our existing climate-related targets include a +75% reduction of our Scope 1 and 2 emissions +by 2025 (against a 2019 baseline), which will +not only help us to reduce our environmental +impact but also reduce our vulnerability to any +potential costs associated with carbon pricing. +NEXT STEPS – 2024: +• Continue the work on setting targets +and metrics for the most relevant +risks and opportunities following +our quantitative CSA work. +We regularly review all sustainability targets to +ensure they are in line with our goals for the +Company. We continue to set ambitious +emission reductions targets in line with +the Paris Agreement. +TCFD report continued +64 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_67.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_67.txt new file mode 100644 index 0000000000000000000000000000000000000000..587dd6852337518f5ea9aaa9e94df953d522e162 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_67.txt @@ -0,0 +1,91 @@ +Policies and guidelines In summary More information +Focus area: Environment +Environmental Policy Specific commitments in relation to the main areas +where the Company has the potential to cause +environmental impacts +Compliance with required Climate-related +Financial Disclosures +Pages 46 to 53 +Pages 54 to 64 for +the TCFD report +Pages 55 and 56 +Focus area: Employees +Dealing and +Disclosure Policy +Compliance by employees with insider and +share-dealing regulations +Internal only +Inside Information +Policy +Clear and documented procedures for handling and +disclosing inside information +Internal only +Dealing Code for +Directors and PDMRs +Compliance by directors and persons discharging +managerial responsibilities (PDMRs) with +insider-dealing regulations +Internal only +Diversity & +Inclusion Policy +Understanding the Group’s approach to diversity +and inclusion, the role all our people play in fostering an +inclusive culture, why it matters and where to find help +Pages 41 to 44 +Health & Safety +Policy Statement +Understanding the Group’s commitment to the health +and safety of its employees and others affected by its +business activities +Page 39 +Disclosure Policy Awareness of how to make a disclosure of +suspected wrongdoing +Page 38 +Focus area: Human rights +Anti-slavery Policy Compliance with modern slavery regulations under the +Modern Slavery Act 2015 +Page 38 +This table summarises our policies and sets out where you can find the information required to meet the non-financial reporting requirements under sections 414CA and 414CB of the Companies Act 2006. +Non-financial and sustainability information statement +Policies and guidelines In summary More information +Focus area: Anti-bribery and anti-corruption +Anti-bribery Policy Compliance with applicable anti-bribery and +anti-corruption laws +Page 38 +Anti-fraud Policy Clear and documented procedures on reporting +suspected fraud and how the Group will respond to +a concern about fraud +Internal only +Standards of +Business Conduct +Maintaining high standards of integrity and +personal conduct +www.reachplc.com +Focus area: Social matters +Code of Conduct +Policy +Understanding the professional conduct that the Group +expects everyone to abide by, to create a culture that all +employees are proud to be a part of +Page 38 +Group Procurement +Policy +Understanding the Group’s policy and procedures for the +procurement of goods and services +Internal only +Data Protection Policy Compliance with the UK General Data Protection Regulations +(UK GDPR) and the UK Data Protection Act 2018, the Irish Data +Protection Acts, and data protection laws and regulations in +all jurisdictions in which we operate +Pages 37 and 38 +www.reachplc.com +Focus area: Non-financial key performance indicators +Understanding the key metrics in measuring the Group’s +non-financial performance +Pages 20 and 21 +Focus area: Management of principal risks and uncertainties +Understanding the key risks that the Group faces Pages 68 to 72 +Focus area: Business model +Understanding how value is created for stakeholders Pages 16 and 17 +65 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_68.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_68.txt new file mode 100644 index 0000000000000000000000000000000000000000..d048a609a6a11c2ba22b890618a77935745de183 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_68.txt @@ -0,0 +1,106 @@ +Risk report +During the year, we have continued to see the +internal and external environment evolve and, +as a result, we have seen the risk environment +evolve and change too. We have continued +to progress and embed our Customer Value +Strategy (CVS) to create a more data-led +digital business. Macroeconomic conditions +continue to be challenging, particularly in the +areas of inflation and consumer confidence, +interest rates, and advertising spend. We have +seen an accelerated decline in digital referral +volumes driven by the evolution of referral +approaches used by the different platforms. +All of these areas affect our risk environment +and underline the importance of managing +risk and uncertainty effectively in order to +ensure the successful delivery of our CVS. +We have focused on our principal risks, with +further work undertaken in the year to evolve +how we mitigate and manage our principal +risks, taking accelerated action where required +to respond to the evolving internal and external +environment. We have also completed deep +dive reviews with the Audit & Risk Committee +for several of our principal risks. These included +cyber security, data protection, brand +reputation, treasury management and future +funding, and US operations risk. We have +continued to develop a better understanding +of our emerging risks and opportunities of +climate change and AI throughout the year. +In line with the recommendations of the Task +Force on Climate-related Financial Disclosures +(TCFD), we have identified our top climate +risks and opportunities and completed further +analysis to understand these more fully and +embed them into our risk management +model, as set out on pages 61 to 63. +How we manage risk +Our risk appetite has been clearly defined +and agreed by the Board and helps us to drive +decision-making when determining how we +best manage each of our principal risks. +We carefully evaluate the level of risk we are +prepared to take, and our risk appetite in +relation to strategic, operational and +regulatory risks is as follows: +Strategic +In pursuing our strategy, the risks we take +carefully balance the need to develop the +business with not knowingly compromising our +existing brands, our reputation or our financial +stability. Our principal strategic risks are: +• deterioration in macroeconomic +conditions; and +• deceleration of digital growth alongside +acceleration of decline in print revenue. +Operational +Our appetite for risks that may lead to +significant disruption of our operations is low. +We seek to minimise risks from unforeseen +operational failures in both our business and +our service providers. Our principal operational +risks are: +• cyber security breach; +• supply chain disruption; +• health and safety incident; +• lack of funding capability; +• inability to recruit and retain talent; and +• damage to brand reputation. +Regulatory +We have no appetite for any risk that may +constitute a breach of regulations, although +we will challenge the appropriate bodies +where we feel regulations are strategically +limiting. Should mistakes occur, we act +promptly to resolve the issue and prevent +it happening again. Our principal regulatory +risk is data protection failure. +Risk management framework +Identifying and evaluating risks +We regularly identify, evaluate and monitor all +risks including emerging risks that may affect +the operation of each area of our business. We +then identify, evaluate and monitor those risks +we consider to be principal – i.e. those with the +greatest potential to have a negative impact +on the business. +Managing risks +Having identified and evaluated our principal +risks, we consider how best to mitigate and +manage their potential impacts. We have +clearly defined roles, responsibilities and +accountabilities for managing our risks as +set out in the diagram opposite. Each of our +principal risks has an Executive Committee +owner and we have well-established +processes in place to allow the Board to +review these risks. These are detailed in +our Governance Report. +AN OVERVIEW OF OUR +RISKS IN 2023 +66 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements +The secret shape is a "heart". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_69.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_69.txt new file mode 100644 index 0000000000000000000000000000000000000000..b75f74bf081aa46d5b01a230b7b39b56976473e4 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_69.txt @@ -0,0 +1,53 @@ +Risk report continued +Our roles, responsibilities and accountabilities +The key roles and responsibilities in risk management are set out below: +Executive Committee +• Owns the day-to-day operation of the risk management framework +and systems of internal control +• Identifies and assesses risks and introduces mitigation controls +• Establishes ongoing processes to monitor and manage risk, +including emerging risks +• Assesses the effectiveness of internal controls and addresses +any issues identified +• Ensures significant issues are escalated promptly to the Board +• Ensures that decisions taken are in line with the corporate +risk appetite +• Ensures onward communication of key Group policies +and procedures +Board +• Sets strategic objectives +• Identifies, evaluates and monitors principal risks and uncertainties +• Sets the ‘tone from the top’ and establishes the corporate risk appetite +• Reviews and approves key Group policies and procedures to manage risk +• Responsible for the assessment of risk (delegated to the Audit & Risk Committee) +Audit & Risk Committee +• Reviews the effectiveness of the risk +management framework and internal +control systems +• Reviews effectiveness and integrity of +financial reporting +• Oversees risk-based internal audit +activity which provides independent +assurance over the operation of the +Group’s internal control systems and +risk management processes +• Monitors compliance with the +corporate risk appetite +Operational functions +• Ensure appropriate risk management is in place +within their business areas +• Review risks and mitigations on a regular basis +• Review and monitor the implementation of key Group policies +and procedures +• Identify emerging risks, and where appropriate escalate to the +Executive Committee +Risk and compliance support functions +• Support and advise management in managing risk +• Support and advise the business on the development of +appropriate and proportionate risk management actions +• Co-ordinate risk identification, reporting and governance activity +• Provide an opinion on the effectiveness of internal control and risk +management systems and processes +Key Direction and oversight Reporting Advice +67 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_7.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..35ce9f6d17766a4d487266c25595fde33d48479b --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_7.txt @@ -0,0 +1,132 @@ +Across the wider business, we continued +to make progress in making Reach more +responsible, such as by providing greater +support to colleagues regarding menopause +and accessibility, and we were proud to see +our efforts recognised when we were ranked +#19 in the Inclusive Companies list. +Our teams +In 2023, the Board oversaw the implementation +of a continued push to carefully manage our +costs, a decision that involved reducing the +size of most of our teams. While we agreed +this was a necessary step to safeguard the +future of our business and our journalism, we +recognise that such changes are enormously +difficult for all our people. We worked closely +with management to understand the impact +of these changes and encouraged direct +communication with employees, via several +in-person meetings across Reach sites. +Board changes +Darren Fisher joined the Board as Chief +Financial Officer in February 2023, joining us +from ITV plc where he was Group Director +of Finance. He has brought a strong set of +financial, operational and strategic skills to the +Board, experience which will benefit the Group. +For more on changes to the Board this year, +see page 75. +Dividend +The Board proposes a final dividend of 4.46 +pence per share for 2023 (2022: 4.46 pence +per share), which follows the interim dividend +of 2.88 pence. In proposing the final dividend, +the Board has considered all investment +requirements and its funding commitments +to the defined benefit pension schemes. +Moving forward +Over the coming months, we expect to +see continuing shifts in audience and tech +platform behaviour but we will be ready to +adapt to those changes. The work we have +done in 2023 has put us in a strong position +to face the challenges 2024 may bring, and +to consolidate our position as a leading +digital publisher. +The Board and I would like to thank everyone +at Reach for another year of outstanding work +under very challenging circumstances. The +talent and dedication we continue to see is +a powerful reminder of the strength of our +purpose as we work together to ensure +the future of our journalism. +Nick Prettejohn +Chairman +5 March 2024 +Chairman’s statement continued +I am always heartened to see the very real +impact our campaigning journalism has every +year, both nationally and locally – a reminder +that the work this business does matters. +While campaigns are often a labour of love +for months or even years, sometimes they hit +the mark quickly, as we saw with the Mirror’s +campaign last summer which successfully +halted the closure of rail station ticket offices. +For more campaigning journalism highlights +of the year, see page 34. +Responsible business +We continued to strengthen our commitment +to being a responsible business, building on +the excellent work done in 2022 when we +introduced a new formal framework. In 2023, +we made further progress in our environmental +efforts, in particular putting the reporting and +data in place that will pave our path to net +zero. A significant step was taken towards +this goal in 2023 when our three print sites +all completed work on installing 9,000sq m of +solar panels that will reduce both our carbon +footprint and our dependence on external +energy providers. +We also continued to work on being a more +inclusive business. At Board level, I am proud +to have achieved our 30% Club commitment +to a better gender and ethnicity balance on +the Board. However, I acknowledge that this +is only a starting point and that, while Reach’s +executive management team has also fulfilled +its pledge of achieving 30% women in its +makeup, it has yet to achieve its ethnicity +targets – this is an area we are committed +to improving. +including the Online Safety Bill and the repeal +of Section 40 of the Crime and Courts Act. +Crucially in 2023, we watched the Digital +Markets Bill continue to take shape. As this Bill +progresses through Parliament, we hope it will +provide rules of engagement that will bring +clarity and transparency to our dealings with +tech platforms, particularly around the value +of our content. Reach will continue to work +both with Government and opposition to +lobby for a fair playing field for news in +the digital landscape. +Innovative journalism +We remain driven by our core purpose +to enlighten, empower and entertain our +audiences. While awards aren’t the only +marker of our success, it was nonetheless +gratifying to see our teams continue to be +recognised for their work in 2023, often on +an international scale. For example, the +International News Media Awards (INMA) +recognised the Manchester Evening News for +its Awaab Ishak investigation, and the Cannes +Lion International Festival of Creativity gave +the Daily Star a Bronze PR award for its viral +sensation ‘Lettuce vs Liz Truss’ campaign. +Closer to home, our journalists continued to +win multiple awards, with our local colleagues +in particular regularly sweeping the categories. +We were also noticed for work which saw our +people exploring new territory – for example, +the multi-award-winning WhatsApp +communities project from our social team, +which pioneered a new and effective way of +engaging with people. This drive to innovate +and reinvent how we deliver our content +deserves to be celebrated. +5 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information5Reach plc Annual Report 2023 5Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_70.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_70.txt new file mode 100644 index 0000000000000000000000000000000000000000..e4a356018044dddb196156332fc68eb34ad78c43 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_70.txt @@ -0,0 +1,69 @@ +Risk report continued +Our principal risks +and uncertainties +We have considered our risks in the context +of delivering our strategy through a more +data-led digital business and the evolving +external environment. The evolving external +environment has seen the macroeconomic +conditions continue to be challenging, +particularly in the areas of inflation and +consumer confidence, interest rates, and +advertising spend. We have seen an +accelerated decline in digital referral volumes +driven by the evolution of referral approaches +used by the different platforms. +This has caused our risk of digital growth +deceleration to increase and our risks +around deterioration in the macroeconomic +environment, supply chain disruption and +cyber security breach to remain elevated +throughout the year. The risk environment +for data protection failure has also changed +during the year with our expansion into the US. +We have reviewed and evolved our mitigating +actions for our principal risks to ensure they +adapted to the changing risk environment. +The Board has undertaken a robust risk +assessment and review of our principal risks +in this context and the Audit & Risk Committee +has also performed a deep-dive review of the +following principal risks during the year: cyber +security, data protection, brand reputation, +treasury management and future funding, +and US operations risk. Our principal risks and +progress against them are set out below. +We have continued to develop a better +understanding of our emerging risks of climate +change throughout the year. Whilst we do not +at this stage consider climate risk to be a +principal risk, in line with the recommendations +of the Task Force on Climate-related Financial +Disclosures (TCFD) we have identified our top +climate risks and opportunities and completed +further analysis to understand these more fully +and embed them into our risk management +model, as set out on pages 61 to 63. +Risk and description How we mitigate the risk What we’ve done this year +Strategic +Deterioration in macroeconomic conditions +Risk owner: Full Executive Committee +Continued deterioration in macroeconomic conditions +could result in an uncertain trading environment with +reduced customer and advertiser spending, higher +interest rates, higher inflation and increased costs, +leading to lower cash flow and profits. +The economic uncertainty continues. We closely monitor the +risk and impact and continue to take action when needed. +We have a proven track record of responding quickly and +delivering additional cost savings as necessary when faced +with unexpected revenue declines. +We have closely monitored and assessed the macroeconomic +factors and during the year we have seen continued +inflationary pressures and increasing interest rates. We have +continued to take action to closely monitor costs and be as +efficient as possible, taking timely actions to mitigate inflation +cost pressures in the year. +Key Increase No change Decrease +68 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_71.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_71.txt new file mode 100644 index 0000000000000000000000000000000000000000..477c2e17bf0bbd1398b2d2ef1179c8c10af54f6a --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_71.txt @@ -0,0 +1,76 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Deceleration of digital growth alongside +acceleration in decline of print revenues +Risk owner: Full Executive Committee +Changes in the traditional publishing industry have led +to an ongoing decline in print advertising and circulation +revenues, which is being exacerbated by macroeconomic +factors. A lack of appropriate strategic focus could result in +us losing further revenue from existing products, while also +failing to grow digital revenues quickly enough to offset the +decline in print. +Our strategic development is led by an experienced Board and +Executive Committee. +We focus on developing digital revenue streams through +the CVS. +We continue to take tactical measures to minimise print +revenue declines and maintain profits, such as taking +appropriate cost mitigation or pricing measures. +We have governance structures which enable the ongoing +review of performance against targets and strategic goals, +including a weekly structured trading meeting. +We keep under consideration acquisition, joint venture and other +corporate development opportunities, which are aligned to +our CVS. +Our strategy, led by an experienced Executive Committee, is built +around moving to a digital-led model and remains the key +strategic focus for the Executive Committee. +During the year we have focused on building our direct +relationships with customers; social video content; our strategy +for affiliates; and Curiously, which aims to grow revenue from +new audiences. +Specifically, we have launched the Secure Audience Strategy, +which focuses newsrooms on increasing the number of page +views which come from reliable sources – those built on +intentional relationships with us by readers. +Content is analysed by age profile to understand what will +appeal to under-35s in particular. This was rolled out in August, +as part of the wider cultural change Curiously is tasked +with delivering. +We have also launched an operation in the US, which gives us +another route to a digital population of 360m people, which in +turn will open up new revenue opportunities. +Operational +Cyber security breach +Risk owner: Chief Financial Officer/Chief Information Officer +An internal or external cyber threat or attack, or a breach +within one of our suppliers, could lead to breaches of +confidential data, interruption to our systems and +services, reputational damage with our stakeholders +and financial loss. +All business-critical systems are well established and are +supported by appropriate disaster recovery plans. +We regularly assess our vulnerability to cyber attack and our +ability to re-establish operations in the event of a failure. +The technical infrastructure supporting our websites is within the +cloud and our sites have been designed to provide adequate +resilience and continued performance in the event of a +significant failure. +We continue to invest in enhancing our cyber security +infrastructure as new threats emerge. +Given our continued strategic focus on customer data as a +source of revenue, the potential impact of a cyber security +breach is increasing all the time. During the year we continued +to deliver our cyber security improvement programme and +have focused on the preparedness of our technology leaders +to manage cyber incidents including cyber incident training +and table-top exercises to rehearse re-establishing operations +in the event of a failure. We have continued to harden our +cloud environments to contain the damage from a potential +cyber attack and performed regular penetration tests to +identify vulnerabilities. +Key Increase No change Decrease +69 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements +The secret office supply is a "calculator". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_72.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_72.txt new file mode 100644 index 0000000000000000000000000000000000000000..ee62452f614d56b971bee6b843777600488db9da --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_72.txt @@ -0,0 +1,67 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Supply chain disruption +Risk owner: Chief Operating Officer/Chief Financial Officer +Disruption or failure in our supply chain could lead to +business disruption, increased costs, reduced service and +product quality, and ultimately mean we are unable to +deliver our strategy. +Print: Our print products, which rely on a small number of +key suppliers (for example, newsprint suppliers, wholesalers +and distributors), could be adversely affected, operationally +and financially, by changes to supplier dynamics. +Information systems and technology: A major failure, +breach or prolonged performance issues at a third-party +provider could have an adverse impact on our business. +We carefully monitor and manage all our third-party print and +information systems and technology providers – these include: +• Ad producers and planners +• Wholesalers and distributors +• Newsprint suppliers +• Manufacturing maintenance and parts providers +• IT providers +• Global digital partners +We have business continuity/disaster recovery plans in place with all +our key partners. +For our IT partners, we have clear governance arrangements covering +risk management, change control, security and service delivery. +During the year we continued to monitor our key +suppliers, with a particular focus on suppliers to our +print site operations. +We also continued to review our contingency +arrangements to ensure we have robust stock +management processes and that there are contingency +arrangements in place with our key suppliers. +Health and safety incident +Risk owner: Chief Operating Officer +Failure to adhere to our health and safety systems could +result in our employees or other workers on our sites +having accidents, including, potentially, fatal ones. +Every site has a professionally qualified and experienced health and +safety manager and an occupational health provider. The health and +safety manager oversees the implementation of our health and safety +management system, which includes an adverse event reporting +system. This allows investigations to be carried out in a timely manner +by the health and safety team. +The system includes a process for assessing risks in different areas of +the business and covers risks such as external work in hostile and +high-risk environments. +It also includes internal and external auditing to ensure continuing +compliance across our print and publishing sites. +We offer health and wellbeing support, including for mental health, to +all our employees. +During the year we have worked to embed the +refreshed Health and Safety Policy and framework +that was implemented in 2022. +We have continued to enhance our risk +assessment processes for events, our hubs and +work in high-risk environments. +We have continued to offer appropriate health +and wellbeing support to all of our employees. Online +threats and abuse towards our journalists is an area +of increasing concern, so addressing this issue and +protecting our journalists will continue to be a priority +for us. +Key Increase No change Decrease +70 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_73.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_73.txt new file mode 100644 index 0000000000000000000000000000000000000000..280fd0b1637465b7ac82cff925c2690f4eb81bae --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_73.txt @@ -0,0 +1,66 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Lack of funding capability +Risk owner: Chief Financial Officer +Our main financial risk is the lack of funding capability +to meet business needs. This may be caused by a lack of +working capital, unexpected increases in interest rates or +increased liabilities, in particular: +• pension deficits may grow at such a rate that annual +funding costs consume a disproportionate level of profit +• volume and level of claims for historical legal issues (HLI) +Financing +We have committed loan facilities sufficient to deliver +our strategy. +Through regular dialogue, we maintain constructive +relationships with our syndicate banks. +We forecast and monitor cash flow regularly through our +treasury reporting processes. +Our exposure to foreign exchange fluctuation is limited. +Commitments +Regular reporting to the Board (including facility utilisation +and covenant compliance). +We hold regular discussions with pension scheme trustees. +We continually review ways of de-risking our pension liabilities. +We continually monitor and manage ongoing HLI claim levels, +and work with external lawyers on HLI civil claims. +Financing +Following the extension of our full loan facility for an additional +year during 2022 (until November 2026) to mitigate the risk of +any unexpected increases in interest rates or liabilities, no +changes to the facility have been made during 2023. +Commitments +We made significant payments to our pension schemes in the +year and we remain committed to addressing our historical +pension deficits. This includes the successful resolution of the +2019 triennial review during the year for the one remaining +scheme. Discussions are ongoing with the Group’s other +schemes regarding the 2022 triennial valuations and are +expected to be concluded satisfactorily by the 31 March 2024 +due date. +In December, the High Court’s judgement on time limitation +provided a clearer view on our future liabilities in relation to HLI. +Inability to recruit and retain talent +Risk owner: Group Human Resources Director +The inability to recruit, develop and retain talent with +appropriate skills, knowledge and experience would +compromise our ability to deliver our strategy. +We continually monitor and review: +• Digital capabilities of our workforce +• Turnover levels +• Pay and benefits +• Opportunities to expand our talent pool +(for example, outside London) +• The recruitment channels we use +• Diversity and inclusion +Against the backdrop of this year having a recruitment freeze +we have been continuing to monitor this risk while taking into +account the current business environment. We are currently +downsizing our workforce. Throughout this exercise, we ensured +that we retained skills and talent. Against this backdrop and +the changing business environment we are closely reviewing +our employee proposition in order to retain the best talent +going forward. +Key Increase No change Decrease +71 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_74.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_74.txt new file mode 100644 index 0000000000000000000000000000000000000000..5c9a7560ae0fd04db719568bfff80b23025794b4 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_74.txt @@ -0,0 +1,71 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Damage to brand reputation +Risk owner: Full Executive Committee +Breaches of regulations or editorial best practice +guidelines; editorial errors; and issues with employees’ +behaviour or the tone of our editorial could damage our +reputation, cause us to lose readership, and put us at risk +of legal proceedings. +We have highly experienced and capable people in our key +senior management roles. +Our governance structures provide clear accountability for +compliance with all laws and regulations, and we have policies +and procedures in place to meet all relevant requirements, +including a crisis management procedure that is +communicated to all relevant staff. +We train all editorial employees on how to create content that +complies with relevant legislation. +We continually monitor upcoming legislative changes and +emerging trends. +We have clear internal expectations around the management +of editorial risk, including a mandatory escalation policy of +significant risks to senior editorial and legal colleagues, and +monthly reporting on editorial risk. We have reviewed and +updated all our Editorial Legal policies in 2023, and created +new versions for use in the US. These have formed the subject +of editorial training and been publicised to all members of our +editorial teams via our legal bulletin, which is circulated monthly. +Regulatory +Data protection failure +Risk owner: Group General Counsel/Data Protection Officer +A contravention of data protection regulations +applicable to Reach such as the UK or EU General Data +Protection Regulations (GDPR), Privacy and Electronic +Communications Regulations 2003 (PECR), various +state and federal legislation in the US and Canada +(e.g. the updated California Consumer Privacy Act +CCPA Amended), could lead to monetary penalties, +reputational damage and a loss of customer trust. +We have clear governance structures to direct and oversee +our data protection strategy. +Our Data Protection Officer and Data Protection team promote +and advise on compliance with data protection regulations, +address rights requests, provide oversight and help mitigate +the risk of compliance breaches. The team works with a +network of data protection champions and teams across +the business to assist the business in delivering its data +protection obligations. +We have well-established data protection policies, processes +and controls to govern how colleagues carry out day-to-day +activities involving the handling of personal data, plus clear +terms with regards to the collection, use, sharing and retention +of user data, including data transferred to third parties. +When developing new products and services, we use a ‘data +protection by design and default’ approach to collecting and +using personal data, to ensure we remain compliant with data +protection regulations. +During the year we continued to focus on embedding data +protection controls and processes and ensuring that data +protection forms part of ‘business as usual’ in everything we do. +This included reviewing and enhancing our Data Protection +risk and reporting framework to incorporate new legislative +requirements and regulatory focus areas and ensuring third +parties met the legislative requirements and correct provisions +were in place. We also advised on matters arising from new +projects involving personal data including the US expansion +and artificial intelligence initiatives, and monitored completion +of data protection awareness training. +Key Increase No change Decrease +72 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_75.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_75.txt new file mode 100644 index 0000000000000000000000000000000000000000..143746e497bdf5a2c0516a32cff55bb64e7b911b --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_75.txt @@ -0,0 +1,109 @@ +2023 VIABILITY +STATEMENT +In accordance with the UK Corporate Governance +Code the directors have assessed the Group’s +prospects over an appropriate period of time +selected by them. +The directors assessed the prospects of the Group +over a three-year period as it enables thorough +consideration of the investment required to drive +growth in digital and the impact of declining print +revenues, and this time period is deemed to +appropriately reflect the evolving environment in +which the Group operates. The assessment took +into account the Group’s current financial position, +principal and emerging risks and uncertainties +facing the Group which have the greatest +potential impact on viability in that period. +When approving the annual budget, projections +for the next two years are also considered. The +annual budget is also used by the Remuneration +Committee to set targets for the annual incentive +plan. The directors also consider projections for the +next 10 years used in connection with the Group’s +impairment review. +Scenario Associated principal risk(s) Description +Significant revenue +reduction +Deceleration of digital +growth alongside +acceleration in decline +of print revenues +Material reduction in digital and print revenues +(net of direct cost reductions) compared to the +three-year plan of 10% per annum. +Adverse changes in +external environment +leading to lower than +expected revenue +and higher than +expected costs +Deterioration in +macroeconomic +conditions +Supply chain disruption +Inflationary pressure in relation to energy and +newsprint costs, together with key supplier failure +in the manufacturing business. +Cyber security breach Cyber security breach +Data protection failure +Damages to brand +reputation +An external cyber attack which leads to breaches +of confidential data and interruption to our systems +and services, resulting in a material reduction in page +views and subsequent digital revenues, together with +additional investigation and remediation costs whilst +the attack is rectified, in addition to associated +regulatory costs and fines. +A number of key assumptions were made in +generating the baseline three-year forecast +as follows: +• digital growth supported by investment in +the Customer Value Strategy; +• print revenue declines with reference to +recent trends and reduction in related costs; +• overall stability in total revenues and +operating profit; +• funding of the historical defined benefit pension +obligations based on the existing schedule of +contributions agreed with the Trustees; +• payments in relation to historical legal and +tax issues reflecting the provisions held in the +balance sheet; +• covenant compliance on existing financing +facilities; and +• dividend payments in each year. +The assessment was undertaken recognising the +principal risks and uncertainties that could have the +greatest potential impact on viability in that period. +A number of hypothetical scenarios have been +modelled. While each of the principal risks on +pages 68 to 72 has a potential impact and has +been considered as part of the assessment, only +those that represent severe but plausible scenarios +were selected for modelling, summarised opposite: +These scenarios were assessed individually and +in unison to understand our capacity for each +risk incident and further stress test viability. The +modelling showed that the Group would be able to +withstand the impact of these scenarios occurring +over the assessment period. The Board also assessed +the likely effectiveness of any proposed mitigating +actions. This did not change the conclusions of +the assessment. +The Strategic Report was approved on behalf of the Board on 5 March 2024. +Darren Fisher +Chief Financial Officer +5 March 2024 +Based on the above, the directors have a +reasonable expectation that the Group will +remain viable and be able to continue operations +and meet its liabilities as they fall due over the +three-year period considered. +Such future assessments are subject to a level of +uncertainty that increases with time and, therefore, +future outcomes cannot be guaranteed or +predicted with certainty. +73 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_76.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_76.txt new file mode 100644 index 0000000000000000000000000000000000000000..20e777bfafb87514f617d215acb7a2d4841934b0 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_76.txt @@ -0,0 +1,83 @@ +The Board’s focus for the +year has been continuing +to support and hold +management to account +on the continued journey +of transforming the +business and becoming +a digital-first organisation. +The Board monitors culture and practices +closely across the business to make sure +they’re aligned with our purpose and strategy, +and we recognise that governance plays a +key role in setting up teams for success. We +nurture a culture that encourages colleagues +to be entrepreneurial, take advantage of +development opportunities and fulfil +their potential. +Below is a summary of the most important +Board activities this year. These initiatives +are outlined in more detail throughout the +Governance Report. +Continuing to evolve our strategy +As macroeconomic uncertainty remained +throughout 2023, our strong and effective +governance framework was critical in +supporting the delivery of our Customer Value +Strategy. To give us even greater long-term +stability and control over our business, the +Board spent time discussing whether the +strategy continued to be the right one. These +discussions included an in-depth review and +selection of numerous investment initiatives to +diversify revenue streams and further develop +audience insight and user experience. More +information on the Board’s strategy days +can be found on page 80. +One of the Board’s principal decisions in 2022 +was approving two organic growth initiatives: +our youth content brand, Curiously, and our +expansion into the US. The Board regularly +reviewed updates on the progress of these +initiatives, while the Audit & Risk Committee +performed a deep dive into the risks +associated with the expansion into the US +market, and how these are being managed +and mitigated. The Board is encouraged +by the progress made during 2023 and will +continue to monitor and provide oversight +as these initiatives develop. +PLANNING FOR THE FUTURE WITH GOOD GOVERNANCE +Nick Prettejohn +Chairman +Chairman’s statement +Compliance with the UK +Corporate Governance Code +The Board considers that, during 2023, +the Company applied the principles +and complied with the provisions of the +Financial Reporting Council’s (FRC) 2018 UK +Corporate Governance Code (2018 Code). +You can read more about our compliance +with the 2018 Code on pages 127 to 130. +Like many companies, we faced considerable +uncertainty and a rapidly changing business +environment. Our rigorous approach and +willingness to challenge in Board meetings has +meant that the difficult decisions we’ve had to +take ensure the interests of all stakeholders +are considered, and their views sought. +In 2023, the Board sought a capital reduction +of Reach plc to maintain the Company’s ability +to pay dividends to its shareholders and return +capital to shareholders, while also investing +to grow the business and meet our funding +commitments to the defined benefit pension +schemes. This was approved by shareholders +at a General Meeting held in November, and +by the Court in early December. You can read +more about this in our section 172 statement +on pages 85 to 87. +74 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #1 is a "giraffe". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_77.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_77.txt new file mode 100644 index 0000000000000000000000000000000000000000..acc0eceecac98ae21aff78e54bc92c669f59a3fd --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_77.txt @@ -0,0 +1,113 @@ +Our Board and +Executive Committee +We have ushered in some changes to the +Board during the year. Darren Fisher joined +the Board in February 2023 as Chief Financial +Officer, as set out in my Chairman’s statement +on page 5. Darren’s financial, operational and +strategic skills have helped the Board navigate +through a number of complex matters, +while managing the Company’s financial +performance in line with expectations. +At the AGM in May 2023, Steve Hatch +stepped down from the Board after more +than seven years of service, following his +full-time appointment as Chief Executive +Officer of YouGov plc. I would like to thank +Steve for his commitment and outstanding +contribution to the Board during his tenure +as Non-Executive Director. +I am pleased that we have met the targets +on Board diversity that must be reported on +under the new Listing Rule requirements, and +we will continue to prioritise diversity on the +Board. The Board acknowledges that, as set +out on page 91, there is progress to be made +at Executive Committee level regarding +ethnicity and this has been discussed at +Board meetings numerous times this year. +We recognise that diversity needs to be +considered throughout the whole organisation +to maintain a strong and diverse pipeline of +talent and to ensure that the organisation +better reflects its wider audience. +Once again, the Board has continued to work +closely with the Executive Committee and +other senior leaders, particularly through the +two in-depth Board strategy meetings held +during the year. Individual non-executive +directors have also provided insight and +expertise in certain areas to teams outside +the formal Board meeting structure. This is +a two-way relationship that enables non- +executive directors to share their deep +knowledge and expertise, assisting strategic +decision-making in the boardroom, and, in +turn, gaining insight into the business in a +more informal way. +Our responsible +business framework +During the year, the Sustainability Committee +oversaw all the work and progress achieved +under the four pillars of our responsible +business framework, which was created in +2022 to formalise our approach to being +a responsible, sustainable business. +One key area of focus has been setting +reduction targets for greenhouse gas +emissions. We are now in the process of +validating these targets, in order to be able to +announce a net zero commitment date in due +course. More information on this can be found +on page 95. +Reflecting on our effectiveness +as a Board +We regularly reflect on our performance as a +Board and consider ways we can improve our +processes and behaviours to make sure we’re +operating effectively. During 2023, we took +several actions to address the issues and +recommendations that arose from our internal +Board evaluation in 2022, covering ESG, market +developments, training and lessons learnt. +At the end of 2023, we conducted another +internal Board evaluation by way of a detailed +questionnaire. You can find more detail about +our processes, recommendations and actions +on page 90, and we will report on progress +against this year’s recommendations at +the end of the year. +Remuneration Policy +In 2024, we will be asking shareholders +to renew the three-year authority for our +Directors’ Remuneration Policy at the AGM. The +proposed new Directors’ Remuneration Policy +(the Policy) can be found on pages 107 to 115. +The Remuneration Committee has proposed +to roll forward materially the current Policy with +minor changes only. +The year ahead +The actions the business has taken during +2023 prepare us to face 2024 with a refreshed +focus on our digital-first goal. As a Board we +will continue to oversee the delivery of the +strategy, which to be successful will require +diversity of people and thought throughout +the entire organisation. The pace and scale of +change in artificial intelligence (AI) means that +this will be a priority as outlined on page 81 +and we will consider setting measures and +targets to monitor progress. +The upcoming corporate governance reforms, +while now not as extensive as originally proposed, +will be another step in strengthening the +governance and controls landscape, and we +will remain focused on overseeing any changes +required to continue to ensure we have a +strong and robust governance framework. +Nick Prettejohn +Chairman +5 March 2024 +Chairman’s statement continued +75 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_78.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_78.txt new file mode 100644 index 0000000000000000000000000000000000000000..b979e58bc7239f08aa4665e3de7faa52b249d11d --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_78.txt @@ -0,0 +1,63 @@ +Our Board +Nick Prettejohn +Chairman +Jim Mullen +Chief Executive Officer +Darren Fisher +Chief Financial Officer +Appointment date: March 2018 +(appointed as Chairman in May 2018) +Skills, experience and contribution: Nick has significant +chairmanship and listed company experience. Since his +appointment in 2018, Nick has successfully led the Board through +a period of transition, bringing on board a new CEO, two CFOs, a +Senior Independent Director and Audit & Risk Committee Chair. +Nick has deep financial services experience, in-depth regulatory +knowledge, significant experience in strategic planning and +implementation, and strong leadership qualities. The Board +believes Nick’s strong leadership and chairing skills means he +continues to effectively lead the Board. Some of Nick’s previous +appointments include Chairman of the Financial Services +Practitioner Panel, the Britten-Pears Foundation, Brit Insurance, the +Royal Northern College of Music and Scottish Widows Limited; +Non-Executive Director of Lloyds Banking Group plc, the Prudential +Regulation Authority and Legal & General plc; Member of the BBC +Trust; and CEO of Prudential UK and Europe, and Lloyd’s of London. +Current external appointments: Chairman of TSB Banking Group +plc and the charity Prisoners Abroad, Senior Independent Director +of YouGov plc and a Trustee of the charity Opera Ventures. +Appointment date: August 2019 +Skills, experience and contribution: Jim has significant +experience in advertising and communications, having spent +more than 10 years in some of the industry’s leading marketing +and communications groups, as well as on significant digital +transformation projects. Since his appointment in August 2019, +Jim has developed and communicated a clear strategic vision +for the future of the business, and the Board considers his +continuing leadership critical to executing the strategy. Some +of Jim’s previous appointments include Group CEO of Ladbrokes +Coral plc and Ladbrokes plc, Chief Operating Officer of William +Hill Online, and Director of Digital Strategy and Product +Management at News International. +Current external appointments: Senior Non-Executive Director +of Racecourse Media Group. +Appointment date: February 2023 +Skills, experience and contribution: Darren is a seasoned +finance professional with more than 30 years’ leadership +experience in global multi-service sector, blue-chip companies +in the UK, India and Australia. Darren has worked across the +media, technology, business services and aviation sectors. +His extensive experience means he offers the Board relevant +insight into strategy development and implementation, +business transformation and integrating acquisitions. +Darren was previously Group Director of Finance of ITV plc, +responsible for the group finance functions and operations. +He was also divisional CFO for the Media & Entertainment division, +which contains the UK broadcast business as well as ITV’s digital +offerings (ITVX). He has previously served as Director of Finance +for Micro Focus plc, Sage plc and Xchanging plc. +Current external appointments: None. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +76 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #5 is a "vase". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_79.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_79.txt new file mode 100644 index 0000000000000000000000000000000000000000..a7ec6e5fbed7ecaa1355a5bec87cb9b97eb967aa --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_79.txt @@ -0,0 +1,67 @@ +Our Board continued +Denise Jagger +Senior Independent Director +Priya Guha, MBE +Independent +Non-Executive Director +Anne Bulford, CBE +Independent +Non-Executive Director +Appointment date: December 2022 +Skills, experience and contribution: Denise is a qualified +solicitor, having been a partner at Addleshaw Goddard and, +until 2020, at Eversheds Sutherlands LLP. Denise brings extensive +governance and plc experience to the Board, having held a +number of non-executive positions during her career. Her +previous appointments include Non-Executive Director at CLS +Holdings plc, Bellway plc, Pool Reinsurance Company Limited, +Redrow plc, and the British Olympic Association, and Chair and +Pro Chancellor of the University of York. She was also a Director +of Asda Stores, and Group General Counsel and Company +Secretary of Asda Walmart. Through these roles, she has +acquired a broad range of M&A, finance raising, competition, +regulation compliance, HR, and remuneration and +benefits experience. +Current external appointments: Non-Executive Director of +Topps Tiles plc, Trustee of the National Trust and a Member +of the Advisory Panel of the charity IntoUniversity. +Appointment date: September 2022 +Skills, experience and contribution: Priya brings a unique +mix of senior diplomatic and governmental leadership to the +Board, alongside extensive experience of the technology sector. +She is a Venture Partner at Merian Ventures, with a focus +on women-led innovation investments. She is also a Non- +Executive Director of Herald Investment Trust, UK Research & +Innovation and the Digital Catapult. Previously, Priya was a +career diplomat, most recently as British Consul General to San +Francisco, with postings before that in India and Spain. In 2021, +Priya was awarded an MBE for services to international trade +and women in innovation. +Current external appointments: Venture Partner at Merian +Ventures, Non-Executive Director of Herald Investment Trust, +UK Research & Innovation and the Digital Catapult, Adjunct +Faculty at the Hult Ashridge Business School, Member of the +Royal Academy of Engineering International Committee and +Trustee of TechSheCan. +Appointment date: June 2019 +Skills, experience and contribution: Anne is a chartered +accountant and an experienced media CFO and Audit +Committee Chair. The Board considers her continuing +leadership of the Audit & Risk Committee to be important +to ensuring the Company continues to benefit from an +independent and objective audit. Anne was awarded an +OBE in 2012 for services to UK broadcasting and, in 2020, a +CBE for services to broadcasting and charity. Some of Anne’s +previous appointments include Deputy Director General of +the BBC and Chief Operating Officer of Channel 4. Her previous +non-executive roles include Chair of the Audit Committee of the +Executive Committee of the Army Board, and Audit Committee +Chair of Ofcom and the Ministry of Justice. Anne qualified as a +chartered accountant with KPMG and spent 12 years in practice. +Current external appointments: Non-Executive Member of +KPMG’s Public Interest Committee, Non-Executive Chair of +Trustees of Great Ormond Street Children’s Hospital Charity, +and Governor of the Royal Ballet. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +77 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_8.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d479c4c89a05fa40a0705fce3a01818c2221ad1 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_8.txt @@ -0,0 +1,24 @@ +A POWERFUL +Brands across UK & US +120+ +We reach +85% +of the regional +news audience +monthly +We reach +72% +of the online UK +audience +monthly +PORTFOLIO +We’re Reach plc, the largest commercial news publisher in the UK and +Ireland. We’re home to more than 120 trusted brands, from national +titles including the Mirror, Express, Daily Record and Daily Star, to local +brands like WalesOnline, BelfastLive and the Manchester Evening News. +Every month, 72% of the online UK population come to us for news, +entertainment and sport they can trust. As a proudly mainstream +publisher, we connect people everywhere with what’s going on in +their area and throughout the world. +6 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_80.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_80.txt new file mode 100644 index 0000000000000000000000000000000000000000..370f5773899f87039d01e95ea0275933125adb08 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_80.txt @@ -0,0 +1,64 @@ +Barry Panayi +Independent +Non-Executive Director +Wais Shaifta +Independent +Non-Executive Director +Olivia Streatfeild +Independent Non-Executive Director +and Colleague Ambassador +Appointment date: October 2021 +Skills, experience and contribution: Barry is an established and +recognised leader in the digital and data space, having spent +most of his career in senior positions at a range of sectors +focusing on data, insight and analytics capability development. +Barry has current executive experience, having worked as Chief +Data and Insight Officer at the John Lewis Partnership since +March 2021. Before this, he was Group Chief Data & Analytics +Officer at Lloyds Banking Group. Barry has extensive experience +in leading data-driven transformations and managing large +teams, having also held senior roles at Bupa and Virgin Group. +He started his career working in consultancy for EY, specialising +in data and digital. +Current external appointments: Chief Data and Insight +Officer at the John Lewis Partnership and Non-Executive +Director of Ofgem. +Appointment date: September 2022 +Skills, experience and contribution: Wais brings a varied +ecommerce background and customer focus expertise to the +Board, having previously held executive roles in a number of +online businesses. He has extensive experience driving growth +and transformation for several digitally enabled brands, with a +track record of leveraging data to drive customer engagement. +As the former CEO at Push Doctor, one of the leading digital +healthcare companies in Europe, Wais worked in partnership +with the NHS to connect thousands of patients each week with +clinicians. Before joining Push Doctor, Wais was Director of +Global Operations at Treatwell, and before that International +Operations Director at Just Eat. +Current external appointments: Chief Executive Officer of +PrivateDoc, Non-Executive Director and Chair of the Sustainability +Committee and Remuneration Committee of The Gym Group plc, +Non-Executive Director of Snappy Shoppers Ltd and Operating +Partner of Samaipata. +Appointment date: January 2016 +Skills, experience and contribution: Olivia has a strong +commercial and consumer background, having previously held +executive roles at TalkTalk, including as Commercial Director +and Marketing & CRM Director. Olivia has a data-driven and +analytical approach to problem solving, having worked in +consulting for McKinsey & Company. This enables Olivia to +support the Board in overseeing the data-driven and +customer-centric strategy. Some of Olivia’s previous +appointments include Chief Executive Officer of INTO University +Partnerships, Commercial Director of TalkTalk’s consumer +business, and Partner at Sir Charles Dunstone’s investment +vehicle Freston Ventures. Olivia was an Associate Principal at +McKinsey & Company and a leader in the business’s consumer +retail practice. +Current external appointments: Chief Executive Officer of +Flamingo Horticulture Investments. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +Our Board continued +78 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_81.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_81.txt new file mode 100644 index 0000000000000000000000000000000000000000..091a7d6a201eccaa81afa354e885099594a52e5a --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_81.txt @@ -0,0 +1,137 @@ +BOARD +IN ACTION +FEBRUARY +MARCH +APRIL JUNE +MAY +• Darren Fisher joined the Board +as Chief Financial Officer +• Finalisation of the 2023 +budget and delivery plan +• Update on Curiously, the +new youth content brand +launched in 2022 +• Annual insight into workforce +engagement from Olivia +Streatfeild, our Colleague +Ambassador +• Update on data protection +priorities and progress +• Financial training for Audit & +Risk Committee members +• 2022 full-year results released +and dividend declared to +shareholders, along with +a Company-wide cost- +reduction programme +• 2022 Annual Report approved +• Review of 2022 editorial +output and highlights +• Deep dive into digital +performance +• Gender Pay Gap +Report approved +• The Board held a +two-day strategy off-site +meeting to reassess and +review Customer Value +Strategy (CVS) goals +and priorities +• Colleague lunch held +with the Board and +regional leaders +in Manchester +• Tour of Oldham print site +• Colleague +breakfast hosted by +non-executive directors • Board visit to the Bristol office +and Colleague lunch held +with the Board and +regional leaders +• Update on the strategic +actions and initiatives agreed +at the strategy meeting in April +• Update on the 2019 and 2022 +pensions valuations process +• Broker update on +macroeconomic environment +and investor views on delivery +of the management plan +and strategy +• Review of the Group’s financial +performance and forecasts +• AI training and insights from +an external expert +• Steve Hatch, Non-Executive +Director, stepped down from +the Board +• Product update and user +experience improvements +• Update on cyber security +programme +• Modern Slavery Statement +approved +• AGM held with shareholders BOARD ACTIVITIES DURING 2023DECEMBER +• Approval of 2024 budget +• Review of proposed 2024 +organisational structure +• Update on data protection +programme +• Annual review of corporate +governance +• Approach to our second +year of reporting under +TCFD approved, including +scenario analysis +• Agreed in principle the +science-based targets for +our pathway to net zero. +To be formally announced +during 2024 +• 2023 half-year +results released +and dividend +declared to +shareholders +JULY +• The Board held another +two-day strategy +off-site meeting to +reassess and review +CVS goals and priorities +• Colleague lunch held +with the Board, Executive +Committee and other +leaders in London +• Colleague breakfast +hosted by non-executive +directors +• Climate-related training +for the Board and +Executive Committee +SEPTEMBER +• Proposed Reach plc +capital reduction of +the share premium +account announced +• Conclusion of the 2019 +and 2022 triennial +pensions valuation +for the MGN pension +scheme announced +• Update on cyber +security programme +OCTOBER +• Cost-reduction +programme for +implementation in +2024 announced +• General Meeting to +approve Reach plc +capital reduction +of the share +premium account +NOVEMBER +79 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret vegetable is "cauliflower". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_82.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_82.txt new file mode 100644 index 0000000000000000000000000000000000000000..9ae36e27ed09748a78edd42b289b5a7ccf7f0480 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_82.txt @@ -0,0 +1,95 @@ +Driving revenue growth +Building a +culture where +people thrive +Developing +a data-led +proposition +Growing through +audience +engagement +Delivering +the stories +that matter +loyalty +Greater More +relevant content +Moreengaging experience +Strategy days +The Board held two in-depth strategy days +in April 2023 and September 2023. Having +initiated the Customer Value Strategy (CVS) +in 2020 the goals and objectives of the +sessions were to reflect on the progress +the Company had made since then, +and identify further areas with potential +for growth. +Given the importance to the Board of +understanding the business rationale +and the risks and opportunities faced, the +Executive Committee and Board worked +together throughout the strategy days to +encourage an immersive debate and +discussion. At the end of the sessions, the +Board was given the opportunity to reflect +collectively and make key decisions. +The main topics covered over both +sessions were: +• re-affirming Reach’s current strategic +priorities for a data-led, customer- +centric proposition and evolving the +interpretation of the CVS to broaden +revenue beyond advertising while still +protecting its core purpose – journalism; +• knowing our customers and the benefits +of data, and considering the results of +an external customer insights panel; +• the future of the CVS and the +consideration and debate of +numerous investment initiatives; +• editorial restructure, the future of the +newsroom and Company culture; and +• the risks and opportunities surrounding AI. +The outcomes were: +• an agreement to diversify revenue +streams through Mantis, affiliates +and ecommerce and consider +new initiatives as appropriate; +• a plan to restructure editorial to +enable a digital-first approach +and continue the development of +audience insight and user experience; +and +• an agreement that the Board would +continue to monitor the culture of the +business and its development so that +Reach can attract the best talent. +Next steps +Given the ongoing development of +strategic priorities, the Board will continue +to monitor and critically evaluate progress +made. As well as reviewing progress at two +planned off-site strategy sessions in 2024, +the Board will spend time outside these +sessions discussing all aspects of +the strategy. +Board in action continued +SUPPORTING DELIVERY +OF THE STRATEGY +Purpose +Our purpose is to enlighten, empower +and entertain through brilliant journalism. +This purpose directly informs and inspires our +strategy. By better understanding our customers +and delivering more data-led content and +advertising, we can continue to invest in our +journalism, our people and our future. +To deliver our purpose, we must continue to +strengthen our data capabilities and audience +engagement and support our strategy by +maintaining a company culture that empowers +our people to perform at their best. +For more information, see our strategy on +pages 18 and 19 of the Strategic Report. +80 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_83.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_83.txt new file mode 100644 index 0000000000000000000000000000000000000000..d1693d5daa74104f5d38b52a75747ac7dd0e8f5e --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_83.txt @@ -0,0 +1,115 @@ +Directors’ attendance at Board and Committee meetings during +the year is outlined below: +Director Board +Nomination +Committee +Sustainability +Committee +Audit & Risk +Committee +Remuneration +Committee +Nick Prettejohn 10/10 3/3 2/2 n/a 5/5 +Anne Bulford 10/10 3/3 2/2 5/5 5/5 +Darren Fisher 10/10 n/a 2/2 n/a n/a +Priya Guha1 10/10 3/3 2/2 4/5 5/5 +Steve Hatch2 4/4 1/1 n/a 2/2 2/2 +Denise Jagger3 9/10 3/3 2/2 5/5 4/5 +Jim Mullen 10/10 3/3 2/2 n/a n/a +Barry Panayi 10/10 3/3 2/2 5/5 5/5 +Wais Shaifta 10/10 3/3 2/2 5/5 5/5 +Olivia Streatfeild 10/10 3/3 2/2 5/5 5/5 +1. Priya Guha was unable to attend an Audit & Risk Committee meeting due to a pre-existing commitment prior +to joining the Company +2. Steve Hatch left the Board in May 2023 +3. Denise Jagger was unable to attend a Board meeting and a Remuneration Committee meeting due to +pre-existing commitments prior to joining the Company +Board in action continued +INCREASING OUR FOCUS +ON ARTIFICIAL INTELLIGENCE +Throughout 2023, the Board regularly +discussed artificial intelligence (AI) and its +increasing relevance and importance to +Reach, in terms of both risks and opportunities. +It became apparent in these discussions that +the Board needed to increase its knowledge +and understanding of this complex area, and +so in June an external expert presented to +the Board. They provided insights into the +development and potential of AI as well +as data and governance issues to be +considered and tackled, particularly as +technology advances. +The Board has had oversight and been kept +informed of the workstreams and outputs of +the internal AI steering group. This group is +cross-functional across all divisions of the +business, including the General Counsel, +and covers editorial usages, innovation +and governance. +The Board recognises the importance of +creating an environment where teams can +innovate by testing and trying out new ideas, +products and ways of working to realise the +potential of AI while at the same time building, +maintaining and monitoring a robust +regulatory framework. During 2024, additional +training will be provided to the Board as +required, and a list of AI topics relevant to +the business will be reviewed and discussed +regularly at Board meetings. We will also +consider setting measures and targets +for AI to monitor progress. +OVERSEEING CYBER SECURITY +AND DATA PROTECTION +During 2023, the Board, together with the +Audit & Risk Committee, continued to oversee +the steps taken and measures put in place +to mitigate the risk and impact of a cyber +security breach and/or a data protection +failure. The Board has identified both of these +as principal risks (for more information, see +pages 68 to 72). +These steps and measures include: +• endorsing the move to be more objectively +risk-based to better focus cyber security +efforts on the threats to the business, the +state of defences and the threat landscape; +• overseeing the development of a +measurement framework to track +improvements in cyber security, which +includes the development of a consistent +set of KPIs to monitor and report progress +on the security improvement journey; +• reviewing the key findings of an audit review +on cyber security arrangements, which +focused on the design and implementation +of controls to ensure the confidentiality, +integrity and availability of systems, +enterprise assets and Reach data; +• receiving updates on cyber security training +for colleagues, such as major cyber security +incident preparation and simulation +desktop exercises; +• receiving updates on the comprehensive +programme in place to deliver the Group’s +data protection and privacy strategy to +enable Reach to meet its commercial +goals and data-led digital-first growth in +a privacy-compliant way (this includes +updates on focus areas and any action +plans in place); and +• overseeing compliance with relevant +privacy laws in the US and Canada following +the 2023 expansion into the US, plus the +legal and regulatory data protection +requirements of evolving laws in existing +markets, and new technology such as AI. +The Board and Audit & Risk Committee will +continue to stay regularly informed and +updated, and recognise that the success +of the cyber security and data protection +programmes depends on engaging with, +and the capability within, all business units. +81 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other InformationStrategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_84.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_84.txt new file mode 100644 index 0000000000000000000000000000000000000000..03b80b5ba1edf1777e50b5504ea3141bb9cb179c --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_84.txt @@ -0,0 +1,113 @@ +MONITORING OUR CULTURE +The Board wants Reach to be a community +in which all colleagues feel respected, happy +in their work, united by a shared purpose and +empowered to succeed. And while the Board +works to establish and support this culture, it +is the individual actions of all colleagues that +make it a reality and ensure that it is +embedded within the business. +For the Board, developing a culture that +encourages and creates opportunities for +individuals and teams to thrive and to realise +their full potential is not only the right thing to +do for us as people but also helps create long- +term value for shareholders and stakeholders. +Throughout 2023, the Board used several +indicators and measures to monitor and +assess the Group’s culture, and we describe +some of those below. +Employee engagement surveys +and experience +The Board receives quarterly reports +on engagement survey results, which +contain several culture-related questions. +The HR Director reports the findings to the +Board and discusses key focus areas and +actions in detail. +The mechanisms for understanding +engagement include: +• employee metrics, such as absence, +unplanned leavers and churn, employee +relations cases, health and wellbeing, and +talent, including management training; +• engagement forums, such as interest +networks, working groups, ambassadors +and union relationships; and +• employee feedback, such as monthly +surveys, focus groups, leadership meetings +and monthly check-ins for all colleagues +with their managers. +In response to feedback from 2022 that our +people were concerned about attracting +and retaining talent, a new Head of Talent +Development joined in July 2023. The 2023 +priorities have been to evolve the employee +experience and also to develop both a career +development framework and editorial +recruitment practices to deliver a truly +innovative platform and a customer-first +newsroom fit for the future. +The Board continues to encourage +improvements in systems and processes that +benefit the health and wellbeing of our people, +and wellbeing zones have been put in place in +some of our offices. +Colleague Ambassador +In her role as Colleague Ambassador, +Non-Executive Director Olivia Streatfeild +provides the Board with an independent link +to our workforce. Olivia joins regular employee +engagement review meetings with our Group +HR Director, which cover key diversity and +inclusion initiatives and outputs, overall +employee experiences and feedback, and +talent and succession planning. These are +all supported by clear data and evidence. +Olivia reports her observations and the +matters raised by colleagues to the Board to +make sure they are considered and factored +into key decisions. Olivia also continues to +attend colleague forums and Inclusion +Champion meetings, and her participation +has been received positively by our people. +Site visits +All our Board members met with colleagues in +person this year, as part of visits to our Oldham +and Bristol hubs, a tour of the Oldham print +site, and also a lunch held in London with +the Executive Committee and other leaders. +These allowed the Board to gather views +about how well the strategy was understood +and embedded within the business and +gain valuable insights into the regions. +Colleague breakfasts +The Board decided to expand opportunities for +engagement with the workforce in 2023 and +introduced colleague breakfasts with non- +executive directors (without senior executives +present) to our events schedule. Olivia +Streatfeild hosted both breakfasts as +Colleague Ambassador and was joined +by Wais Shaifta in April and Priya Guha in +September. The breakfasts were held in person +in small groups to make sure everyone had +a chance to be heard and give the Board a +direct insight into the opinions of the workforce, +its current morale and any issues faced by the +business. Colleagues from a wide range of +teams attended both breakfasts to ensure a +diverse range of voices were present, including +the editorial, commercial, finance, IT, HR, print, +customer and product teams. +“It was great to see the linkages and interactions +across different sites in action and to speak to +colleagues about how the operational structure and +system dynamics fit together and work in practice. +Reach is home to many titles and brands, but I got +a real sense from colleagues that they felt well +connected and passionate about what they do.” +Barry Panayi, Non-Executive Director +Board in action continued +82 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_85.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_85.txt new file mode 100644 index 0000000000000000000000000000000000000000..e20922fd6a8755f7ea6363abb046ab5a77138688 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_85.txt @@ -0,0 +1,74 @@ +The insights and outcomes of the sessions +were fed back to the Board at the following +Board meetings. Themes raised included: +• user experience; +• keeping up morale in the newsroom; +• the split between focus on page views +versus engagement; +• acquiring, retaining and developing top +talent; and +• creating career paths for technical experts +and premium content journalists. +The sessions were very well received by both +colleagues and the Board, and we are +scheduling further ones for 2024. +Diversity and inclusion +The Group Head of Diversity and Inclusion +presented regular updates to the Board. In +2023, these included updates on that year’s +agreed priorities (read more on page 41 and +42) which were: +• line managers having accountability and +responsibility for ensuring inclusive behaviour; +• increasing participation rates and reducing +‘Prefer Not to Say’ responses in Be Counted +employee data; and +• delivering a programme of outreach +activities to support social mobility in +the communities we serve. +The Board recognises that the employee data +it receives helps it to understand and refine +the cultural and organisational characteristics +of Reach. During 2024, it will continue to focus +on gathering high-quality information to +enable it to critically monitor progress. +At the end of 2022, Reach signed up to +Generation Valuable, a 12-month programme +that aims to address the gap in disability +talent. A participant who was mentored by +Jim Mullen, our CEO, provided an update to +the Board on the 2023 objectives for the +programme. Reach is striving to accelerate +inclusion in this area and ensure it is truly +embedded in the business. You can read +more about this on page 44. +Talent +The Nomination Committee regularly +receives talent assessment updates about +the Executive Committee and its direct reports. +This provides the Board with insight into +decision-making around investing, succession +planning and managing our talent pipeline, in +line with Reach’s values, vision and strategy. +Compliance +The Board oversees the implementation of +policies regarding anti-bribery, anti-slavery, +data protection and cyber security. It also +oversees e-learning modules for colleagues +and receives regular updates on completion +rates. The Head of Risk and Internal Audit +provides updates on any matters raised +through the Group’s whistleblowing procedures. +Board in action continued +“Colleague breakfasts are an invaluable way to have +rich discussions with teams across the business. +These have covered managing the tension between +short and medium-term objectives, competing +for talent, the impact of our efficiency focus on +colleague morale, and how to increase the speed +of innovation. As a Board, we have an informed +overview of our colleagues’ biggest concerns and +opportunities, as well as our strategic priorities.” +Olivia Streatfeild, Colleague Ambassador +83 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_86.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_86.txt new file mode 100644 index 0000000000000000000000000000000000000000..75915a13edc83d8ea3685a114ebb250707381ac7 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_86.txt @@ -0,0 +1,71 @@ +What is your background and why did +you join the Company? +Throughout my career, I have enjoyed working +in large, multi-site organisations with high +numbers of employees, similar to Reach. +I like fast-paced, competitive and dynamic +marketplaces and consumer-facing +businesses. In complex and geographically +spread organisations, the company’s purpose +and its strategy to deliver must be clearly +understood and well communicated across +all areas, and the challenge of achieving this +at Reach interested me. A further motivation +was the opportunity to oversee digitisation, +which is particularly significant for Reach +as the Company focuses on accelerating +development in this area against a backdrop +of print decline. I was also keen to join an +impressive and diverse Board focused on +ensuring the business is modernised and in +tune with changing consumer demand and +emerging technologies. +Which sites did you visit last year and +what impressions and insights did you +gain from them? +I visited the Newcastle office, and also the +Oldham site as part of the Board’s off-site +strategy days. I’m a big advocate of site visits, +not least because of my retail background but +also because you can experience the culture +of a company first-hand and ascertain +whether colleagues are empowered to do +their job, rather than just hearing about it +second-hand in the boardroom. +Board in action continued +Q&A WITH +DENISE JAGGER +Senior Independent Director +“We want to look beyond those +people immediately visible to the +Board so that we are informed and +can more effectively support the +executive’s plans for their teams.” +I’ve met colleagues at all stages of their careers, +which is important when looking at succession. +Site visits are a great litmus test for the +strategy, enabling you to understand whether +it’s understood across all business functions. +Site visits also enable Board members to +increase their understanding of operating +parameters, which informs strategic +decision-making. +How have you found the induction +process, and do you have any +suggested improvements? +The induction process was thorough. I was +well briefed through a series of meetings +with senior executive team members and +key advisers on the operating landscape and +the issues the Company faces, which helped +me quickly get up to speed. Future director +appointments would benefit from additional +briefings in 6-12 months once a greater +understanding of the business has been +established, resulting in a more rigorous line +of questioning and specific areas of interest. +I also highly recommend site visits as a +useful part of the induction process. +84 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsOther Information 84Reach plc Annual Report 2023Strategic Report Governance Financial Statements +The secret tool is a "ruler". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_87.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_87.txt new file mode 100644 index 0000000000000000000000000000000000000000..7fc31e7e65617d392d0b0e2a6a26c315ab9f3ddd --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_87.txt @@ -0,0 +1,124 @@ +Under the UK Companies Act 2006 (the Act), +we must promote the success of the +Company for the benefit of its members as a +whole – and, in doing so, consider the interests +of all our stakeholders in the decisions we +make, along with any other relevant factors. +We consider the interests and views of all our +stakeholder groups (as outlined in the table on +pages 86 and 87), the effect of the Company’s +operations on the community and the +environment and the need to act fairly +between stakeholders. +We acknowledge that key decisions we make +will affect long-term performance. We also +recognise that every decision we make will not +necessarily result in a positive or equivalent +outcome for all our stakeholders. By +considering our purpose, vision and values, +together with our strategic priorities, we are +better able to choose the best course of +action for the Company while maintaining +our reputation for high standards of business +conduct. In the same way, by assessing the +outcomes of our decisions and engaging with +stakeholders, we can determine and revise +potential decisions in the future. +In this section, we set out how the Board has, in +performing its duties over the year, considered +matters set out in section 172 of the Act, +alongside examples of how each of our +key stakeholders has been considered and +engaged. We also discuss how we do this +on pages 30 to 53 of the Strategic Report. +Principal decisions in 2023 +Here are three examples of our principal +decisions in 2023 and how we considered +section 172 matters. +PLANNING FOR THE FUTURE +In March and November 2023, the Board +approved and the Company announced a +cost-reduction programme that committed to +a 5-6% reduction in the Company’s operating +costs for 2023 and 2024. Part of the programme +for 2024 proposed the reduction of the +workforce by an estimated 450 full-time roles. +These difficult decisions were made against +the backdrop of the macro-environment: +fundamental changes in the external market, +rising interest and inflation and a change +in audience behaviour resulting in shifts in +advertising spend. Throughout the year, the +Board has considered the information and +data available to it, and debated and +discussed the pros and cons to satisfy itself +that any decisions were made after taking +into account all stakeholder interests. +While the business is having to let a number of +colleagues leave the business and drive cost +efficiencies, the Board’s decision on this was +taken to safeguard the sustainability of the +business in the medium to long term. As +a result, we can ensure that the business +operates in a way that creates value for our +shareholders, continues to make progress to +deliver our core purpose and protects the +future of our journalism. Alongside this, in +considering the needs of other stakeholders +when making such decisions, the overall +reduction in costs enables the Board to +reform the shape of the business. This will +allow us to capture a wider audience online +in accordance with their changing habits, +ensuring our journalism remains relevant and +engaging to the communities that are served, +which in turn secures advertising spend. It is +also critical that as a company, our financial +obligations, particularly to our pension trustees, +continue to be met. +PENSION SCHEMES +Having settled all but one of the 2019 triennial +review of pensions within the statutory +15 month period, the Company continued +to work with the Trustees of the MGN pension +scheme during 2023 to achieve its resolution. +In October 2023, the Board approved, and the +MGNPS Trustee agreed, both the 2019 and 2022 +triennial valuations for the MGN pension scheme. +The decision was taken to settle the pension +funding at an extra cost of £5m per annum to +the business. While the Board recognises the +additional financial burden, this agreement +was made having carefully considered +stakeholders’ expectations around pension +commitments and the benefit to be gained +by all stakeholders in creating certainty for the +business that enables it to plan for the future. +CAPITAL REDUCTION +In October 2023, the Board decided to seek +shareholder and subsequent court approval +of a reduction in capital. A shareholder +General Meeting was held on 15 November +2023 and court approval was given on +5 December 2023. The reduction in capital +resulted in the cancellation of the balance +standing to the credit of the Company’s share +premium account (£605.4m) and the creation +of distributable reserves of the same amount. +The capital reduction itself did not involve any +return of capital to any shareholder. +In taking this decision, the Board was +unanimously of the view that such reserves +would be available to support the future +payment by the Company of dividends or +other distributions to its shareholders (as +considered appropriate and in accordance, +and subject to, the Company’s Dividend +Policy) while also meeting our funding +commitments to the defined benefit +pension schemes. +SECTION 172 +STATEMENT + +85 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_88.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_88.txt new file mode 100644 index 0000000000000000000000000000000000000000..e40e46e4819fd2603f3d2c29b88177dd653b3141 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_88.txt @@ -0,0 +1,56 @@ +S172 statement continued +BOARD ENGAGEMENT +Stakeholder How the Board engaged in 2023 Outcomes and impact +Our people • Site visits to the Manchester and Bristol hubs, where the Board met with colleagues on an +informal basis and hosted lunches with Reach leaders +• Olivia Streatfeild, Colleague Ambassador, hosted two breakfast sessions with colleagues, each +attended by another non-executive director, to hear about challenges currently faced by the +business from a diverse range of voices (read more on pages 82 and 83) +• Tour of the Oldham print site, providing an opportunity for directors to speak to colleagues +involved in the print manufacturing process +• The directors continued to interact with senior leaders and receive their presentations at Board +meetings. Executive Committee members all regularly present to the Board, often discussing +the views and sentiments of their respective teams +• The CEO held fortnightly breakfast sessions with colleagues across the business and, together +with the CFO, held regular town halls with colleagues +• The Board received regular updates on HR matters, diversity and inclusion, and employee +engagement survey results +Site visits and face-to-face interactions with colleagues provided +first-hand insight into culture and sentiment within the business, +helping the Board make broader strategic decisions. +Through regular diversity updates, the Board endorsed the inclusion and +social mobility agenda for 2023. Reach has been ranked as the 19th most +inclusive employer in the Inclusive Top 50 UK Employers List 2023/24 +(up from 29th the previous year). +Customers • Received regular updates on the two organic growth initiatives approved by the Board in 2022: +Curiously, and entry into the US market +• Discussed the use of behavioural and contextual data to understand customers better and drive +page views +• Considered initiatives to boost page views following declining digital referral volumes +• Discussed AI and its potential application and use, as well as risks and opportunities +• Received the results of a customer insights panel to understand the digital behaviour +of the general audience and how the brands’ content relates to this +Customer insight and market knowledge are a vital part of the decision- +making process, for example, in areas such as new market development +and expansions. +The Board has requested more research and detail into customer +insights and the output of this work will be presented for debate in 2024 +to further assist our strategic thinking. +Communities • The Sustainability Committee received presentations on the positive social impact that the +Group’s content has had on communities across the country, through campaigns, lobbying +and forcing change, protecting the environment and promoting social good +• Undertook climate training on Scope 1, 2 and 3 greenhouse gas emissions, and +science-based targets +• The Audit & Risk Committee and Sustainability Committee monitored compliance with, and +progress on, the journey to net zero and climate-related reporting, including the Task Force +on Climate-related Financial Disclosures (TCFD) and climate scenario analysis +• The Board received an update on the Generation Valuable programme and Reach joining the +Valuable 500: a partnership of 500 global companies working together to end disability exclusion +The Board deepened its understanding and awareness of ESG factors +to help inform its decisions. +The Board approved near-term science-based targets to commit to +reducing Scope 1, 2 and 3 emissions. +The Board has encouraged the application of measurable objectives +to monitor continued progress in the Generation Valuable programme. +86 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_89.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_89.txt new file mode 100644 index 0000000000000000000000000000000000000000..af5ac1330601eb6e7cac3f8a982229e88c2ed283 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_89.txt @@ -0,0 +1,65 @@ +Stakeholder How the Board engaged in 2023 Outcomes and impact +Advertisers • Received regular updates from executive directors on advertising performance and also +marketplace trends as part of the financial performance +• Received regular presentations throughout the year about the development of Mantis, +our in-house machine learning tool +This engagement enabled the Board to understand the opportunities and +the challenges, and to interrogate the revenue impact of the strategy. +Approved further investment in Mantis. +Suppliers +and partners +• Discussed contracts and relationships for major suppliers, looking at each supplier’s +perspectives and pressures, and at the key risks to Reach and relevant mitigating actions +• Reviewed and negotiated the terms of two significant raw material suppliers +• Agreed a new IT outsourcing supplier and oversaw its implementation and rollout across +the business +Ongoing monitoring to make sure the benefits outweigh the risks, +including shipping risks and changes to our carbon emissions. +We changed one significant raw material supplier this year. The potential +environmental impact was considered before we made this change. +By moving to a new IT outsourcing supplier it was determined that +there would be a significant reduction in cost, improved automation, +enhanced efficiencies and a more streamlined service. +Shareholders • Held an AGM in May 2023, providing an opportunity for shareholders to interact with directors +and ask questions +• Held a General Meeting in November 2023 to approve a capital reduction of the Company’s +share premium account +• The Chairman held meetings with institutional shareholders to discuss topics such as +governance, risk and remuneration +• The Remuneration Committee Chair met with institutional shareholders to discuss the 2024 +Remuneration Policy +• The CEO and CFO held investor roadshows and results of briefings for the full-year and half-year +results, involving presentations and Q&A sessions for analysts +• Reviewed reports and received presentations from brokers and the Investor Relations Director on +shareholder feedback and market perceptions +Engagement activities provide opportunities for the Board to +communicate its strategy and financial performance and to +understand shareholder views and perceptions. +The 2024 Remuneration Policy can be found on pages 107 to 115 +and shareholders will be asked to approve this at the 2024 AGM. +The capital reduction became effective on 18 December 2023, which +means the full amount from the Company’s share premium account +can now be utilised as distributable reserves. +Pension funds +and members +• Regularly discussed the triennial valuations alongside lawyers and advisers for support The 2019 and 2022 triennial valuations for the MGN pension scheme +were concluded and the schedule of contributions has been agreed +with the trustees. Discussions with the other pension scheme Trustees for +the 2022 triennial review are expected to be completed by the 31 March +2024 due date. +Government +and regulators +• Received regular regulatory updates from the CEO and Head of External Communications +covering topics such as the Online Safety Bill, the Digital Competition Bill and Ofcom’s +consultation on the BBC’s operating licence +• Through the CEO’s chairmanship of the News Media Association, the Board received regular +updates regarding the views and concerns of the Government, regulatory authorities, industry +bodies and other organisations on political, legal and regulatory matters +Government policies and regulation in areas such as competition and +technology can affect our ability to operate effectively. We will continue +to engage with the Government and other stakeholders to make sure +our views feed into policymaking. +S172 statement continued +87 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #2 is a "penguin". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_9.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..a22c8a3e38ca8aa2f0a005203a2a4d0aa02d8d4d --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_9.txt @@ -0,0 +1,64 @@ +DEVELOPING +OUR AUDIENCE +Securing our digital distribution +While we still by some distance command +the largest audience of any news publisher in +the UK and Ireland, we contended with several +dramatic shifts in online traffic trends in 2023. +We responded to these challenges by +focusing on areas within our control, driving +our Customer Value Strategy (CVS) to +maximise the ‘secure’ audience we reach +directly and by strengthening our search +engine optimisation (SEO) capability to make +our online content more visible to searchers. +We also successfully grew our secure +audience by focusing on distribution channels +we can control. For example we began using +WhatsApp groups around key topics and +brands, reaching over 1m subscribers in +just seven months. +We now have over 9.1m sign-ups from people +to receive content to their devices via these +secure channels, including newsletters, +WhatsApp and push notifications. +Widening our appeal +2023 saw us leverage our expertise in +reaching a mass audience by expanding +our operations in the US with the launch of +three ‘.com’ sites to a massive and largely +untapped audience. +We also grew our relationship with and +data-led understanding of key demographics, +in particular the youth audience, to support +our Customer Value Strategy. Our youth- +oriented brand Curiously has attracted a +healthy following (250k TikTok followers as +of January 2024), and has also provided a +valuable testing ground for our established +brands. For example, we applied learnings +from Curiously to the Mirror TikTok channel, +which by the end of the year had secured +360k followers, up from 66k in January 2023. +We will further develop our youth and video +proposition in 2024 with our newly created +multimedia Studio team. +And we continued our work to reach previously +under-served audiences via our Belonging +Project, which holds every regional newsroom +and the Mirror accountable for producing +more inclusive content and reaching more +segments of the communities they serve – +read more on page 43. +We have the largest +Arsenal WhatsApp +channel globally, with +over 600,000 members +9.1M +Sign-ups to +secure channels +(newsletters, +WhatsApp, push +notifications) +7 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_90.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_90.txt new file mode 100644 index 0000000000000000000000000000000000000000..bb3eafee72a3a2a54b52fc507d662468ef39baa1 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_90.txt @@ -0,0 +1,85 @@ +There were several changes to the Board at +the end of 2022 and the start of 2023, and +inducting and embedding the new Board +members to enable them to contribute +effectively to Board discussions from the +outset was a key priority of the Nomination +Committee (the Committee) during the year. +We performed an internal evaluation again +this year and the results and progress made +against last year’s recommendations are +discussed on page 90. Recognising the need +for more interaction with colleagues during +2023 was a key outcome of 2022’s evaluation, +so I am pleased that we were able to meet +with colleagues in Oldham and Bristol as part +of our two awaydays. We also held a lunch +with the Executive Committee and other senior +leaders in London. Two colleague breakfasts +were also hosted by non-executive directors, +providing direct insights into workforce +sentiments and morale. We will continue +with these valuable engagements in 2024 +and beyond. You can learn more about the +2023 events on pages 82 and 83. +Building and maintaining a diverse +and inclusive workforce is of the utmost +importance to the Board and the Committee +and its desire to achieve this goal influences +every hiring discussion and decision. +At the end of 2023, the Board was 44.4% +female (four of nine directors), with two Board +members from an ethnic minority background. +The position of senior independent director is +also held by a woman, meaning the Board +meets the new diversity requirements under +the Listing Rules. The Board aims to maintain +or improve on this level in the future and also +looks to make progress on diversity in other +areas of the business. +Olivia Streatfeild will reach her nine-year +tenure at the end of 2024 so as a Committee, +we will consider the composition of the +Board during the year. This will also include +considerations for her other Board roles +of Remuneration Committee Chair and +Colleague Ambassador. Executive and senior +management succession and talent will +remain a keen area of focus, to ensure that +we develop the strong and diverse pipeline of +future leaders we need to deliver our strategy +and long-term plans. +Nick Prettejohn +Nomination Committee Chair +5 March 2024 +COMPOSITION, SUCCESSION AND EVALUATION +Nick Prettejohn +Nomination Committee Chair +Nomination Committee Report +Role of the Committee +The Committee is responsible for: +• Board composition – the Committee +considers the balance of skills, diversity, +knowledge and experience of the Board +and its Committees, and reviews the +Board’s structure, size and composition, +including the time commitment required +from non-executive directors; +• Board appointments – the Committee +leads on the recruitment and +appointment process for directors and +makes recommendations regarding any +adjustments to the composition of the +Board; and +• succession planning – the Committee +proposes recommendations to the +Board for the continuation in service +of each director and ensures that the +Board is well prepared for changes to +its composition with appropriate +succession plans in place. +The Committee has formal terms of +reference, which are available on the +Company’s website at www.reachplc.com. +88 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_91.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_91.txt new file mode 100644 index 0000000000000000000000000000000000000000..cd8767b4381ae6bf7436f42e007b2b69ed0672ce --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_91.txt @@ -0,0 +1,105 @@ +Nomination Committee Report continued +Committee membership +The members of the Committee are the +Chairman of the Board as the Committee +Chair, all non-executive directors and the CEO. +The majority of Committee members are +independent non-executive directors. The +Committee met three times during 2023 and +attendance is set out in the table opposite. +Key focus areas +Board succession planning +At least twice a year, the Committee discusses +the future composition of the Board, with a +rolling programme to consider the size and +shape of the Board, taking into account the +tenure of individuals, expertise required +and diversity. Denise Jagger was appointed +as Senior Independent Director in December +2022 and Darren Fisher as Chief Financial +Officer in February 2023. The focus for 2023 +was embedding the new Board members, +including reviewing and improving the +induction process. You can read more +about Denise’s programme on page 93. +Steve Hatch left the Board in May 2023 due to +external commitments and it was decided not +to appoint a replacement to reduce the size of +the Board to its former level. +The Committee regularly reviews Board and +Committee succession plans. There were no +changes to Committee Chairs in 2023, but +emergency and short-term succession plans +for Board and Committee roles were reviewed +and agreed by the Committee. +Executive succession planning and talent +The Committee regularly reviews Executive +Committee and senior management +succession planning and has formal plans +in place for the short, medium and long term. +Emergency plans are in place should the need +arise for any executive position, which are +periodically assessed. +The Committee also received presentations on +the performance of the Executive Committee +and other senior managers and reviewed the +Executive Committee and senior +management pipeline. +Board Diversity and Inclusion Policy +A Board Diversity and Inclusion Policy +(the Policy) was introduced in 2021 and is +available to view on the Company’s website at +www.reachplc.com/corporate-governance/ +policies. It is reviewed annually and was last +substantially updated by the Committee in +2022 to include Board diversity targets in line +with the Listing Rule targets, and to cover the +diversity policies of the Board Committees +and wider diversity characteristics. +The Policy formally sets out the Company’s +approach to the diversity of the Reach plc Board. +The Policy is consistent with the Company’s +objective to promote diversity and inclusion +(D&I) across the business and is aligned with the +Company’s three D&I pillars: connect, respect +and thrive. This helps to ensure that the skills, +experience and social, cultural, educational +and professional backgrounds of the +workforce are appropriately diverse +to support the Company’s strategy. +The Group’s Diversity and Inclusion Policy +and its objectives are inextricably linked to the +Company’s strategy, a part of which is focused +on creating a culture in which all can thrive. +The governance framework ensures that, for +senior leaders, the Executive Committee and +the Board’s strategic priorities incorporate D&I +where appropriate. For example, senior leaders +have developed and implemented action +plans to support the achievement of each +function’s inclusion strategy and to embed +it throughout the organisation. You can read +more about how D&I forms part of our strategy +on pages 41 to 44. +Committee membership +and attendance +Nick Prettejohn, Chair +Anne Bulford +Priya Guha +Steve Hatch +Denise Jagger +Jim Mullen +Barry Panayi +Wais Shaifta +Olivia Streatfeild +“Building and maintaining +a diverse and inclusive +workforce is of the utmost +importance to the Board +and the Committee and +the desire to achieve this +goal influences every +hiring discussion +and decision.” +89 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_92.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_92.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3b6b2d14787b3e58a4f9365450c766dbc956647 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_92.txt @@ -0,0 +1,90 @@ +The table below sets out the actions undertaken during the year as a result of the 2022 evaluation, and also actions to be taken in 2024 as a result of +the 2023 evaluation. +Issues and recommendations from 2022 evaluation Actions undertaken in 2023 +ESG +Having established the responsible business framework +in 2022, further develop and articulate the Company’s +approach to ESG +Reach has created a Sustainability Network to bring together people across the Company +who are keen to make a difference on ESG initiatives, and to discuss how the Company can be +more sustainable. +We organised two colleague breakfasts, each attended by two non-executive directors, providing +an opportunity for the Board to engage with employees. +We completed a full Scope 3 emissions inventory, a key goal in our climate strategy. More details +can be found on page 48. +Market developments +More information about market developments and how +the Company is performing relative to competitors to be +provided to the Board +The Board discussed and reviewed a paper on the competitive landscape of Reach at a Board +meeting. An external expert was then invited to join a subsequent Board meeting to present +insights into the development and potential of AI. +Training +Offer the Board more training and deep dive sessions on +topics requested by the Board, from both an internal and +external perspective +External subject matter experts delivered financial and climate-related training to the Board. +The Audit & Risk Committee conducted deep dives into brand reputation and ongoing business +funding, overseas operations, cyber risk and data protection. +The Board conducted a deep dive into how the curated marketplace worked, and how Mantis +was being used to enable the monetisation of data. +Lessons learnt +Ensure that lessons learnt from past decisions are +reviewed and captured, and are used as part of +decision-making for future strategic initiatives +The Board has regularly discussed how its decision-making process has changed and directors +continue to be open and honest about lessons learnt. +Issues and recommendations from 2023 evaluation Actions to be undertaken in 2024 +Board engagement +Continue the Board’s formal and informal engagement +activities with key talent across the Group +Key talent (including the level below the Executive Committee) to present where appropriate to +the Board and Committees. Informal Board engagement with leaders to also be arranged during +the year. +Succession planning +Review the Board’s composition and the skill sets needed +over the medium term +Board skills matrix to be revisited to determine desired skills for future Board members. +Succession planning for the roles of Remuneration Committee Chair and Colleague +Ambassador to be considered. +Risks and controls +Continue work to strengthen governance and controls in +light of upcoming governance reforms +Continue to document and where necessary further strengthen controls, and ensure compliance +with the new FRC’s UK Corporate Governance Code requirements under the sponsorship of the +Audit & Risk Committee. +Nomination Committee Report continued +Evaluating performance +A formal review of the Board, its Committees +and the Chairman is performed annually. The +Board last undertook an externally facilitated +evaluation in 2021. The 2022 and 2023 reviews +were conducted internally and led by the +Chairman, Nick Prettejohn. The non-executive +directors, led by the Senior Independent +Director, Denise Jagger, conducted a review +of the Chairman’s performance, with Denise +providing feedback from this review to Nick. +A detailed questionnaire was completed +by all Board members, regular Committee +attendees from senior management and +external advisers. The questionnaire sought +feedback on a range of matters, including the +Board’s oversight of purpose, values, strategy +and risk, and the composition and diversity of +the Board, as well as themes and issues that +emerged from the last external evaluation in +2021. The 2023 evaluation confirmed that +the Board was operating effectively, with +appropriately balanced agendas and +discussions to cover all key areas and issues. +The four directors that joined the Board at the +end of 2022 and the start of 2023 had embedded +well, contributing to robust debate and +challenge, and open communication. Further +progress had been made in interactions with +colleagues, through the comprehensive +programme of awaydays, site visits, and +colleague lunches and breakfasts. +90 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_93.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_93.txt new file mode 100644 index 0000000000000000000000000000000000000000..0ecba43483b043766241921613e2f061c7d3c890 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_93.txt @@ -0,0 +1,117 @@ +The Board aims to maintain or improve this +level of diversity in the future and also looks +to make progress on diversity in other areas of +the business. The Committee keeps the Board +composition and size under review to maintain +an appropriate balance of skills, experience, +diversity and knowledge for the Group. The +Board also recognises the importance of D&I +at senior management level. The Group’s +Executive Committee, the members of which +are direct reports of the CEO and CFO, is made +up of nine members, including the CEO and +CFO. In 2023, there were three women on the +Executive Committee (2022: two). There are +80 direct reports to the Executive Committee +for the purposes of FTSE 350 Women Leaders +Review reporting, of whom 37 were female. +Information on senior management initiatives +on D&I can be found on pages 41 to 44 of the +Strategic Report. The percentage of women +within the Group overall decreased slightly to +39.0% (2022: 39.1%), with women occupying +36.3% of senior managerial roles across the +Group (2022: 39.4%). +In 2021, Reach plc joined the 30% Club, +committing the Company to 30% +representation of women on the Board, +including one person of colour by 2023, and +30% representation of women on the Executive +Committee, including one person of colour +by 2023. By committing to these targets, the +Board also voluntarily committed to meeting +the Parker Review requirements by 2024. At the +end of 2023, these targets had been met, other +than the Executive Committee including one +person of colour. +Nomination Committee Report continued +The Board also aspires to meet the Parker +Review requirement on a voluntary basis for +the Executive Committee that at least 10% of +the Executive Committee will self-identify as +being from an ethnic minority background +by 2027. +Our Be Counted initiative was launched in +2021, to capture colleague demographic and +diversity data and develop the D&I strategy. +According to the protected characteristics of +the Equality Act 2010, along with socioeconomic +data, Reach is able to identify areas of +opportunity, along with challenges, to help +drive D&I activity. Regular updates of the results +of the Be Counted initiative have been provided +to the Board, including how this has fed into +progressing the social mobility agenda. +The following table sets out the information +required under Listing Rule 9.8.6R (10) on the +Board’s and executive management’s ethnic +background and gender identity or sex: +Number of +Board +members +Percentage +of the Board +Number of +senior positions +on the Board +(CEO, CFO, SID +and Chair) +Number +in executive +management +Percentage +of executive +management +Men 5 55.6% 3 6 66.7% +Women 4 44.4% 1 3 33.3% +Other categories 0 0 0 0 0 +Not specified/prefer not to say 0 0 0 0 0 +White British or other White +(including minority-white groups) 4 44.4% 2 8 88.8% +Mixed/Multiple Ethnic Groups 1 11.1% 0 0 0 +Asian/Asian British 1 11.1% 0 0 0 +Black/African/Caribbean/Black British 0 0 0 0 0 +Other ethnic group, including Arab 0 0 0 0 0 +Not specified/prefer not to say 3 33.3% 2 1 11.1% +Diversity +Valuing D&I is an integral priority of the Company. +While the Board Diversity and Inclusion Policy +applies to the Board only, it sits alongside +the wider Company Diversity and Inclusion +Policy, setting out the Company’s broader +commitment to D&I. It is implemented, in part, +through the Code of Conduct programme. +The Board recognises the importance of D&I in +the boardroom and seeks to recruit directors +with varied backgrounds, skills and experience. +Reach seeks to broaden the diversity of +the Board to reflect its audience and their +communities. This will continue to be a +key consideration when appointing new +non-executive directors in the future. +As at 31 December 2023, the Company has +met the targets on Board diversity required to +be reported on under Listing Rule 9.8.6R(9)(a), +with 44.4% of Board members being women +(four of nine in total), the senior Board position +of senior independent director being held by a +woman, and two Board members being from +a minority ethnic background. In addition, +each of the Audit & Risk, the Remuneration and +the Sustainability Committee is chaired by a +woman and all of the non-executive directors +are members of all committees, therefore +reflecting the diversity of our Board. +91 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #4 is a "pillow". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_94.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_94.txt new file mode 100644 index 0000000000000000000000000000000000000000..c25471649652808975899233e0a75d23eae891a8 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_94.txt @@ -0,0 +1,71 @@ +Board composition as at +31 December 2023 +Gender breakdown as at +31 December 2023 +Gender split of direct reports to the +Executive Committee +Board composition +Gender split of Group employees +Board gender diversity +Board tenure +Female +Male +Total +37 +43 +80 +Chairman +Executive directors +Non-executive +directors +1 +2 +6 +Female +Male +4 +5 +0-3 years +3-6 years +6+ years +5 +3 +1 +Board skills and experience +70% +Media +Skill Number of directors +Digital transformation +Strategy and business +planning +Accounting and finance +People and talent +Sustainability/ESG +Technology/IT +Digital marketing/advertising +Data analytics +90% +90% +40% +90% +60% +40% +30% +40% +Board skills evaluation +The broad range of skills, experience and diversity of the Board that are relevant to Reach’s +strategy and business are illustrated above. This represents where the Board as at 5 March +2024 considers they have considerable or expert knowledge in the listed area. +Nomination Committee Report continued +63.7% (93) 36.3% (53) +33.3% (3)66.7% (6) +61.0% (2,167) 39.0% (1,384) +Female +Male +1,440 +2,266 +Executive Committee +Senior managers  +Other  +92 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_95.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_95.txt new file mode 100644 index 0000000000000000000000000000000000000000..4115a200d01738b37938930b5d28ab8ef0429971 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_95.txt @@ -0,0 +1,54 @@ +NON-EXECUTIVE DIRECTOR INDUCTION +A full, formal and tailored induction +programme is in place for new Board +members, to provide a comprehensive +induction to the Group and enable new Board +members to contribute to Board discussions +from the outset. The induction is designed to +cover a range of areas, including Board +procedures and listed company director +duties, the Group’s operational and financial +performance and strategic direction, and +key areas of the business. +Denise Jagger’s induction programme, +designed through discussion with the +Chairman and Company Secretary, +consists of: +• a series of in-depth meetings with other +Board members, Executive Committee +members and other senior leaders, such +as the Director of Investor Relations and +Director of Risk and Internal Audit; +• training about Board procedures and listed +company duties; +• a visit to the Newcastle hub; +• a visit to the Oldham print site; +• introductory meetings with our auditors +and lawyers advising on pensions matters; +• remuneration training delivered by FIT +Remuneration Consultants; and +• access to a comprehensive library +of internal and external papers and +presentations covering key functional +and operational areas of the Group. +You can read more about Denise’s views on +the induction programme on page 84. +Nick Prettejohn +Nomination Committee Chair +5 March 2024 +Nomination Committee Report continued +Induction meeting attendees Meeting purpose +Chairman Introduction to the priorities of the Board and way of working, +ongoing matters considered by the Board, and the Group’s +governance structure. +Committee Chairs and other +non-executive directors +Introduction to the responsibilities and composition of the +Board’s Committees. +Executive directors Strategic priorities and direction of the Group, operational +and financial performance, and culture and purpose. +Executive Committee members Overview of their respective business area and current priorities. +Company Secretary Induction planning, duties and responsibilities of a listed company +director, and Market Abuse Regulation duties and responsibilities. +93 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_96.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_96.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ed5debcbbcfffda6f329f0da395da026fa1d412 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_96.txt @@ -0,0 +1,91 @@ +As stated in the 2022 Annual Report, I took over +as Chair of the Sustainability Committee (the +Committee) at the end of 2022, so this report +marks my first full year in the role. I’m pleased +with the further progress we have made on +being a responsible, sustainable business that +aims to do things with integrity at all times. +One of my priorities as Chair this year has +been to work closely with management +outside the formal Committee meetings, +to support them in the development of the +sustainability strategy and ensure it aligns +with our purpose and business strategy. +Our main focus this year was to embed the +responsible business framework (please see +pages 30 to 53) that was developed and +approved at the end of 2022. The Committee +has discussed and received updates on work +being undertaken by the business under all +four pillars of the framework. +To keep pace with the fast-moving regulatory +landscape, the Committee and Executive +Committee undertook climate-related +training delivered by external experts. +Through this, we gained a broader +understanding of Scope 1, 2 and 3 greenhouse +gas (GHG) emissions and Reach’s full GHG +emissions breakdown including Scope 3, +types of science-based targets (SBTs) and +the SBTi requirements for target-setting. +In 2024, we’ll continue to hold management +accountable for delivery across the four +pillars, including overseeing and reviewing +quantitative and qualitative analysis of +progress. We’ll also continue our work in +order to be able to announce our net +zero commitment date in due course. +Following the news that the International +Sustainability Standards Board’s (ISSB) +disclosure standards for the UK are expected +to be endorsed by the Government during 2024, +the Committee will oversee the application of +the standards and any work required to be +undertaken to comply with them by the time +they are expected to come into force in 2025. +Priya Guha, MBE +Sustainability Committee Chair +5 March 2024 +TO EMBED, REVIEW AND CHALLENGE +Priya Guha, MBE +Sustainability Committee Chair +Sustainability Committee Report +Role of the Committee +The role and responsibilities of the +Committee are set out in its terms of +reference, which are available on the +Company’s website at www.reachplc.com. +The role of the Committee is to: +• review, challenge, oversee and +recommend for Board approval +the sustainability strategy, and any +sustainability-related commitments +communicated externally in support +of the Group’s corporate purpose; +• embed, review, challenge, oversee +and support the sustainability strategy, +management initiatives and their +performance, to ensure a coherent and +consistent approach is adopted across +the Group; +• be responsible for the oversight and +review of relevant internal reporting +regarding the implementation of the +sustainability strategy; +• stay up to date with ESG best practice and +thought leadership, keeping under review +the extent and effectiveness of the Group’s +external reporting of relevant sustainability +performance, and its participation in +external benchmarking indices; +• consider the appropriateness of the +Group’s position on relevant emerging +sustainability issues; and +• be responsible for the oversight of diversity +and inclusion matters, people and +community engagement and monitoring +of corporate culture in support of the +Group’s purpose and values, reporting to +the Board on such matters as appropriate. +94 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_97.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_97.txt new file mode 100644 index 0000000000000000000000000000000000000000..efe735259dce2a5954adb707ed64b7951094aaec --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_97.txt @@ -0,0 +1,100 @@ +Sustainability Committee Report continued +Committee membership +The members of the Committee are all +the non-executive and executive directors. +The Committee met twice during the year +and attendance is set out opposite. +Embedding our responsible +business framework +At the end of 2022, the Committee reviewed +and recommended for Board approval the +responsible business framework, which +formalised the Company’s sustainability +approach and key sustainability-related +disclosures. Key issues were grouped into +four pillars, creating a purpose-led +framework that is unique to our business. +This year, the Committee received updates on +work being undertaken by the business under +all four pillars of the framework. It has also +focused on embedding the framework and +assessing its alignment with our purpose and +business strategy, forming a strong foundation +for the ongoing evolution of our approach to +measuring and disclosing progress related +to being responsible and sustainable. Some +of the KPIs are reported in the Responsible +business section on pages 30 to 53. Additional +KPIs have been identified and will be kept +under review by the Committee for +consideration in future reporting. +For the pillar ‘Creating trusted, quality content’, +a Group-wide editor forum was established +in 2023, which meets every three months to +review and provide evidence of the positive +social impact the content of both our national +and regional brands have on society. The +Committee has received updates on the +highlights, which include campaigning against +injustice, striving to improve the common +good, lobbying to change laws and fight +inequity and promoting social good, inclusion +and diversity. You can read more about some +of our 2023 campaigns on pages 34 and 35. +For more information on our responsible +business framework, see page 30. +Task Force on Climate-related +Financial Disclosures +The Committee has been provided with +regular updates on the progress made +on climate strategy and the Task Force on +Climate-related Financial Disclosures (TCFD). +We carried out qualitative Climate Scenario +Analysis (CSA) in 2022 which identified three +key risks – flooding, carbon pricing and energy +pricing. In 2023, we completed further work to +quantify these risks by carrying out detailed +quantitative CSA. This has improved our +understanding of the risks and has started +to identify what the potential financial +implications on our business could be now +and in the future, as well as the resilience of +our strategy under multiple climate scenarios. +Committee membership +and attendance +Priya Guha, Chair from +31 December 2022 + +Anne Bulford +Darren Fisher +Steve Hatch n/a +Denise Jagger +Jim Mullen +Barry Panayi +Nick Prettejohn +Wais Shaifta +Olivia Streatfeild +The Committee has worked closely with the +Audit & Risk Committee on the quantitative +CSA work, with that committee being +responsible for risk management, including +climate-related risks, and for reviewing the +content and accuracy of our TCFD report. +Our TCFD report can be found on pages 54 +to 64. +Setting our target for net zero +One key area of focus has been setting +greenhouse gas emission reduction targets +and the Committee has approved Reach’s +near-term science-based targets for Scope 1, +2 and 3 emissions. +We are now in the process of validating these +targets, in order to be able to announce a net +zero commitment date in due course. +More information can be found on page 48. +Priya Guha, MBE +Sustainability Committee Chair +5 March 2024 +95 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #2 is a "bottle". \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_98.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_98.txt new file mode 100644 index 0000000000000000000000000000000000000000..c97b6c6f9c18280488e0ffc62ed9429976d48845 --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_98.txt @@ -0,0 +1,97 @@ +During the year, the Audit & Risk Committee’s +(the Committee) core duties remained +unchanged. We continued to fulfil an +important oversight role, monitoring the +effectiveness of the Group’s system of internal +controls and risk management framework +and reviewing the integrity of the Group’s +financial reporting. The principal role of the +Committee is to help the Board to fulfil its +responsibilities and provide valuable +independent challenge around financial +reporting and financial controls. The Committee +also oversees the external auditor relationship. +Throughout the year, the Committee has +continued to review the Group’s principal risks, +particularly considering the evolving internal +and external environment, and performed +several in-depth reviews into principal risk areas. +This included reviewing the comprehensive +measures in place to protect the integrity and +reputation of Reach brands, which plays an +important part in maintaining audience trust +and the confidence of shareholders. The +Committee also reviewed how Reach had +approached its expansion into the US and the +risks related to the US business across various +areas such as tax, finance, HR, governance, +intellectual property and data. +AUDIT, RISK AND INTERNAL CONTROLS +Anne Bulford, CBE +Audit & Risk Committee Chair +Audit & Risk Committee Report +Role of the Committee +The role and responsibilities of the Committee +are set out in its terms of reference, which are +available on the Company’s website at +www.reachplc.com. +The key objectives of the Committee are to review +and report to the Board and shareholders on the +Group’s financial reporting, internal control and +risk management systems, and the independence +and effectiveness of the external auditors. +The Committee is also responsible for: +• monitoring the financial reporting process, +including the integrity of the financial +statements of the Company such as its +annual and half-year financial results; +• reviewing and assessing the Annual Report +to determine whether it can advise the Board +that, taken as a whole, the Annual Report is fair, +balanced and understandable; +• monitoring the statutory audit of the annual, +and the review of the half-year, consolidated +financial statements; +• reviewing significant financial reporting issues; +• recommending to the Board the appointment +of the external auditors and approving their +remuneration and terms of engagement; +• monitoring and reviewing the external +auditors’ independence, objectivity and the +effectiveness of the external audit process, +including considering relevant UK professional +and regulatory requirements such as the +appropriateness of the provision by the +auditors of non-audit services; +• monitoring and reviewing the effectiveness +of the internal control and risk management +systems, including the internal audit function; +and +• reviewing and approving the remit of the +internal audit function, ensuring it has +the necessary resources and can meet +appropriate professional standards for +internal auditors. +The Board’s responsibility for the assessment +of risk is delegated to the Committee. +The internal control environment has +been reviewed in depth. The Committee +has reviewed reports from internal audit and +overseen that, where appropriate, corrective +action is being taken to address any weaknesses +identified in those reports, to enhance the +internal control environment. During the year, +the Committee has continued to review +regular updates on ongoing work to +strengthen controls and governance. +In 2024, the Committee will maintain focus on +the ongoing work to strengthen controls and +governance arrangements. We have also +planned deep dives on information security, +data protection, supply chain and health +and safety. +Anne Bulford, CBE +Audit & Risk Committee Chair +5 March 2024 +96 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_99.txt b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_99.txt new file mode 100644 index 0000000000000000000000000000000000000000..bfee2fe952789a482aa2ae3afd4a3fe6bc2db61a --- /dev/null +++ b/Reach/Reach_100Pages/Text_TextNeedles/Reach_100Pages_TextNeedles_page_99.txt @@ -0,0 +1,128 @@ +Audit & Risk Committee Report continued +The Board has confirmed it is satisfied that the +members of the Committee are independent +and, as a whole, have competence relevant +to the sector in which the Group operates, +gained from their respective external roles, +previous and present. Committee member +biographies are set out on pages 76 to 78. +Anne Bulford, the Committee Chair, is considered +by the Board to have recent and relevant +financial experience for the purposes of the +Financial Reporting Council’s (FRC) 2018 UK +Corporate Governance Code (the 2018 Code). +At the invitation of the Committee Chair, the +Chairman, CEO and CFO, along with the Group +Financial Controller and the Director of Risk +and Internal Audit, attended all meetings +during the year to maintain effective and +open communications. The external auditors, +PricewaterhouseCoopers LLP (PwC), attend +meetings and have direct access to the +Committee should they wish to raise +any concerns outside the formal +Committee meetings. +reviewed and discussed a report from +management and concluded that the financial +statements can be prepared on a going +concern basis, and that there is a reasonable +expectation that the Group will be able to +continue operating and meet its liabilities +as they fall due over the next three years. +The directors assessed the prospects of +the Group over a three-year period, which +enabled them to consider the investment +required to drive growth in digital and the +impact of declining print revenues. The Group’s +going concern statement is set out on pages +149 and 150 and the viability statement is set +out on page 73 of the Strategic Report. +Interactions with the FRC +There have been no interactions with the +Financial Reporting Council (FRC) during 2023. +External auditors +Auditors’ appointment and independence +PwC was appointed by shareholders as the +Group’s statutory auditor in 2019 following +a formal tender process. The external audit +contract will be put out to tender every 10 years. +It is the Committee’s current intention to tender +its audit services by no later than 2028. +The lead audit partner at PwC is rotated at +least every five years to ensure continuing +independence. The new audit partner, Colin +Bates, has been in post since the start of 2021. +Committee membership +and attendance +Anne Bulford, Chair +Priya Guha +Denise Jagger +Steve Hatch +Barry Panayi +Wais Shaifta +Olivia Streatfeild +• reviewed the internal control environment +in depth and received regular updates on +ongoing work to strengthen controls and +governance arrangements in light of the +upcoming regulatory changes. +Annual Report +The Committee has undertaken a review and +assessment of the Annual Report to determine +whether it can advise the Board that, taken as +a whole, the Annual Report is fair, balanced and +understandable, and provides shareholders +with the information they need to assess the +Group’s position, performance, business model +and strategy. +In doing this, the Committee has: +• considered the results of an internal +review performed by a senior chartered +accountant not involved in the preparation +of the Annual Report; +• reviewed and discussed the findings from +the external auditors as part of the 2023 +year-end audit; and +• fully discussed the Annual Report at the +Committee meeting in February 2024. +Following a robust process, the Committee +recommended to the Board that the Annual +Report, taken as a whole, is fair, balanced +and understandable. +Going concern and +viability statement +In its Annual Report, the Company is required +to include statements relating to going +concern and viability. The Committee +Time allocation +Financial reporting +External audit +Internal control, +risk management +and internal audit +Deep dives +Governance +26% +23% +24% +19% +8% +Committee membership +The members of the Committee are all +the independent non-executive directors. +The Committee met five times during 2023 +and attendance is set out below. +How we used our meetings in 2023 +In addition to planned activities and work, +the Committee: +• undertook a detailed review and scrutiny of +wider risk areas, with deep dives into cyber +security, data protection, brand reputation, +treasury management and future funding, +and a review of the US operations; +• reviewed TCFD compliance and its +application through the governance +framework, alongside the Sustainability +Committee; and +97 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_100Pages/needles.csv b/Reach/Reach_100Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..923c034508e70e06f2ffe7e753e6fda9d942cd4c --- /dev/null +++ b/Reach/Reach_100Pages/needles.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". +The secret object #3 is a "bowl". +The secret animal #5 is a "squirrel". +The secret clothing is a "sock". +The secret instrument is a "violin". +The secret transportation is a "bike". +The secret object #1 is a "clock". +The secret fruit is a "lemon". +The secret animal #3 is a "spider". +The secret food is "chocolate". +The secret animal #4 is a "cow". +The secret drink is a "smoothie". +The secret shape is a "heart". +The secret office supply is a "calculator". +The secret animal #1 is a "giraffe". +The secret object #5 is a "vase". +The secret vegetable is "cauliflower". +The secret tool is a "ruler". +The secret animal #2 is a "penguin". +The secret object #4 is a "pillow". +The secret object #2 is a "bottle". diff --git a/Reach/Reach_100Pages/needles_info.csv b/Reach/Reach_100Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..c648983b542179358a52ac52a5ea41f51618719a --- /dev/null +++ b/Reach/Reach_100Pages/needles_info.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben".,3,9,red,white,0.632,0.154,helvetica-bold,98 +The secret currency is a "ruble".,6,12,gray,white,0.754,0.431,times-bold,109 +The secret flower is a "daisy".,12,10,green,white,0.724,0.817,times-roman,111 +The secret kitchen appliance is a "microwave".,14,10,white,black,0.689,0.767,courier,121 +The secret sport is "surfing".,19,12,brown,white,0.387,0.112,times-bolditalic,106 +The secret object #3 is a "bowl".,21,9,black,white,0.159,0.555,helvetica-boldoblique,103 +The secret animal #5 is a "squirrel".,28,9,blue,white,0.482,0.22,helvetica,73 +The secret clothing is a "sock".,30,10,purple,white,0.266,0.643,courier-bold,108 +The secret instrument is a "violin".,34,13,yellow,black,0.109,0.386,courier-oblique,98 +The secret transportation is a "bike".,38,14,orange,black,0.266,0.955,times-italic,138 +The secret object #1 is a "clock".,43,9,black,white,0.633,0.35,helvetica-boldoblique,118 +The secret fruit is a "lemon".,45,11,blue,white,0.663,0.571,times-bold,71 +The secret animal #3 is a "spider".,52,12,orange,black,0.841,0.519,times-roman,90 +The secret food is "chocolate".,55,11,green,white,0.524,0.335,courier-oblique,90 +The secret animal #4 is a "cow".,58,9,red,white,0.584,0.084,times-bolditalic,104 +The secret drink is a "smoothie".,63,10,gray,white,0.92,0.109,courier-bold,104 +The secret shape is a "heart".,68,13,brown,white,0.592,0.305,helvetica-bold,89 +The secret office supply is a "calculator".,71,8,white,black,0.55,0.26,helvetica,90 +The secret animal #1 is a "giraffe".,76,12,yellow,black,0.315,0.698,times-italic,66 +The secret object #5 is a "vase".,78,10,purple,white,0.158,0.89,courier,129 +The secret vegetable is "cauliflower".,81,9,green,white,0.98,0.607,courier-bold,139 +The secret tool is a "ruler".,86,10,brown,white,0.001,0.88,courier-oblique,100 +The secret animal #2 is a "penguin".,89,10,yellow,black,0.642,0.998,times-bold,102 +The secret object #4 is a "pillow".,93,12,purple,white,0.167,0.258,times-italic,103 +The secret object #2 is a "bottle".,97,13,black,white,0.018,0.604,helvetica,72 diff --git a/Reach/Reach_100Pages/prompt_questions.txt b/Reach/Reach_100Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..584cb3dae905052c00727690ef04f604488edee3 --- /dev/null +++ b/Reach/Reach_100Pages/prompt_questions.txt @@ -0,0 +1,25 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? +What is the secret object #3 in the document? +What is the secret animal #5 in the document? +What is the secret clothing in the document? +What is the secret instrument in the document? +What is the secret transportation in the document? +What is the secret object #1 in the document? +What is the secret fruit in the document? +What is the secret animal #3 in the document? +What is the secret food in the document? +What is the secret animal #4 in the document? +What is the secret drink in the document? +What is the secret shape in the document? +What is the secret office supply in the document? +What is the secret animal #1 in the document? +What is the secret object #5 in the document? +What is the secret vegetable in the document? +What is the secret tool in the document? +What is the secret animal #2 in the document? +What is the secret object #4 in the document? +What is the secret object #2 in the document? diff --git a/Reach/Reach_10Pages/needles.csv b/Reach/Reach_10Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..b9dc32daf967dc4bb4faed45c8f3211108b0ee35 --- /dev/null +++ b/Reach/Reach_10Pages/needles.csv @@ -0,0 +1,10 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". +The secret clothing is a "sock". +The secret instrument is a "violin". +The secret transportation is a "bike". +The secret fruit is a "lemon". +The secret food is "chocolate". diff --git a/Reach/Reach_10Pages/needles_info.csv b/Reach/Reach_10Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..3abdd8a50bcc63f05f3c268d42721f8c69a8bf13 --- /dev/null +++ b/Reach/Reach_10Pages/needles_info.csv @@ -0,0 +1,10 @@ +The secret landmark is "Big Ben".,1,12,gray,white,0.169,0.082,times-bold,68 +The secret currency is a "ruble".,2,9,black,white,0.939,0.692,courier,63 +The secret flower is a "daisy".,3,12,yellow,black,0.476,0.742,helvetica-bold,83 +The secret kitchen appliance is a "microwave".,4,9,white,black,0.192,0.08,courier-oblique,69 +The secret sport is "surfing".,5,10,red,white,0.534,0.977,helvetica-boldoblique,72 +The secret clothing is a "sock".,6,10,green,white,0.054,0.133,times-bolditalic,102 +The secret instrument is a "violin".,7,10,orange,black,0.779,0.858,helvetica,102 +The secret transportation is a "bike".,8,9,brown,white,0.528,0.62,times-roman,95 +The secret fruit is a "lemon".,9,12,blue,white,0.596,0.116,courier-bold,112 +The secret food is "chocolate".,10,10,purple,white,0.509,0.939,times-italic,88 diff --git a/Reach/Reach_10Pages/prompt_questions.txt b/Reach/Reach_10Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..8a4816ebf75d454bc9de829d269b6f5eff9cf58c --- /dev/null +++ b/Reach/Reach_10Pages/prompt_questions.txt @@ -0,0 +1,10 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? +What is the secret clothing in the document? +What is the secret instrument in the document? +What is the secret transportation in the document? +What is the secret fruit in the document? +What is the secret food in the document? diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_1.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..327269c28e5e2a1cdef0a8adb73397ae637e0a86 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_1.txt @@ -0,0 +1,7 @@ +Annual Report 2023 +Developing +our audience +Diversifying +our revenue +Focusing +on efficiency \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_10.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..fed910ac08fdf59eea245308553be2ad66d3b424 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_10.txt @@ -0,0 +1,56 @@ +The habitual nature of newspaper +consumption means we continue to see +reliable but falling demand for our printed +products. We still sell hundreds of thousands +of our print products every day. +Part of our strategy is to maintain this +considerable revenue stream and profit +generator for as long as possible. This is +achieved by carefully managing the levels of +publication availability across the country and +undertaking carefully planned price increases +and promotional activity. We benefit from a +significant amount of data and expertise in +these areas which help achieve the optimal +changes. Whilst availability varies by geography +and publication, it averages for the Group at +over 85%. We periodically increase the cover +prices, and over 2023 we increased these an +average of 14% per title, ahead of 4% inflation. +These actions have more than offset the 17% +volume decline, driving an increase in overall +circulation revenues. +We also work hard to manage our cost +base to address the challenges from falling +volumes and inflation. Our print business is +run by highly experienced production teams +who excel in evolving production systems, +procurement and planning our distribution +network. These actions have helped address +the rising unit costs of production and +maintained the strong profitability of the print +business. This means we have been able to +successfully ensure that print revenues and +profitability remain resilient. +DIGITAL +PRINT +Print circulation revenue +£313M +Up 1.6% on 2022 despite 17% +reduction in print volume +Print business revenue +£439M +Down 2.2% on 2022 +Print copies sold a year +250M+ +Retail availability ++85% +BUSINESS +A RESILIENT +RPM +(revenue per 1,000 pages) ++11% +Total data-driven revenue +£55M +8 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_100.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_100.txt new file mode 100644 index 0000000000000000000000000000000000000000..c1449dcf7df71a3bda0c4e7757381a7ae793cae3 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_100.txt @@ -0,0 +1,135 @@ +PwC has indicated its willingness to continue +in office and shareholders’ approval will be +sought at the AGM on 2 May 2024. +The Company complied throughout the +year with the provisions of the Statutory Audit +Services Order 2014 relating to the UK audit +market for large companies. There are no +contractual obligations that restrict the +Company’s choice of external auditors. +During the year, private meetings were held +with PwC to ensure there were no restrictions +on the scope of their audit, and to discuss any +items that the external auditors did not wish +to raise with the executive directors present. +The Committee is satisfied that there are no +relationships between the Company and the +external auditors, its employees or its affiliates +that may reasonably be thought to impair the +external auditors’ objectivity and independence. +The Committee formally reviews the +effectiveness of the external auditors in +July each year and considers the results of a +survey sent to directors and senior managers, +including the Executive Committee and +members of the finance team. This survey +asks questions about independence, planning, +expertise and resources, the audit process, +communications and fees. A full report +of the survey results was reviewed by the +Committee, which concluded that the external +auditors’ performance remained effective. +The effectiveness review of PwC for the 2023 +audit will be carried out in the coming months. +An example of the auditors demonstrating +their effectiveness this year was through +debate and challenge on key assumptions +within the impairment assessment, including +circulation decline and digital growth within +the Group’s financial projections from 2024 +to 2033. +In addition, the effectiveness of the external +auditors is closely monitored on an ongoing +basis, and there is a regular cycle of meetings +between the Company and PwC where audit +planning and process are discussed, and any +issues can be raised. This includes monthly +meetings between the CFO and the lead +audit partner, and a meeting between the +Committee Chair and the lead audit partner +before each scheduled Committee meeting. +In audit periods, weekly meetings are held +between the finance team and PwC to discuss +progress on deliverables and resolve any +issues in real time. +Non-audit services +The Group has a formal policy on the +engagement and supply of non-audit +services, to protect the objectivity and +independence of the external auditors and +avoid a conflict of interest. The policy is in line +with the recommendations set out in the FRC’s +Guidance on Audit Committees and its 2019 +Revised Ethical Standard. Generally, the +external auditors will not be engaged to +provide any additional services other than +audit-related services, including the review +of the interim financial information and +loan covenant reporting. +There may, however, be circumstances where +it could be in the Company’s and shareholders’ +interests if the external auditors were engaged. +Such circumstances are likely to relate to +either exceptional transactions or those +deemed not to be of a material nature. +The Committee’s approval must be obtained +before the external auditors are engaged to +provide any permitted non-audit services, +which are detailed in the policy. +For permitted non-audit services that are +clearly trivial, the Audit & Risk Committee has +pre-approved the use of the external auditors, +subject to the following limits: +Value of service requested +Approval required prior +to engagement of the +external auditors +Up to £25,000 Chief Financial Officer +£25,001 to £50,000 Audit & Risk Committee +Chair +£50,001 and above Audit & Risk Committee +Where non-audit work is performed by +PwC, steps are taken to safeguard auditors’ +objectivity and independence, including a +different team of people working on the task. +Details of the fees paid to PwC for the financial +period ending 31 December 2023 can be +found in note 6 to the consolidated financial +statements. In 2023, the approved non-audit fee +items provided by PwC related to the interim +review, loan covenant reporting and provision +of access to the PwC accounting website. +The spend in relation to these services was +£149,000 totalling 10.8% of the overall fees +paid. The Committee was satisfied that the +non-audit services purchased were in line +with the non-audit services policy and did not +compromise the independence of the auditors. +The Committee is satisfied that the Company +was compliant during the year with both the +2018 Code and the 2019 Revised Ethical +Standard, in respect of the scope and +maximum level of permitted fees incurred +for non-audit services provided by PwC. +Significant matters considered by +the Committee in relation to the +financial statements +The Committee has assessed whether +suitable accounting policies have been +adopted and whether management have +made appropriate estimates and judgements +on significant issues. +The Committee reviews accounting papers +prepared by management, which provide +details of the main financial reporting +judgements. The Committee also reviews +reports by the external auditors on the +full-year and half-year results, which highlight +any issues with respect to the work undertaken. +After receiving reports on the significant issues +and after discussion with PwC, the Committee +agreed that the judgements made by +management were appropriate. +Audit & Risk Committee Report continued +98 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_101.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_101.txt new file mode 100644 index 0000000000000000000000000000000000000000..a3064f6f1aa79adf811a9ee44d7e130ab781d858 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_101.txt @@ -0,0 +1,40 @@ +The Committee considered the following significant issues in relation to the 2023 financial statements: +Critical estimate +or key judgement How the Committee addressed the issue +Impairment reviews +in respect of the +carrying value +of assets on the +consolidated and +parent company +balance sheets +The Committee received detailed papers from management in respect of the impairment reviews in relation to the carrying value of assets on the consolidated and +parent company balance sheets. +The Group’s consolidated balance sheet has material goodwill and other intangible assets (publishing rights and titles), and the parent company balance sheet has +material investment in subsidiary undertakings. +The Committee needed to assess whether the carrying value of assets of a cash-generating unit are impaired and are carried at no more than their recoverable amount +(the higher of fair value less costs of disposal and value in use) in the consolidated balance sheet. +The Committee also assessed whether the carrying value of investments are impaired and are carried at no more than the recoverable amount (the higher of fair value +less costs of disposal and value in use) in the parent company balance sheet. +The value in use has been calculated using a discounted cash flow model, and the fair value has been considered based on the value of the Group with costs of disposal +considered to be minimal. +The discounted cash flow model has been prepared based on the final budget for 2024, and then high level projections for the period 2025 to 2033. There are a number of +judgements made in setting the assumptions that underpin the model: +• the projections are management’s best estimate of the future performance of the Group which are subject to risk and uncertainties as set out in the Annual Report; +• the key assumptions in the projections relate to the continuation of print declines, of digital growth and the associated change in the cost base as a result of the +changing revenue mix; +• the long-term growth rate has been set at 0.9% (2022: 1%) from year 10; +• capital expenditure has been based on expected run rates of the existing business over the next 10 years; +• tax has been modelled based on the expected future tax rates at the balance sheet date; and +• the weighted average cost of capital post tax rate of 10.2% (2022: 10.8%) is calculated after due consideration of market factors impacting the rate and items that are +specific to the Group, such as the current capital structure and the best estimate of future movements in the capital structure. +The value in use from the discounted cash flow model is in excess of the carrying value of assets of the cash-generating unit resulting in no impairment (2022: nil) being +required in respect of the carrying value of assets on the consolidated balance sheet. Management also considered sensitivity scenarios which highlighted that no +impairment would be required. +The impairment review in respect of the carrying value of investments in the parent company balance sheet resulted in an impairment charge of £167.8m (2022: £65.1m). +The impairment review is highly sensitive to reasonably possible changes in key assumptions. The Committee noted that the Company has significant distributable +reserves of £522.0m (2022: £111.8m) following the capital reduction converting the entirety of the share premium account into distributable reserves, which provides +headroom relating to the Company’s ability to pay dividends. +Audit & Risk Committee Report continued +99 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_102.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_102.txt new file mode 100644 index 0000000000000000000000000000000000000000..29b0ba36145b8129f136529b9dc48e455783389d --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_102.txt @@ -0,0 +1,41 @@ +Critical estimate +or key judgement How the Committee addressed the issue +Impairment reviews +in respect of the +carrying value +of assets on the +consolidated and +parent company +balance sheets +continued +The Committee members reviewed in detail the papers supporting the impairment review ensuring consistency with Board discussions relating to the budget and the +progress on the Customer Value Strategy which underpin the digital growth in the projections (all members of the Committee are Board members). The Committee also +reviewed the consistency of the current year model with the prior year model. +The external auditors challenged the conclusions and considered any external factors which may change the conclusions of the review. The external auditors also +undertook a detailed review of the assumptions and of the model supporting the papers. +In reaching its conclusion on the impairment review, the Committee considered the papers prepared by management and the external auditors. The Committee noted +the comparisons to external forecasts (which were supportive of the projections) and sensitivity analysis (which showed sufficient headroom of the carrying value of assets +in the consolidated balance sheet and an impairment of £167.8m in the parent company balance sheet). +The Annual Report contains disclosure of the Critical Judgements in applying the Group’s accounting policies, the key factors relating to the impairment reviews and the +conclusions reached (note 3 and note 16 in the notes to the consolidated financial statements, note 2 and note 4 in the notes to the parent company financial statements). +Impairment is not considered a principal risk for the Group, as identified on pages 68 to 72 of the Strategic Report, as it relates to historical transactions with no future cash +impact, nor is there any impact on the financial covenants for the Group’s debt facilities. +Consideration was also given to the continued adoption of the indefinite life assumption in respect of publishing rights and titles, and in assessing the publishing rights +and titles with reference to a single publishing cash-generating unit. The appropriateness of a single cash-generating unit for the publishing rights and titles: +The assumption is considered at each reporting date and is a Critical Judgement in applying the Group’s accounting policies. +The Group is a content business with content delivered through multiple brands. The brands have traditionally been in print and are transitioning to digital. The challenges +facing the brands have resulted in the Group becoming more integrated to such an extent that the interdependency of revenues across the network of brands is significant. +As such, assessing the publishing rights and titles with reference to a single publishing cash-generating unit, whose cash flows are interconnected, is deemed to be the +most appropriate treatment. There has been no change to the assessment of this Critical Judgement. +The indefinite life assumption in respect of publishing rights and titles: +The assumption is considered at each reporting date and is a Critical Judgement in applying the Group’s accounting policies. +The Group has, from first recognition to the latest results announcement, consistently adopted an indefinite life assumption for its publishing rights and titles. Indefinite life +intangible assets are not amortised. The Committee noted that indefinite is not the same as infinite (that is, limitless in extent). The brands have delivered trusted news to +readers for many years in print and more recently digital. The brands are core to our digital strategy, either directly or indirectly. In support of the assumption, management +have prepared 10-year illustrative projections which highlight that print will continue to be significant, and that digital will be increasingly significant. Based on the Group’s +strategic focus and the illustrative projections, it is considered that there is no foreseeable limit to the period over which the net cash inflows are expected to be generated +from the publishing rights and titles and that the current carrying value will be supported for the foreseeable future. As such, continuing to adopt the indefinite life assumption +in respect of publishing rights and titles is deemed to be the most appropriate treatment. There has been no change to the assessment of this Critical Judgement. +Audit & Risk Committee Report continued +100 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_103.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_103.txt new file mode 100644 index 0000000000000000000000000000000000000000..47b3b1e87e13929752e221903020ed4fe3c53337 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_103.txt @@ -0,0 +1,31 @@ +Critical estimate +or key judgement How the Committee addressed the issue +Pensions At each reporting date, the Group’s actuaries for this purpose, Willis Towers Watson (WTW), undertake a detailed calculation of the IAS 19 valuation of the Group’s defined +benefit pension schemes and of the specific financial disclosures in the financial statements. +The assumptions are agreed by management after taking advice from WTW. This includes external benchmarking of the key assumptions by WTW. +Independent investment manager confirmations are received for all investment assets and confirmation is received from the scheme administrators for all scheme +bank accounts. +An executive summary and a detailed report prepared by WTW setting out the methodology, judgements, assumptions and conclusions is presented to the Committee +for review. The assumptions regarding the discount rate, inflation rates and demographic assumptions are reviewed by the Committee. +The external auditors perform a detailed review of the reports prepared by WTW and of the methodology, judgements and assumptions used for the valuation, including +external benchmarking and testing in respect of the investment assets and bank accounts. +Full disclosure of the Group’s pension schemes including valuation, the approach to setting assumptions and the sensitivity to changes in key assumptions are disclosed +in note 21 in the notes to the consolidated financial statements. +Pension schemes are included in one of the Group’s principal risks that are set out in the risks and uncertainties section on pages 68 to 72 of the Strategic Report. This sits +under the wider lack of funding capability risk which sets out the pensions risk and mitigating management action. +Historical legal issues The Group is exposed to civil claims in relation to historical phone hacking. This is a standing item on the Board agenda and therefore is not specifically an agenda item +for the Committee. The Committee does assess the appropriateness of any provisions in relation to these matters and other implications on the consolidated financial +statements, and that the Annual Report contains sufficient disclosure of such matters, noting that there has been a material reduction in the provision following the High +Court’s judgment on time limitation during December 2023. Disclosures relating to the latest position are set out on page 27 of the Strategic Report and in note 27 in the +notes to the consolidated financial statements. +The external auditors’ report to the Committee details the procedures undertaken by them and their discussions with management, and this is discussed in detail by +the Committee. +Historical legal issues are included in one of the Group’s principal risks that are set out in the risks and uncertainties section on pages 68 to 72 of the Strategic Report. +This sits under the wider lack of funding capability risk which sets out the historical legal issues risk and mitigating management action. +Restructuring and +impairment +The Group has recorded significant restructuring and impairment charges in respect of the ongoing transformation programmes undertaken during the current year. +The Committee reviewed the reasonableness and inclusion of these items in operating adjusted items and the disclosures in the Annual Report. +Audit & Risk Committee Report continued +101 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_104.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_104.txt new file mode 100644 index 0000000000000000000000000000000000000000..f070924a3c3a46eb9990e23d64fb7a6be7a96168 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_104.txt @@ -0,0 +1,138 @@ +Risk management +The Board is responsible for ensuring sound +internal control and risk management systems +are in place. During 2023, there was an ongoing +process for identifying, evaluating and managing +the significant and emerging risks faced by +the Company, including those exacerbated by +the current economic uncertainty. The process +is subject to regular review by the Board and +the Committee. The process accords with the +FRC’s Guidance on Risk Management, Internal +Control and Related Financial and Business +Reporting, as applicable for this financial year. +The Committee reviews the principal +risks, including descriptions of the risks, an +assessment of the impact on the business, the +probability of their occurrence, management +accountability and mitigating controls and +actions. During 2023, principal and emerging +risks were identified, assessed and reviewed +by impact and probability, and the Board +reconfirmed its view of the Group’s appetite +for risk and how this manifests itself in the +way the Group conducts its business. +During the year, further work was undertaken to +embed risk management within the business +and evolve how the Group mitigates and +manages principal risks, taking accelerated +action where required to respond to the +evolving internal and external environment. +Work was also undertaken to continue to +identify the Group’s top climate risks and +opportunities, plus further analysis to +understand these more fully and embed +them into our risk management model. +The Committee undertook a more detailed +review of several key risk areas during the year, +including cyber security, data protection, brand +reputation, treasury management and future +funding, and a risk review of the US operations. +The way the Company manages risk is set out +in the Strategic Report on pages 66 and 67, +with the key risks facing the Group and the +associated mitigating actions described +on pages 68 to 72. +Internal controls +The directors are responsible for the Group’s +established system of internal control and +for reviewing its effectiveness. The directors +confirm that the actions they considered +necessary have been or are being taken to +remedy any failings or weaknesses identified +from their review of the system of internal +control. This has involved considering the +matters reported to them and developing +plans and programmes that they consider +reasonable in the circumstances. +The changing internal and external +environment has led us to commit to +improving our internal control environment. +The Committee has received updates and +reviewed ongoing progress made throughout +the year on the work undertaken to enhance +our internal control environment. +The Board also confirms that it has not been +advised of material weaknesses in the part +of the internal control system that relates to +financial reporting. No system of internal +control can provide absolute assurance +against material misstatement or loss. +However, such a system is designed to provide +the directors with reasonable assurance that +problems are identified on a timely basis and +dealt with appropriately. +Although the Board has overall responsibility for +internal control, we acknowledge the positive +contribution made by senior management to +establish and develop internal controls within +the Group. In reviewing the effectiveness of +our system of internal controls, the Board has +considered several key elements, including +financial controls, investment controls, +management reporting and the various +review, steering, policy and Board committees. +The key procedures that have been established +and designed to provide effective internal +financial control are: +Financial reporting +Part of the budgeting, forecasting and +comprehensive management reporting +discipline involves the preparation of detailed +annual budgets and regular forecasts by the +business. These budgets and forecasts are +carefully examined by the executive directors +and then summarised and submitted to the +Board for approval. Weekly revenue and profit +forecasts are prepared and reported against +the approved budget and latest forecasts. +Weekly trading meetings are held to review +and discuss latest performance. +Consolidated monthly management accounts +– including detailed revenue and profit analysis +with comparisons to budget, latest forecasts +and prior year, and treasury, health and safety +and risk updates – are prepared, providing +relevant, reliable and up-to-date financial +and other information to the Board. +Investment appraisal +The Group has a well-defined framework +for capital expenditure, which is controlled +centrally. Appropriate authorisation levels +and limits are clearly established. There is +a prescribed format for capital expenditure +applications, which places a high emphasis +on the overall Group strategy or support for +the expenditure, and requires a comprehensive +and justified financial appraisal of the business +case being put forward. +All significant corporate acquisitions or +investments are controlled by the Board, or +a Board sub-committee, and are subject to +detailed investment appraisal and due diligence +procedures before the Board will approve them. +Additionally, an Investment Committee, which is +a management committee, is held every month +to review key business cases that management +has prepared. +Functional reporting +Several key functions – including treasury, +taxation, internal audit, risk management, +litigation, IT strategy and development, +environmental issues and insurance – are +dealt with centrally. Each of these functions +reports to the Board regularly, through the +CEO or CFO, as appropriate. +Audit & Risk Committee Report continued +102 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_105.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_105.txt new file mode 100644 index 0000000000000000000000000000000000000000..8722bc4f5bce5588f827e68322be953225ac0f17 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_105.txt @@ -0,0 +1,137 @@ +The treasury function operates within the +terms of clearly defined policy statements. +The policy statements exist to ensure that the +Group is not exposed to any unnecessary risk +and that, where appropriate, there is hedging +against foreign currency and interest rate risks. +Effectiveness of risk management and +internal controls system +The Board has overall responsibility for the +Company’s system of risk management and +internal controls. In accordance with the 2018 +Code, the Committee carries out a robust +assessment of the principal and emerging +risks. It also reviews the effectiveness of the +Company’s risk management and internal +control systems, covering all material +controls, including financial, operational +and compliance controls. +The Committee’s assessment includes a +review of the risk management process and the +principal and emerging risks and uncertainties. +As usual, the Committee reviewed reports +from the internal audit function in 2023, which +provided reasonable assurance that internal +control procedures remain in place and are +being followed. Formal procedures have been +established for taking appropriate action to +correct weaknesses identified from these +reports, and for enhancing the internal +control environment. +The Committee confirms that necessary actions +have been or are being taken where failings or +weaknesses were identified. The key risks and +uncertainties are set out on pages 68 to 72 of +the Strategic Report. The Committee considers +that the appropriate systems are in place, +adequate and operating properly. +The Committee also believes that the +Company’s Remuneration Policy is adequate +for a group of this size and nature and that +compensation policies and practices are +appropriate for maintaining a robust control +environment and do not put the Company +at risk. +Risk management and internal +controls compliance +Our risk management process and system +of internal control was operated through +the structure described here during 2023: +Group internal audit +The internal audit function focuses on +providing assurance about the design and +operating effectiveness of the internal control +system and enhancing the Group’s internal +controls. It has an annual plan based on a +rolling programme and specific risk-based +audits, which are approved by the Committee +every year. Internal audit sits independently +of the business, with no responsibility for +operational management. +The Director of Risk and Internal Audit oversees +an internal audit programme using in-house +resources and the services of external service +providers, as necessary. The internal audit +plan, being risk-based, is focused on those +areas deemed critical to achieving our +business objectives. +The Committee oversees the performance +of the internal audit function by having the +Director of Risk and Internal Audit attend +Committee meetings. In addition, a review of +the effectiveness of the internal audit function +was undertaken for the financial year. +The Committee concluded that the function +continues to operate effectively. +Risk management framework +The executive directors, assisted by the +Director of Risk and Internal Audit, oversee and +co-ordinate the risk management activities of +the Executive Committee. +The agreed objectives for the risk management +framework have been achieved during 2023 +and all significant risks have been reviewed. +To enable consistent and focused monitoring, +reporting, evaluation and management of +significant Group risks, the executive director +owners of each key risk have reviewed and +documented the plans, actions and initiatives +that have taken place or are under way. +Year-end compliance reporting +A formal process exists for year-end compliance +reporting, requiring executive directors to confirm +their responsibilities for risk management and +internal control. Ultimate compliance reporting +is required of all Board members. +Steps have been taken to embed internal +control and risk management deeper into the +operations of the business and to deal with +areas for improvement that come to the +attention of management and the Board. +The Group’s systems of internal control are +designed to manage, rather than eliminate, +the risk of failure to achieve business +objectives, and can only provide reasonable +and not absolute assurance against material +misstatement or loss. +Whistleblowing charter +and procedure +The Group has a whistleblowing charter in +place and provides a confidential, independent +whistleblowing line where employees may +report any concerns about the integrity of the +business or breaches of the Group’s policies, +without fear of criticism or future discrimination. +The whistleblowing charter is supported by +an independent external service provider and +arrangements are overseen by the Director +of Risk and Internal Audit. The whistleblowing +charter is owned by the Committee with +oversight from the Board. +The Director of Risk and Internal Audit oversees +the investigation of all whistleblowing cases, +involving relevant resources as necessary. The +Committee Chair and the CEO are informed of +all cases as they arise. The Committee reviews +all information received to ensure the process +is working correctly. +Overall, we remain satisfied that the +whistleblowing policies and procedures are +robust and adequate. More information can +be found on page 38 of the Strategic Report. +Anne Bulford, CBE +Audit & Risk Committee Chair +5 March 2024 +Audit & Risk Committee Report continued +103 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_106.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_106.txt new file mode 100644 index 0000000000000000000000000000000000000000..df48a6236bf271e66dc9728556a27e5bef2f82e6 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_106.txt @@ -0,0 +1,79 @@ +Our report is split into three parts: our Annual +Statement, including this foreword and our +2023 Remuneration at a glance summary +on page 106, the Policy Report and the +Annual Remuneration Report. +I thank our shareholders for their support on +remuneration matters at our 2023 Annual +General Meeting (AGM), when our 2022 +Directors’ Remuneration Report was +approved by 90.45% of shareholders voting. +2023’s performance and +pay outcomes +As explained earlier in this Annual Report, +the Company’s 2023 focus on ’controlling +the controllables’ meant priority focus on +transforming our cost base and driving +efficiencies, while also accelerating digital +transformation through improved customer +engagement and diversified revenues. Despite +continued progress on digital transformation +and resilience in our print business, the 2023 +Group adjusted operating profit did not reach +threshold levels sufficient to allow bonus +payments for our executive directors or wider +senior management group. Accordingly, +annual bonuses for 2023 were nil. +Similarly, no Long Term Incentive Plan +(LTIP) vested in respect of the Company’s +performance measured across the three +years to 31 December 2023, and these LTIP +awards which were made in 2021 will +accordingly lapse during 2024. +Renewing our Remuneration Policy +in 2024 +Revised Remuneration Policy +At the 2024 AGM, we will ask shareholders +to renew the three-yearly authority for our +Directors’ Remuneration Policy (the Policy), +which was last approved at our AGM in 2021 +(with 94.64% approval). +We propose to roll forward materially our +current Policy and retain the architecture of +our current incentive plans (the annual bonus +and LTIP). No increases in incentive quantum +are proposed. The Remuneration Committee +(the Committee) came to this decision after +thoroughly reviewing the continuing +appropriateness of the current Policy. +RENEWING OUR POLICY +Olivia Streatfeild +Remuneration Committee Chair +Our proposals include a limited number of +changes only, as described below: +• our shareholding guidelines for executive +directors will apply for two years from +stepping down from the Board +(increased from one year); and +• we will continue our practice since 2022 of +using a three-month average share price +to determine the number of shares used for +LTIP awards. This moderates the potential for +short-term share price volatility to impact +the number of shares in awards made +each year. +Operation of share plans in 2024 +We are also proposing two changes in how +we operate our share plans for 2024. +First, we will seek our shareholders’ approval +at the 2024 AGM to operate our share plans +within the 10% in 10 years share plans dilution +limit only (removing the internal 5% in 10 years +limit for selective plans). The LTIP is our only +selective plan and there is a continuing +commercial need for Reach to offer the LTIP +each year to a broad population, which can +be over 40 people a year. +Remuneration Report +104 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_107.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_107.txt new file mode 100644 index 0000000000000000000000000000000000000000..a6b4d112a53d8790ff174d34b79b1807b8ea2cf7 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_107.txt @@ -0,0 +1,109 @@ +Using our LTIP so broadly makes the 5% dilution +limit potentially constraining and, unless it is +removed, likely to inhibit our ability to make LTIP +awards to colleagues who have been making +important contributions to our business, +particularly the Company’s continuing +transformation into a customer-data-led +business. Accordingly, we view this proposed +change on share plans dilution limits as +important in supporting our Customer Value +Strategy. The wider colleague group who have +been included in the LTIP in recent years would +often expect to be included in equity plans as +part of their packages in competitor businesses +where their skills would be similarly in demand. +We remain committed to offering all-employee +share plans when we can do so within the 10% +share plans dilution limit. +The Company also intends to buy shares +into its employees’ share trust when it is +appropriate to do so to manage overall +dilution from share plans. Reach has made +such purchases in the past and would also +expect to make such purchases in future. +Secondly, we are revising the mix of performance +conditions for our LTIP awards in 2024. In 2023 +the performance conditions were 75% relative +TSR and 25% Customer Value Strategy +measures, but in 2024 the weightings will be: +• Relative TSR – 40% +• Absolute TSR growth – 20% +• Customer Value Strategy metrics – 25% +• Environmental metrics, reductions in Scope 1 +and Scope 2 emissions – 15% +The element of absolute TSR growth was +introduced to recognise the importance of +absolute shareholder value for our shareholders. +The growth range for this measure will be 10% +to 20% three-year compound annual growth +rate (CAGR). This will be measured from a +three-month base period to 31 December 2023 +in which our average share price was 75.4p. +The new environmental performance conditions +for our 2024 LTIP reflect the importance which +Reach places on environmental matters. As +we explain in the Strategic Report, Reach has a +twofold responsibility: we promote awareness +of environmental issues across all of our +publications and we also seek to reduce the +negative impacts of our own operations on +the environment. +The metrics proposed for our 2024 LTIP are +aligned to Reach’s near-term science-based +targets for Scope 1 and 2 emissions in 2030. +These targets were approved by the Reach +Sustainability Committee in December 2023 +and the measurement of progress against the +metrics will be subject to external verification. +I hope that our shareholders will remain +supportive of our approach to executive pay +at Reach and vote in favour of all of these +resolutions at our 2024 AGM. +The Committee welcomes all input on +remuneration matters so if you have any +comments or questions on any element of the +Directors’ Remuneration Report or the proposed +changes to our Directors’ Remuneration Policy, +please email me – care of Laura Harris, +Interim Group Company Secretary – at +company.secretary@reachplc.com. We are +grateful for the guidance and support we +have received from our shareholders on +remuneration matters in the past year. +Olivia Streatfeild +Remuneration Committee Chair +5 March 2024 +Committee membership +and attendance +Olivia Streatfeild, Chair +Anne Bulford +Priya Guha +Steve Hatch, until +3 May 2023 + +Denise Jagger, from +31 December 2022 + +Barry Panayi +Nick Prettejohn +Wais Shaifta +Remuneration Report continued +Matters to be approved at our +2024 AGM +At the 2024 AGM, shareholders will be asked +to approve three resolutions related to +remuneration matters, which are: +• a resolution to approve the Directors’ +Remuneration Report, which is the normal +annual advisory vote on this report; +• a resolution to approve the updated +Directors’ Remuneration Policy, which, as +explained above, is the normal three-year +vote on this matter; and +• a resolution to amend the share plan +dilution limits within the rules of the +Company’s LTIP as described above. +105 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret office supply is a "calculator". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_108.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_108.txt new file mode 100644 index 0000000000000000000000000000000000000000..365965ea536e8d4fe4ad80c244bdde596d83142b --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_108.txt @@ -0,0 +1,75 @@ +2023 Single total figure of remuneration for executive directors (£’000) +Executive directors (£’000) Salary +Taxable +benefits +Pension +benefits Other +Single-year +variable +Multiple-year +variable Total +Jim Mullen 504 22 38 – – – 564 +Darren Fisher 330 21 25 1951 – – 571 +1. Darren Fisher received a cash payment of £123,662 which was a buy-out of the value of Darren’s attained ITV 2022 cash bonus which was forfeited on his joining the Company. In addition a share award which was made +to buy-out a forfeited ITV share award vested on 6 June 2023 with a value of £70,910 (95,760 shares with a share price of £0.7405) +Summary of Remuneration Policy +Pay element Overview of Policy Remuneration in respect of 2023 Implementation of Policy in 2024 +Base +salary +Reviewed annually, considering salary increases across the Group. +Increases not normally to exceed workforce increases +CEO, Jim Mullen = £504,425 (frozen for 2023) +CFO, Darren Fisher = £360,000 +(from appointment in February 2023) +Salary review date is 1 April 2024. If the CEO and CFO +receive any salary increase, this will be in line with +workforce increases for 2024 +Benefits Benefits typically consist of provision of a company car or car allowance, +private medical cover, permanent health insurance and life assurance +In line with Policy No change to benefits for 2024 +Pensions 7.5% salary contribution level, with this rate being within the range of +contribution rates for the workforce (for which there are a large range +of legacy arrangements in place) +7.5% of base salary No change to pensions for 2024 +Annual +bonus +Maximum annual bonus opportunity 125% of salary for CEO and 100% of +salary for CFO +Based on financial/business performance, with financial measures to be +not less than 50% of the total bonus opportunity +Any bonus up to 50% of salary is paid in cash, with the remainder delivered +in the form of deferred bonus share awards vesting after three years +Clawback provisions apply +Annual bonus for 2023 confirmed as nil +Performance measures for 2023 were fully +assessed on Group adjusted operating profit for +2023. Progress considered against a wider range of +factors (including Customer Value Strategy, diversity +and inclusion and cash management) +Maximum annual bonus opportunities remain at 125% +of salary for CEO and 100% of salary for CFO +Performance measures for 2024 will be similar to +2023. These are fully assessed on Group adjusted +operating profit. Progress will also be considered +on a wider range of factors +LTIP Annual awards of LTIP of 175% of salary for CEO and 150% of salary for CFO +in normal circumstances +Awards vest subject to performance over a three-year period. Vested +shares are subject to an additional two-year holding period +Malus and clawback provisions apply +Awards of 175%/150% of salary made to the CEO/CFO +Performance to be measured over the period +December 2022 to December 2025 against relative +TSR (75% weighting) and Customer Value Strategy +metrics (25%) +2021 LTIPs have nil vesting +No change to structure or quantum of LTIP for 2024 +Performance to be measured over the period +January 2024 to December 2026 against relative TSR +(40% weighting), absolute TSR growth (20% weighting), +Customer Value Strategy metrics (25% weighting), and +ESG (Scope 1 and Scope 2 reduction) (15% weighting) +2023 REMUNERATION AT A GLANCE +Remuneration Report continued +106 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_109.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_109.txt new file mode 100644 index 0000000000000000000000000000000000000000..fd0117546c80e0bc00b3015de3abaa1ea77a8323 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_109.txt @@ -0,0 +1,59 @@ +Pay element and how it supports strategy Operation Opportunity Performance conditions +Changes from +previous Policy +Base salary +To attract and retain talent +by ensuring base salaries are +competitive in the relevant +talent market +Base salaries are reviewed annually, taking +into account individual performance, market +competitiveness, the experience of each +executive director, and salary increases +across the Group +Any base salary increases are applied in line +with the outcome of the review +Percentage salary increases for executive +directors will not normally exceed those of +the wider workforce +Increases may be above this level if there +is an increase in the scale, scope, market +comparability or responsibilities of the role. +Where increases are awarded in excess of the +wider employee population, the Committee will +provide an explanation in the relevant year’s +Annual Remuneration Report +Individual and business performance are +considerations in setting base salary +No material +changes +Pensions +To provide post-retirement +benefits for participants in +a cost-efficient manner +Executive directors participate in the +Company’s defined contribution scheme +or receive a cash allowance in lieu +7.5% salary contribution level, with this rate +being within the range of contribution rates +for the workforce (for which there are a large +range of legacy arrangements in place) +None No material +changes +Remuneration Report continued +Introduction +This Directors’ Remuneration Report has been prepared in accordance with the provisions of the +Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups +(Accounts and Reports) Regulations 2008 (as amended). +The report meets the requirements of the FCA Listing Rules and the Disclosure Guidance and +Transparency Rules. In it, we describe how the principles of good governance relating to directors’ +remuneration, as set out in the FRC’s UK Corporate Governance Code July 2018 (2018 Code), are +applied in practice. +Policy Report +Revised Directors’ Remuneration Policy table +As described earlier in this report, the Committee undertook a review of Reach’s Remuneration +Policy in 2023 and as confirmed below, no material changes are proposed to the Policy for the +next policy period which will apply from Reach’s 2024 AGM. +107 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #1 is a "giraffe". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_11.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..2c7664d41ae0e60a83f03da0054cefd54f1ebd40 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_11.txt @@ -0,0 +1,56 @@ +DIVERSIFYING +While print remains important, both as a +revenue stream and as a source of trusted +news for millions of readers, our overall +direction of travel continues steadily towards +digital. Using the Customer Value Strategy +(CVS) as our guide, and now with over 12.3m +registered customers, we continue to explore +ways to drive further resilience. +Affiliates and ecommerce +Our affiliates business allows us to work with ad +partners to produce quality content directing +readers to purchase, earning us steady +non-advertising revenue. Over the past three +years, our affiliates revenues have doubled, +demonstrating the benefit of relevant content +– especially across the Black Friday period +where revenue was up 90% versus last year. +We also continue to drive our ecommerce +business, for example with our OK! Beauty Box, +an early CVS initiative which now has circa +12k subscribers. +Mantis B2B +Through 2023 we continued to refine our +AI-powered ad tech tool, Mantis, in order +to open up a further B2B revenue stream. +In past years we have successfully licensed +Mantis for its brand safety capabilities. We +have now tested and built up its first-party +data contextual targeting capabilities, an +element that will be more important in 2024 +and beyond thanks to Google’s well-publicised +deprecation of third-party cookies. In 2023 +we invested in this in-house tech to support +a bigger B2B licensing business in 2024. +Audience diversification +And we continue to diversify our audience +and strengthen our video capabilities to +reach more of the youth market and take +better advantage of the branded social +opportunity. For more on this, see page 7. +OUR REVENUE ++45% +Affiliates/ +ecommerce/ +partnerships +revenue growth +>1M +people receiving +content by +WhatsApp +12,000 +OK! Beauty Box +subscribers +9 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_110.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_110.txt new file mode 100644 index 0000000000000000000000000000000000000000..bc62ac6fcc1b21aa637f79cc53cd0e4b07e499b2 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_110.txt @@ -0,0 +1,83 @@ +Pay element and how it supports strategy Operation Opportunity Performance conditions +Changes from +previous Policy +Benefits +To provide non-cash benefits, +which are competitive in the +market in which the executive +is employed +Benefits typically include the provision of a +company car or car allowance, private medical +cover, permanent health insurance and life +assurance. Where appropriate, other benefits +may be offered including, but not limited to, +allowances for accommodation, travel, +relocation and participation in +all-employee share schemes +Benefits vary by role and individual +circumstances; eligibility and cost is +reviewed periodically +Relocation benefits may only be paid for +a maximum of two years +None No material +changes +Annual bonus +(delivered in the form of +cash and deferred shares) +To focus executive directors on +delivering the business priorities +for the financial year +Deferral of an element of bonus +outcomes in shares provides +further alignment with the +interests of shareholders +Performance measures, targets and weightings +are set at the start of the year. At the end of the +year, the Committee determines the extent to +which the targets have been achieved +For executive directors, any bonus earned +over 50% of salary is delivered in the form +of deferred bonus share awards +Deferred bonus share awards may not +normally be transferred or otherwise disposed +of by a participant for a period of three years +from the date of grant, and will be forfeited +on resignation to join a competitor +Clawback provisions apply as described in +the notes to this table +The maximum annual bonus opportunity will +be 125% of base salary for the CEO and 100% +of base salary for the CFO +For on-target performance, the bonus +opportunity is up to 50% of maximum +For threshold performance, the bonus +opportunity is up to 20% of maximum +Additional shares representing reinvested +dividends may be released following the +vesting of any deferred bonus share award +The performance conditions applied +may be financial or non-financial and +corporate, functional or individual, and +in such proportions as the Committee +considers appropriate +The performance conditions selected +may vary each year depending on +business context and strategy and will +be weighted appropriately according to +business priorities. Financial measures +will not be less than 50% of performance +measures for annual bonus in each year +of this policy +However, the annual bonus plan remains +a discretionary arrangement and the +Committee retains a standard power +to apply its judgement to adjust the +outcome of the annual bonus plan for +any performance measure (from zero +to any cap) should it consider that to +be appropriate +No material +changes +Remuneration Report continued +108 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_111.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_111.txt new file mode 100644 index 0000000000000000000000000000000000000000..8b72783304c74e768a9c6614f06c69312b253192 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_111.txt @@ -0,0 +1,72 @@ +Pay element and how it supports strategy Operation Opportunity Performance conditions +Changes from +previous Policy +Long Term Incentive Plan +To align the interests of executives +with shareholders in growing the +value of the business over the +long term +LTIP awards may be granted annually +There is a three-year vesting period subject to +continuing employment, and a further two- +year holding period for vested LTIP shares to +provide additional alignment with shareholders +Malus and clawback provisions apply as +described in the notes to this table +LTIP awards in normal circumstances are for +shares worth up to 175% of base salary for the +CEO and 150% of base salary for the CFO in +each year +Additional shares representing reinvested +dividends for the vesting period may be +released following the vesting of an LTIP award +The plan rules under which LTIP awards are +made provide for LTIP awards of up to 200% +of base salary in each year; however, the +Committee intends that this limit will be +used only in exceptional circumstances +In calculating the numbers of shares for LTIP +awards, the Company normally uses the +three-month average share price preceding +the award date +Performance conditions are reviewed +before each award cycle to ensure they +are appropriate and targets are set to +be appropriately stretching over the +performance period +The performance conditions applied +may be financial or non-financial and +corporate, functional or individual, and +in such proportions as the Committee +considers appropriate +However, the Committee would expect +to consult leading shareholders if it +proposed materially changing the current +performance conditions for LTIP awards +made to executive directors (relative TSR: +20%; absolute TSR growth: 25%; strategic +measures: 25%; ESG metrics 15%), or the +weightings between these measures +Performance periods will not be less than, +but may be longer than, three years +No more than 20% of awards vest for +attaining the threshold level of +performance conditions +The Committee also has a standard +power to apply its judgement to adjust +the formulaic outcome of any LTIP +performance measures (including to zero) +should it consider that to be appropriate +No material +changes +Clarified that +when calculating +the numbers +of shares for +awards, a +three-month +average share +price will be used +Remuneration Report continued +109 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_112.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_112.txt new file mode 100644 index 0000000000000000000000000000000000000000..662ce70db6624c5de8bf7bcc47b0ed4c49f1a568 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_112.txt @@ -0,0 +1,123 @@ +Notes to the Policy table +1. Payments from existing awards +Executive directors are eligible to receive +payments from awards made prior to the +approval and implementation of the Policy +detailed in this report. Such payments may +not be within the scope of this Policy. Details +of these awards, if applicable, will be disclosed +in the Annual Remuneration Report. +2. Performance measure selection and +approach to target setting +The measures used under the annual +bonus plan are selected annually to reflect +the Company’s key strategic priorities for the +year and to reinforce Company performance. +Targets are set to reflect the need to support +performance in the short term while making +progress towards achievement of the Group’s +strategic objectives. +The Committee considers that the metrics +used in the LTIP help align executives with +shareholder interests, and provide objective +and transparent measures of the Company’s +performance and shareholder value. +3. Malus and clawback +The Committee may apply malus and +clawback to an LTIP award, to a deferred +bonus share award (malus only) and to +cash amounts under the annual bonus plan +(clawback only). The relevant circumstances +when malus and clawback can operate +are where: +• there has been a significant deterioration +in the underlying financial health of the +Company; or +• there has been a material misstatement +of the Company’s accounts; or +• the participant has deliberately misled the +Company, the Company’s shareholders +or the market regarding the Company’s +financial performance; or +• circumstances of significant reputational +damage (or potential damage) for any +Group company; or +• errors in assessment or calculation of +performance condition outcomes; or +• gross misconduct. +Malus can operate during the three-year +period until the vesting of a deferred bonus +share award. Malus and clawback can +operate from the award date until the end +of the two-year holding period for a vested +LTIP award. Cash bonuses can be subject to +clawback for up to three years from payment. +4. Travel and hospitality +While the Committee does not consider +travel and hospitality to form part of benefits +in the normal usage of that term, it has been +advised that corporate hospitality, whether +paid for by the Company or another, and +business travel for directors (and any related +tax liabilities settled by the Company) may +technically come within the applicable rules +and so the Committee expressly reserves +the right for the Committee to authorise such +activities and reimbursement of associated +expenses within its agreed policies. +5. Committee discretions +The Committee will operate the annual bonus +plan, the plan for awarding deferred bonus +share awards and the LTIP according to their +respective rules and the above Policy table. +The Committee retains discretion, consistent +with market practice, in a number of respects, +in relation to the operation and administration +of these plans. These discretions include, but +are not limited to, the following: +• the selection of participants; +• the timing of grant of an award/ +bonus opportunity; +• the size of an award/bonus opportunity +subject to the maximum limits set out in +the Policy table; +• the determination of performance +against targets and resultant vesting/ +bonus pay-outs; +• discretion required when dealing with +a change of control or restructuring of +the Group; +• determination of the treatment of leavers +based on the rules of the plan and the +appropriate treatment chosen; +• adjustments required in certain +circumstances (e.g. rights issues, corporate +restructuring events and special dividends); +and +• the annual review of performance +measures, weightings and targets +from year-to-year. +While performance measures and targets for +annual bonus and LTIP will generally remain +unchanged once set, the Committee has the +usual discretions to amend the measures, +weightings and targets in exceptional +circumstances (such as a major transaction) +where the original conditions would cease +to operate as intended. Any such changes +would be explained in the subsequent Annual +Remuneration Report and, if appropriate, +be the subject of consultation with the +Company’s major shareholders. +In any year where the Company is unable to +make an annual LTIP award due to corporate +activity, the Committee may use its discretion +to make that award in the following year in +addition to the normal annual award for +that following year. +Any use of these discretions would, where +relevant, be explained in the Annual +Remuneration Report. +Remuneration Report continued +110 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_113.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_113.txt new file mode 100644 index 0000000000000000000000000000000000000000..85ea6baf9f065da1ae9f9ff3c028f0c317aaed05 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_113.txt @@ -0,0 +1,59 @@ +6. Shareholding guidelines +The policy on shareholding guidelines for +the executive directors can be summarised +as follows: +• executive directors are subject to a +guideline requirement of 200% of base +salary; and +• until the relevant shareholding levels are +acquired, executive directors are required to +retain 100% of shares vesting, after the sale +of sufficient shares to meet any income tax +or national insurance obligations, under all +share plan awards. +From the 2024 AGM, this guideline applies +additionally for a period of two years (an +increase from one year) from the date on +which an executive director stands down +from the Board. The requirement in these +circumstances is to retain shares with a value +equivalent to the lower of either: a) the 200% of +salary guideline; or b) the value of shares held +at the date of standing down from the Board. +This calculation excludes: a) shares purchased +by an executive director with their own funds; +b) shares obtained under awards granted at +recruitment to buy-out awards from a prior +employer; or c) shares from awards made +before the 2020 AGM (when a policy on +post-employment share ownership was +first introduced). Any shares obtained from +awards made between the 2020 AGM and +the 2024 AGM will be subject to the equivalent +requirement applying when those awards +were made (one year from the date of +standing down from the Board). +7. Differences in Remuneration Policy operated for other employees +Pay and employment conditions generally in the Group will be taken into account when setting executive directors’ remuneration. +The same reward principles guide reward decisions for all Group employees, including executive directors, although remuneration packages differ to +take into account appropriate factors in different areas of the business: +Base salary/benefits/ +pension +The Committee receives and considers an annual report summarising the base salaries, benefits and pension +arrangements received by each category of Group staff +Annual bonus The majority of Group employees can participate in an annual bonus plan, although the quantum and balance of Group, +business unit and individual objectives varies by level and nature of role. The Committee receives an annual report +summarising the bonus potential and performance metrics used in each of the annual bonus schemes in operation +across the Group +Long-term incentives Key Group employees participate in the same share plan as is available to the executive directors (LTIP) and may receive +awards based on the same terms as for executive directors (although the Committee reserves the discretion to vary the +terms for awards made to employees below Board level). The Committee is responsible for approving all share awards +made to Group staff +The Company operates a SAYE all-employee share plan when considered appropriate to do so. All employees (including +executive directors) are given the opportunity to participate on the same terms when this plan is offered, reflecting HMRC +requirements and the limits specified by HMRC from time to time +Reflecting standard practice, the Company does not consult with staff in drawing up the Company’s Annual Remuneration Report or when +determining the underlying Policy. +Remuneration Report continued +111 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_114.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_114.txt new file mode 100644 index 0000000000000000000000000000000000000000..31aedc707d1aeefff53d616da7f79f96394ecfe4 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_114.txt @@ -0,0 +1,98 @@ +Recruitment Policy +External appointment +In cases of hiring or appointing a new executive director from outside the Company, the Committee +may make use of all existing components of remuneration, as follows: +Component Approach Maximum annual grant value +Base salary The base salaries of new appointees will be +determined based on the experience and skills +of the individual, internal relativities, relevant +market data and their current basic salary. +Initial salaries may be set below market and +consideration given to phasing any increases +over two or three years subject to development +in the role +Not applicable +Pension New appointees will be entitled to become +members of the Company’s defined +contribution pension scheme or receive +a cash alternative +7.5% of base salary +Benefits New appointees will be eligible to receive +benefits in line with the Policy +Not applicable +Annual bonus +(cash and +deferred bonus +shares) +The structure described in the Policy table +will apply to new appointees with the relevant +maximum being pro-rated to reflect the portion +of the year served +Up to 125% of base salary +for the CEO and 100% of +base salary for the CFO +LTIP New appointees will be granted LTIP awards on +similar terms as other executives, as described +in the Policy table +Up to 200% of base salary, +but normally 175% of base +salary for the CEO and 150% +of base salary for the CFO +In determining appropriate remuneration +structures and levels, the Committee will take +into consideration all relevant factors to ensure +that arrangements are in the best interests of +both the Company and its shareholders. The +Committee may make an award in respect +of a new appointment to ‘buy-out’ incentive +arrangements forfeited on leaving a previous +employer, i.e. over and above the approach +outlined in the prior table, and may exercise the +discretion available under Listing Rule 9.4.2 R if +necessary to do so. If making buy-out awards, +the Committee will consider relevant factors +including any performance conditions +attached to the forfeited awards, the likelihood +of those conditions being met and the +Remuneration Report continued +Executive directors’ service contracts +Name Date of contract +Date joined the +Reach plc Board +Notice period from +either party (months) +Jim Mullen 27 July 2019 16 August 2019 12 months +Darren Fisher 10 October 2022 1 February 2023 12 months +Non-executive directors’ letters of appointment +Name +Date of letter of +appointment +Date joined the +Reach plc Board +Notice period from +either party (months) +Nick Prettejohn 13 November 2017 6 March 2018 No prescribed period +Anne Bulford 17 June 2019 18 June 2019 3 months +Priya Guha 28 July 2022 1 September 2022 3 months +Denise Jagger 21 December 2022 31 December 2022 3 months +Barry Panayi 13 October 2021 13 October 2021 3 months +Wais Shaifta 28 July 2022 1 September 2022 3 months +Olivia Streatfeild 8 January 2016 15 January 2016 No prescribed period +proportion of the vesting period remaining. +The Committee will seek, as far as practicable, +to make any buy-out awards subject to +comparable requirements in respect of service +and performance as the awards forfeited. For +the avoidance of doubt, the value of buy-out +awards is not capped. +Internal promotion +In cases of appointing a new executive director +by way of internal promotion, the Recruitment +Policy will be consistent with that for external +appointees, as detailed above. Where an +individual has contractual commitments made +prior to their promotion to executive director +level, the Company will continue to honour +these arrangements. +112 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_115.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_115.txt new file mode 100644 index 0000000000000000000000000000000000000000..036fd2220c023d73765cc0ecc08fcc90f9596401 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_115.txt @@ -0,0 +1,117 @@ +Exit payment policy +Each of the executive directors has a service +contract which can be terminated by either +party giving one year’s written notice. +The termination provisions of executive +directors’ service contracts provide that should +the Company seek to terminate an executive +director’s employment it may do so making +a payment in lieu of 12 months’ base salary. +Any payment in lieu will not include elements +relating to any bonus or benefits. The contract +provides that the Company may terminate in +breach of the agreement and may require the +director to mitigate any loss. +The Company may reimburse reasonable +legal costs incurred in connection with a +termination of employment, if the Committee +considers it appropriate. +Any new executive directors will be engaged +on these, or similar, contractual terms. +Executive director service contracts are +available for inspection at the registered +office and at the AGM. +In the event that a participant ceases to be an +employee of Reach, treatment of outstanding +awards under the Group’s incentive plans will +be determined based on the relevant plan +rules as summarised in the following sections. +Annual bonus plan – exit treatment +If an executive director resigns or is dismissed +for cause before the payroll cut-off date for +annual bonus payments the right to receive +any bonus normally lapses. If an executive +director ceases employment before such +date by reason of death, injury, ill health, +disability or any other reason determined by +the Committee, such bonus may be payable +as the Committee in its absolute discretion +determines, although normally such payment +will be pro-rated to reflect only the period +worked in the year. Similar treatment will +apply in the event of a change in control +of the Company. +Deferred bonus share awards – +exit treatment +Outstanding awards held by leavers will +normally continue to vest at the usual time, +unless the Committee exercises discretion to +allow early release in compassionate cases. In +cases of summary dismissal or the resignation +of a director to join a competitor, unvested +awards will lapse. On a change of control, +outstanding awards would normally vest. +LTIP awards – exit treatment +Unvested LTIP awards normally lapse unless +the participant is a good leaver. An executive +director will be considered a good leaver if +he/she ceases employment by reason of +death, injury, disability, ill health, redundancy, +retirement, transfer of an employing company +or business, or any other reason determined +by the Committee. In the case of a good leaver, +unvested LTIP awards will be retained and may +only vest in accordance with the performance +conditions at the end of the vesting period, but +will be pro-rated for time, subject to Committee +discretion to vary the time pro-rating formula if +considered appropriate. The Committee also +has discretion to allow earlier performance +condition assessment and release of time +pro-rated vested shares in exceptional cases. +Vested LTIP awards which are subject to an +additional holding period will typically be retained +and released at the end of the holding period, +subject to the Committee’s discretion to allow +release of the holding period in compassionate +cases. On a change of control, unvested LTIP +awards would normally vest immediately subject +to performance condition assessments and +be pro-rated for time, subject to Committee +discretion to vary the time pro-rating formula +if considered appropriate. +Remuneration Report continued +External appointments +The Company acknowledges that its executive +directors are likely to be invited to become +non-executive directors of other companies. +The Committee believes that these non- +executive duties can broaden the directors’ +knowledge and experience to the benefit of +the Company. Executive directors are therefore, +with the Board’s permission, allowed to accept +one such appointment as long as there is +no conflict of interest and to retain any fees. +Details of external appointments are set out on +page 76 of the Governance Report and details +of any remuneration received in respect of +such positions is set out on page 120. +Consideration of conditions +elsewhere in the Company +The Committee does not currently consult with +employees specifically on the effectiveness and +appropriateness of the Directors’ Remuneration +Policy and framework. However, the Company +seeks to promote and maintain good +relationships with employee representative +bodies, including trade unions and staff forums, +as part of its employee engagement strategy +and consults on matters affecting employees +and business performance as required in each +case by law and regulation in the jurisdictions in +which the Company operates. The Committee +is mindful of the salary increases applying +across the Group when considering salary +increases for the executive directors. +113 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_116.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_116.txt new file mode 100644 index 0000000000000000000000000000000000000000..f722f1a6763951552f36b7da850fb60ba41f24a3 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_116.txt @@ -0,0 +1,99 @@ +Remuneration Report continued +Pay element and function Operation Opportunity +Performance +conditions +Changes from +previous Policy +Company Chair +and non-executive +directors’ fees +To attract and retain +a company Chair and +non-executive directors +of the highest calibre +with broad commercial +and other experience +relevant to the +Company and sector +Fee levels are reviewed periodically +The fees paid to the Company Chair are determined by +the Committee and the fees paid to the non-executive +directors are determined by the Board +Additional fees are payable for additional Board +responsibilities such as acting as Senior Independent +Director and as Chair of the Audit & Risk, Sustainability +and Remuneration Committees +In exceptional circumstances, if there is a temporary +yet material increase in the time commitments for +non-executive directors, the Board may pay extra +fees to recognise the additional workload +When reviewing fee levels, time commitment, +responsibilities and the market positioning of fees +against sector comparators and FTSE-listed companies +of similar size and complexity are taken into account +However, the Company’s preferred way to consider +the appropriateness of any future reviews for Company +Chair and non-executive directors’ fee levels is to have +regards to percentage salary increases for the wider +workforce within Reach in any year +Any Company Chair and +non-executive director fee +increases are applied in line +with the outcome of the annual +fee review +There is no prescribed maximum. +Fees from 1 January 2024 are set +out in the Annual Remuneration +Report on page 119 +The maximum aggregate annual +fee for all non-executive directors +provided in the Company’s +Articles of Association is £700,000 +None No material +changes +Clarified the +Company’s +preference +to align fee +reviews with +percentage +salary +increases +for the wider +workforce +Notes: +While the Committee does not consider it to form part of benefits in the normal usage of that term, it has been advised that corporate hospitality, +whether paid for by the Company or another, and business travel for directors (and any related tax liabilities settled by the Company) may technically +come within the applicable rules and so the Committee expressly reserves the right for the Committee to authorise such activities and reimbursement of +associated expenses within its agreed policies. +Consideration of shareholder views +The Committee considers shareholder views +received during the year and at the AGM each +year, as well as guidance from shareholder +representative bodies more broadly, in shaping +remuneration policy. The Committee continues +to keep its remuneration arrangements under +regular review, to ensure it continues to reinforce +the Company’s long-term strategy and align +closely with shareholders’ interests. We consulted +with selected major shareholders regarding our +Directors’ Remuneration Policy to be brought +forward at the 2024 AGM. +Non-executive director +remuneration +Non-executive directors do not have service +contracts, but are engaged on the basis of +a letter of appointment. In line with the 2018 +Code guidelines, all directors are subject to +re-election annually at the AGM. It is the policy +of the Board that non-executive directors +are not eligible to participate in any of the +Company’s bonus, long-term incentive or +pension schemes. +Details of the Policy on fees paid to our +non-executive directors are set out in the +following table. On any recruitment of a new +non-executive director, the Committee will also +apply this Policy. +114 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_117.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_117.txt new file mode 100644 index 0000000000000000000000000000000000000000..bebb2892bfae3a21b1e0c6f1de9c745230ab2503 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_117.txt @@ -0,0 +1,94 @@ +Scenario analysis +The charts that follow provide an estimate +of the potential future reward opportunities for +the executive directors, and the potential split +between the different elements of remuneration +under four different performance scenarios: +‘Minimum’, ‘On-target’, ‘Maximum’ and ‘Maximum +plus Growth’. Potential reward opportunities are +based on Reach’s Remuneration Policy, applied +to latest known base salaries and incentive +opportunities. Note that the LTIP awards granted +in a year do not normally vest until the third +anniversary of the date of grant. +The ‘Minimum’ scenario reflects base salary, +pension and benefits (i.e. fixed remuneration), +being the only elements of the executive +directors’ remuneration package not linked +to performance. +The ‘On-target’ scenario reflects ‘Minimum’ +fixed remuneration as above, plus target bonus +(based on 50% of maximum opportunity) and +LTIP threshold vesting (20% vesting). +The ‘Maximum’ scenario reflects ‘Minimum’ fixed +remuneration, plus maximum payout under all +incentives. This could be lower than single figure +total remuneration which includes the value of +LTIP awards which vested based on the share +price at vesting (rather than grant). +The ‘Maximum plus Growth’ applies a 50% share +price growth factor to awards of LTIPs under the +‘Maximum’ scenario. +CEO (£'000) +CFO (£'000) +Minimum On-target +3,000 +2,500 +2,000 +1,500 +£564 +£1,056 +17% +30% +53%100% +£2,519 +18% +35% +25% +22% +1,000 +500 +Fixed pay +Variable pay +LTIPs ++50% share price +Maximum +plus Growth +£2,519 +18% +35% +25% +22% +Maximum +£2,079 +43% +30% +27% +Minimum On-target Maximum +plus Growth +2,000 +1,500 +£409 +£697 +15% +26% +59%100% +£1,579 +17% +34% +23% +26% +Maximum +£1,309 +41% +28% +31% +1,000 +500 +Fixed pay +Variable pay +LTIPs ++50% share price +Remuneration Report continued +115 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_118.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_118.txt new file mode 100644 index 0000000000000000000000000000000000000000..a15c968983e6018ff2607a902857ed936e918e16 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_118.txt @@ -0,0 +1,60 @@ +Remuneration Report continued +Annual Remuneration Report +The following section provides details of how the current Policy was implemented during 2023. +References to 2023 or any other year in the Annual Remuneration Report (unless otherwise stated) +refer to a calendar year (1 January to 31 December inclusive). +The Remuneration Committee is a committee of the Board of directors and has been established +with formal terms of reference approved by the Board. The Committee’s purpose is to help the +Board fulfil its oversight responsibility by ensuring that Reach’s Remuneration Policy and practices +reward fairly and responsibly, link to corporate and individual performance, and take account of +the generally accepted principles of good governance. A copy of the terms of reference +is available on the Company’s website at www.reachplc.com. +The Committee fulfils its duties with a combination of formal meetings and informal consultation +with relevant parties internally. During the year, the Committee, where appropriate, sought advice +and assistance from the executive directors and the Group HR Director in connection with carrying +out its duties. The activities of the Committee include appropriate review and oversight of the +operation and implementation of the Company’s Remuneration Policy each year. The Committee +also reviewed its terms of reference in the year. +The Chairman of the Board, together with the CEO, is responsible for evaluating and making +recommendations to the Board on the remuneration of the non-executive directors. Members of +the Committee and any person attending its meetings do not participate in any decision on their +own remuneration. +The Committee met five times during the year, and details of members’ attendance at meetings +are provided on page 81 of the Governance Report and page 105 of this Remuneration Report. +During the year, the Committee considered its obligations under the 2018 Code and concluded that: +• the Directors’ Remuneration Policy supports the Company’s strategy, including the performance +measures chosen; and +• remuneration for our directors remains appropriate. +In addition, the Committee has ensured that its policy and practices are consistent with the six +factors set out in Provision 40 of the 2018 Code: +Clarity – our Policy is well understood by our senior executive team and has been clearly +articulated to our shareholders and representative bodies. +Simplicity – the Committee is mindful of the need to avoid overly complex remuneration +structures that can be misunderstood and deliver unintended outcomes. Therefore, a key +objective of the Committee is to ensure that our executive remuneration policies and practices +are straightforward to communicate and operate. We operate one annual bonus and one senior +executive share plan across all our senior team. +Risk – our Policy has been designed to ensure that inappropriate risk-taking is discouraged +and will not be rewarded, through: 1) the balanced use of both annual incentives and LTIPs; 2) +the significant role played by shares in our incentive plans, together with bonus deferral and +in-employment and post-cessation shareholding guidelines; and 3) malus and clawback +provisions within all our incentive plans. The Committee reviews the overall appropriateness +of all incentive plan outcomes before they are confirmed, and any risk-related concerns can +be considered during that review. +Predictability – our incentive plans are subject to individual caps, with our share plans also +subject to appropriate share plans dilution limits. The weighting towards use of shares within +our incentive plans means that actual pay outcomes are highly aligned to the experience of +our shareholders. +Proportionality – there is a clear link between individual awards, delivery of strategy and our +long-term performance. In addition, the significant role played by incentive/‘at risk’ pay, together +with the structure of the executive directors’ service contracts, ensures that poor performance is +not rewarded. Both post-vesting holding periods for LTIP awards and deferral of annual bonus +ensures that rewards at Reach are aligned with longer-term shareholder experience. +Alignment to culture – our executive pay policies are fully aligned to Reach’s culture through the +use of metrics in both the annual bonus and the application of performance conditions for LTIPs. +These metrics consider how we perform against key aspects of our strategy. +The Company engages in collective bargaining on pay for those areas in the business where +there are agreements to do so. The members of the Committee (as full Board members) are +kept informed on these engagements. +116 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_119.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_119.txt new file mode 100644 index 0000000000000000000000000000000000000000..383fb9c4a2a70b8740ef2d4db6ea2e9db158f420 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_119.txt @@ -0,0 +1,58 @@ +We consider that our executive directors’ pay is shown to be aligned to wider Company pay policy +through the consistency of approach taken on base salary increases and annual bonus measures. +Before proposing the revised and updated Directors’ Remuneration Policy which is being presented +at the 2024 AGM, the Company engaged with some of its major shareholders with regards to the +continued appropriateness of our Policy. +Advisers +The Committee evaluates the support provided by its advisers annually to ensure that advice is +independent, appropriate and cost-effective. The Committee retains responsibility for appointing +any consultants in respect of executive director remuneration. +The Committee received advice from FIT Remuneration Consultants LLP (FIT) in 2023. FIT was +appointed by the Committee in 2019 following a competitive tender process. FIT also provided +share plan implementation advice to the Company during the year. The Committee reviewed the +advice provided to it and is satisfied that the advice received from FIT in 2023 was independent +and objective. FIT does not have any connection with the Company or its directors. +Summary of shareholder voting on remuneration matters +The table below shows the results of the votes on: (1) the Directors’ Remuneration Policy at the +2021 AGM; and (2) the advisory vote on the 2022 Directors’ Remuneration Report at the 2023 AGM. +Resolution text Votes for % for Votes against % against Total votes cast +Votes +withheld +(1) Approve the Directors’ +Remuneration Policy 239,993,386 94.64 13,592,059 5.36 253,585,445 17,272 +(2) Approve the Directors’ +Remuneration Report 212,391,939 90.45 22,430,699 9.55 234,822,638 100,410 +Single total figure of remuneration for executive directors (audited) +The table below sets out a single figure for the total remuneration received by each executive director for the years ended 31 December 2023 and 31 December 2022. +Salary +£’000 +Taxable benefits +£’000 +Pension benefit +£’000 +Total fixed +remuneration £’000 +Other +£’000 +Single-year +variable £’000 +Multiple-year +variable £’000 +Total variable +remuneration £’000 +Total +£’000 +Executive 2023 2022 2023 2022 2023 2022 2023 2022 20232 2022 20233 20223 2023 20224 2023 2022 2023 2022 +Jim Mullen 504 501 22 22 38 38 564 561 – – – – – – – – 564 561 +Darren Fisher1 330 – 21 – 25 – 376 – 195 – – – – – – – 571 – +1. Darren Fisher was appointed as CFO on 1 February 2023 +2. Darren Fisher received a cash payment of £123,662 which was a buy-out of the value of Darren’s attained ITV 2022 cash bonus which was forfeited on his joining the Company. In addition a share award which was made to +buy-out a forfeited ITV share award vested on 6 June 2023 with a value of £70,910 (95,760 shares with a share price of £0.7405) +3. Annual bonus for 2023 was nil (2022: nil) +4. Jim Mullen asked that his March 2020 LTIP would not vest and this award was cancelled. As at the date this award would have vested (27 March 2023), the value of this award was £264,827 +Remuneration Report continued +FIT’s total fees for the provision of remuneration services to the Committee in 2023 were £89,200 plus +VAT. These fees were charged on the basis of FIT’s normal terms of business for advice provided. +117 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #5 is a "vase". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_12.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..a3b600d62d83cf6d4d9873277f5d12d7831342f3 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_12.txt @@ -0,0 +1,62 @@ +A PROACTIVE +Both our business and more broadly our +sector are constantly evolving and each year +we are faced with new challenges. However, +we consistently prove ourselves adept at +weathering difficulties, delivering against +our commitments and adapting to change. +Resolving past uncertainties +In 2023 we made significant progress in +resolving two long-standing issues, both +with material benefits. Firstly we were able to +reach agreement on our outstanding pension +valuation with the MGN pension scheme, +avoiding costly regulatory intervention and +providing clarity that these financial obligations +will in the main unwind in early 2028. +After a lengthy legal process we have also +been able to achieve clarity around our +historical legal issues. December’s judgment +on time limitation has materially reduced +our expected obligations and, barring +exceptional circumstances, brought +an end to any future claims. +↓ £20M +Estimated reduction in +historical legal issue costs +↓ c.£40M +Estimated reduction in +pension obligations in 2028 +43% +Data-driven revenues +11% +RPM increase +Moving forward to digital-first +In 2023 we delivered a 5.7% reduction in +operating costs (on a like-for-like basis) +and in November announced a similar 5-6% +reduction for 2024. These savings decisions, +while never easy, are made to support the +future of our business. +A guiding principle behind these changes was +the need to more firmly orientate our newsrooms +and wider organisation towards our digital +audience. This meant considering online +behaviour in all of our decisions – topics, +timing, format – and rethinking how we tell +every story in today’s digital landscape. +Initiatives include the automation of our +content management system (CMS) so +journalists can save time uploading stories, +sharing more content across brands, and +organising teams for maximum impact. +For example we have brought together +our video and audio talent into one Studio +team, to produce content for both our +editorial brands and commercial partners +and to better support the branded content +revenue opportunity. +APPROACH +10 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret currency is a "ruble". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_120.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_120.txt new file mode 100644 index 0000000000000000000000000000000000000000..c22f6ce5fdce96e984dfb92dad27b5e560812d70 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_120.txt @@ -0,0 +1,68 @@ +PENSIONS (AUDITED) +For both Jim Mullen and Darren Fisher, this item applied a 7.5% pensions contribution rate +throughout the year to paid salary (see page 106). +Neither of the executive directors participated in any of the Group’s defined contribution or defined +benefit pension schemes. Each executive director received the above as an annual cash sum to +use for pension purposes. +SINGLE YEAR VARIABLE (AUDITED) +The 2023 annual bonus was based entirely on the achievement of Group adjusted operating profit. +As the threshold level of Group adjusted operating profit was not attained, the outcome was nil. +Measure +Weighting +(% of bonus) Threshold Stretch Actual +Total payout +(% of maximum) +Group adjusted operating profit 100% +£103.0m +(Nil) +£116.0m +(100%) +£96.5m +Nil +Total Nil +2021 LTIP AWARDS (AUDITED) +Details of the performance metrics applying for the 2021 LTIP awards, the performance period for +which ended in December 2023, are summarised below. As noted in the Committee Chair’s +introduction on page 104, the vesting level was nil. +Vesting of the 2021 LTIP award was dependent on achieving relative TSR (70% weighting) and +Cumulative Net Cash Flow performance measures (20% weighting), and Overall Digital Average +Revenue Per User (ARPU) (10% weighting) as follows: +TSR performance relative to constituents of FTSE SmallCap (ex. IT) % of award that can be exercised +Upper quartile or above 70% +Between median and upper quartile Straight-line vesting between 14% and 70% +Median 14% +Below median Nil +TSR performance was measured using a three-month average period at the start and end of the +three-year performance period. The Company’s ranking was below median, which warranted nil +vesting of the TSR shares. +Cumulative Net Cash Flow over the performance period % of award that can be exercised +£395m (or above) 20% +Between £345m and £395m Straight-line vesting between 4% and 20% +£345m 4% +Below £345m Nil +Cumulative Net Cash Flow was measured over financial years 2021, 2022 and 2023. However, +the Cumulative Net Cash Flow attained was £224.1m and so was below the £345m threshold. +Accordingly, there was nil vesting of the Cumulative Net Cash Flow shares. +Cumulative Net Cash Flow for the 2021 award was defined as the net cash flows generated by the +business before the payment of dividends, pension deficit funding and associated tax relief, and +the cost of acquisitions, and before any significant cash outflows that have been treated as +non-recurring in the financial statements. +Remuneration Report continued +SALARY (AUDITED) +The salary review date in the year was 1 April 2023. The CEO did not receive a salary increase in +2023. The CFO’s salary applied from appointment. +Salary until +31 March 2023 +Salary from +1 April 2023 % increase +Jim Mullen £504,425 £504,425 0% +Darren Fisher £360,000 £360,000 0% +TAXABLE BENEFITS (AUDITED) +This item relates to the provision of car allowance and healthcare cover. +Car allowance +Value of +healthcare cover +Jim Mullen £20,000 £2,454 +Darren Fisher £18,333 £2,254 +118 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_121.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_121.txt new file mode 100644 index 0000000000000000000000000000000000000000..90f5bd8b8431a608927b095712d0892e78861bca --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_121.txt @@ -0,0 +1,69 @@ +Single total figure of remuneration for non-executive directors (audited) +The table below sets out a single figure for the total remuneration received by each non-executive +director for 2022 and 2023. +Base fee +£’000 +Other fees +£’000 +Total +£’000 +2023 2022 2023 2022 2023 2022 +Anne Bulford 52 49 13 13 65 62 +Priya Guha1 52 17 13 – 65 17 +Steve Hatch2 17 49 – – 17 49 +Denise Jagger3 52 – 13 – 65 – +Barry Panayi 52 49 – – 52 49 +Nick Prettejohn 185 183 – – 185 183 +Wais Shaifta1 52 17 – – 52 17 +Olivia Streatfeild 52 49 13 13 65 62 +1. Priya Guha and Wais Shaifta joined the Board on 1 September 2022 +2. Steve Hatch stepped down from the Board on 4 May 2023 +3. Denise Jagger joined the Board on 31 December 2022 +The non-executive director fee rates below were in place during 2023. +Chairman base fee £185,400 +Non-executive director base fee £52,000 +Additional fee for Senior Independent Director £12,500 +Additional fee for chairing Audit & Risk Committee £12,500 +Additional fee for chairing Remuneration Committee £12,500 +Additional fee for chairing Sustainability Committee £12,500 +The aggregate remuneration of all executive and non-executive directors under salary, fees, +benefits, cash supplements in lieu of pensions and annual bonus in 2023 was £1.63 million +(2022: £1.57 million). +LTIP interests awarded in 2023 (audited) +On 13 April 2023, Jim Mullen and Darren Fisher were granted awards under the LTIP. To the extent +that performance conditions are met, these awards will vest on 13 April 2026. The three-year +period over which performance is to be measured is from 26 December 2022 to 31 December +2025. Vested shares are subject to a two-year holding period. +Date +of grant +Shares over +which awards +granted1 +Value +of awards +granted (£) +% of +salary +Jim Mullen 13 April 2023 1,040,970 £882,743 175 +Darren Fisher 2 13 April 2023 582,708 £494,136 137 +1. The base price for calculating the level of awards was £0.848, the three-month average share price to the +date of grant. The share price on 13 April 2023 was £0.758, and so using £0.848 reduced the number of shares +in 2023 LTIP awards +2. Darren Fisher’s award was pro-rated in 2023 to reflect his starting date of 1 February 2023 +Vesting of LTIP awards granted (as nil-cost options) in 2023 is subject to three performance +conditions: relative TSR, representing 75% of each award, three-year Overall ARPU for 12.5% and +revenue per thousand page views (RPM) 12.5%. +Remuneration Report continued +The Customer Value Strategy metrics applied for 2021 LTIPs considered Overall ARPU with the +following scale, measured to the end of financial year 2023. Overall ARPU is defined as the total +digital revenue generated across the business, divided by the active UK digital audience (based +on the accepted industry measurement standard). The ARPU figure attained was £3.05, and there +was nil vesting of the ARPU shares. +ARPU (£) % of award that can be exercised +£4.57 (or above) 10% +Between £4.35 and £4.57 Straight-line vesting between 7.33% and 10% +Between £3.91 and £4.35 Straight-line vesting between 2% and 7.33% +£3.91 2% +Below £3.91 Nil +119 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_122.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_122.txt new file mode 100644 index 0000000000000000000000000000000000000000..c1fbb8c3cb4167fd79f049f41a3effe01916b340 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_122.txt @@ -0,0 +1,59 @@ +More details of the targets applying to these awards are included in the tables below. +Relative TSR condition (75% weighting) +TSR performance relative to constituents of FTSE SmallCap (ex. IT) % of award that can be exercised +Upper quartile or above 75% (100% of this part) +Between median and upper quartile Straight-line vesting between 15% and 75% +Median 15% (20% of this part) +Below median Nil +In addition, for this part of an award to become exercisable, the Committee must be satisfied that +the Company’s TSR performance is a genuine reflection of the underlying business performance +of the Company over the performance period. +When making this assessment, the Committee will consider factors including revenues, free cash +flow and change in net debt, as well as the Company’s TSR performance over the period. The +Committee will be guided in its assessment by a review of performance against these metrics, +based on the audited results, which it will undertake prior to vesting. The Committee will consider +both a quantitative and qualitative analysis of the performance and consider any relevant +internal and external factors to help ensure that unexpected events during the period are +considered properly. +ARPU condition (12.5% weighting) and RPM condition (12.5% weighting) +ARPU is defined consistently with the definition for this measure on page 119, with the targets for +2023 LTIP awards being by reference to ARPU for 2025. RPM is defined as the total worldwide digital +revenue generated across the business during a specified period, divided by the total number of +worldwide page views (measured in thousands). +In line with other conditions, 20% will vest for achieving threshold and full vesting for achieving +maximum target. +The Committee regards ARPU targets and RPM targets for the 2023 LTIP awards as commercially +sensitive at the current time, and accordingly will not be disclosing these targets on a prospective +basis. This information will be disclosed when it is appropriate to do so, and not later than the +publication of the Annual Remuneration Report for the year of vesting. +Buy-out awards made to the CFO in 2023 (audited) +On 6 June 2023, the Company granted nil-cost options to Darren Fisher which were a buy-out +of share awards from his former employer (ITV) previously held by Darren Fisher and that were +forfeited on his joining the Company. The buy-out awards will vest on the original vesting dates +of the forfeited awards, subject to Darren’s continued employment with Reach up to the relevant +vesting dates. The forfeited awards were awards in respect of deferred bonus or restricted share +awards in ITV and had no pre-vesting performance conditions. +The number of shares under the buy-out awards were equivalent in value to the awards forfeited, +calculated using a three-month average share price of £0.7771 per share. +Shares over which awards granted Year of vesting +95,760 2023 +61,164 2024 +80,816 2025 +77,360 2025 +79,566 2026 +Payments for loss of office (audited) +In the 2022 Directors’ Remuneration Report we disclosed the remuneration-related arrangements +for Simon Fuller stepping down as our CFO on 31 December 2022. In 2023, Simon received fixed pay +(base pay, pension and benefits) in line with contractual entitlements whilst on garden leave until +10 October 2023 (£351,584). Following the 2023 financial year end, Simon Fuller’s 2021 LTIP award +(which had been retained on a time pro-rated basis) lapsed in full. +Payments to past directors (audited) +There were no payments to past directors in the year. +External directorship fees +As set out in the Remuneration Policy, the Company recognises the benefits of executive directors +taking on external appointments as non-executive directors. Jim Mullen serves as a non-executive +director of Racecourse Media Group Limited. For 2023, he received fees of £40,000, which he retained. +Remuneration Report continued +120 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret vegetable is "cauliflower". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_123.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_123.txt new file mode 100644 index 0000000000000000000000000000000000000000..ecb06a1e3f54ce089daf69b54d5268e3c4c57fba --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_123.txt @@ -0,0 +1,95 @@ +Annual percentage change in remuneration of directors and employees +The table below shows the percentage change in CEO remuneration from the prior year, compared to the average percentage change in remuneration for all other employees. In accordance with +Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), we also show the relevant percentage changes for all other directors and +figures are shown for 2020 through to 2023. Over time, five years’ worth of data will be shown. +The CEO’s remuneration includes base salary paid in 2023, taxable benefits and bonus. The base salary and taxable benefits for all other employees is calculated using the increase in the earnings of +employees taken from salary (as at the end of the year and the end of the previous year) and payroll and P11D data from the relevant tax years. It excludes any discount from participation in the Reach +Savings-Related Share Option Scheme. +The table is based on a consistent set of employees, that is, the same individuals appear in both years’ populations but there are now four years and people may have left. The annual bonus is the +amount payable in respect of 2023 compared to the amount paid in respect of 2022. The base salary data for part-time employees has been pro-rated up to the full-time equivalent. +Jim Mullen +CEO +All other +employees5 +Darren +Fisher +CFO6 +Nick +Prettejohn +Chairman +Anne +Bulford +Non- +Executive +Director7 +Priya Guha +Non- +Executive +Director8 +Steve Hatch +Non- +Executive +Director9 +Barry Panayi +Non- +Executive +Director10 +Wais Shaifta +Non- +Executive +Director9 +Olivia +Streatfeild +Non- +Executive +Director +20231,2 +Salary 0.6% 5.4% n/a 1.1% 4.8% 282.4% (65.3%) 6.1% 205.9% 4.8% +Taxable benefits 0.0% 7.0% n/a n/a n/a n/a n/a n/a n/a n/a +Annual bonus3 0.0% 0.0% n/a n/a n/a n/a n/a n/a n/a n/a +2022 +Salary 2.7% 6.3% n/a 1.7% 6.9% n/a 8.9% 390.0% n/a 21.6% +Taxable benefits (12.0%) 10.7% n/a n/a n/a n/a n/a n/a n/a n/a +Annual bonus3 (100%) (100%) n/a n/a n/a n/a n/a n/a n/a n/a +2021 +Salary 13.2% 3.8% n/a 11.8% 13.7% n/a 12.5% n/a n/a 27.5% +Taxable benefits 13.6% (0.3%) n/a n/a n/a n/a n/a n/a n/a n/a +Annual bonus 100% 100% n/a n/a n/a n/a n/a n/a n/a n/a +2020 +Salary4 (14.8%) 4.2% n/a (10.6%) 112.5% n/a (11.1%) n/a n/a (11.1%) +Taxable benefits nil 2.9% n/a n/a n/a n/a n/a n/a n/a n/a +Annual bonus3 (100%) (100%) n/a n/a n/a n/a n/a n/a n/a n/a +All figures are expressed as percentage changes from the prior year +1. Please see the single total figure of remuneration tables for both the executive +directors and non-executive directors +2. Annual reviews from 1 April each year produce year-on-year changes and +for non-executive directors, differentials can reflect changes in committee +chair responsibilities +3. The annual bonus for 2023 was nil, the annual bonus for 2022 was nil and the +annual bonus for 2020 was cancelled +4. The voluntary salary reduction in 2020 for all directors impacts differentials for +2020 and 2021 +5. There are no other employees of the listed parent and, as such, the all +employees (of the Group) measure is a more appropriate comparable +6. Darren Fisher was appointed as Chief Financial Officer on 1 February 2023. +n/a has been included as Darren has no prior year data for the purposes of +a comparison +7. Anne Bulford was appointed as a non-executive director on 18 June 2019. +Accordingly, the percentage difference in 2020 shown represents a comparison +between a full year (2020) and a part year (2019) +8. Priya Guha and Wais Shaifta were appointed as non-executive directors on +1 September 2022. Accordingly, the percentage difference in 2023 shown +represents a comparison between a full year (2023) and a part year (2022) +9. Steve Hatch stepped down from the Board as a non-executive director +on 3 May 2023 +10. Barry Panayi was appointed as a non-executive director on 13 October 2021. +Accordingly, the percentage difference in 2022 shown represents a comparison +between a full year (2022) and a part year (2021) +Denise Jagger was appointed as a non-executive director on 31 December 2022. +She is not included in the table above for 2023 because Denise has no prior +year data for the purposes of a comparison. Simon Fuller, David Kelly and Helen +Stevenson all left the Board on 31 December 2022 and have not been included in +this table. +Remuneration Report continued +121 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_124.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_124.txt new file mode 100644 index 0000000000000000000000000000000000000000..95a9e5d9f2d29495c072b02f6081cd96c5d7ae9e --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_124.txt @@ -0,0 +1,60 @@ +Chief Executive Officer pay ratio +The table below shows the ratio of the CEO’s single figure total remuneration to the total +remuneration for the median (50th percentile), 25th and 75th percentile paid employee. +Year Method +25th percentile +pay ratio +Median pay +ratio +75th percentile +pay ratio +2018 Option B 38:1 27:1 18:1 +20191 Option B 43:1 31:1 24:1 +2020 Option B 17:1 14:1 11:1 +2021 Option B 59:1 53:1 41:1 +2022 Option B 18:1 16:1 10:1 +2023 Option B 17:1 14:1 9:1 +1. The CEO single figure total remuneration for 2019 was determined by adding together Simon Fox and +Jim Mullen’s single figures of total remuneration as disclosed in the single figure table for that year +The ratios are calculated using Option B methodology set out in the remuneration regulations. This +was considered the optimum approach utilising data compiled for annual gender pay reporting +which provides a robust set of data to refer to in order to identify representative employees in the +organisation at median, lower quartile and upper quartile. Our preference is to have a consistent +reporting reference date. +The median, 25th and 75th percentile employees were identified from the list of full pay relevant +employees in the organisation on 5 April 2023 and where the individuals were also in employment +at full year end in December 2023. The total compensation figure was then calculated and +checks made to ensure the employees identified are representative of pay at these levels in the +organisation. The data points are reflective of our Company structure and types of roles across +the organisation and accordingly the Committee believes the median pay ratio for 2023 to be +consistent with the pay, reward and progression policies for the Company’s UK employees taken +as a whole as at the reference date. +The median pay ratio for 2023 is slightly lower than the figure reported for 2022 where in both +years Group bonuses were not payable and there was no LTIP benefit for the CEO. The ratio +has been significantly higher in years when bonus has paid out and LTIP vested positively. +As the CEO pay ratio will involve the inclusion of variable pay outcomes for any year, it is +reasonable to expect the ratio to vary from year to year. However, the Committee will take +employee pay arrangements into account when setting the pay of our executive directors for any +year, and is committed to paying our directors appropriately and in line with Company performance. +Supporting data compensation figures 25th percentile Median 75th percentile +Total employee pay and benefits figure £32,767 £41,611 £59,758 +Salary and wages component of total +employee pay and benefits figure £31,080 £39,511 £53,638 +Review of past performance +The following chart illustrates the Company’s performance compared to the FTSE SmallCap Index +– which is considered the most appropriate form of ‘broad equity market index’ against which the +Company’s performance should be measured (the Company is a constituent) – and the FTSE +AllShare Index (of which the Company is also an constituent), and to the FTSE 350 Media Index. +Performance, as required by legislation, is measured by TSR. +10-year TSR chart +1413 15 16 17 18 19 20 21 22 23 +250 +200 +150 +100 +50 +Reach plc FTSE 350 Media Index FTSE All-Share Index FTSE Small Cap Index +Source: Refinitiv Eikon +Remuneration Report continued +122 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_125.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_125.txt new file mode 100644 index 0000000000000000000000000000000000000000..cede3e161c743aaf40c896168533dd116584ec63 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_125.txt @@ -0,0 +1,76 @@ +Chief Executive Officer’s single figure of remuneration +2014 2015 2016 2017 2018 2019(a)1 2019(b)2 2020 2021 2022 2023 +Single figure of remuneration (£’000) 1,678 2,260 749 893 949 780 323 485 2,069 561 564 +Annual bonus outcome (% of maximum) 45.8% 34.6% 34.6% 39.7% 38.3% 67.65% 67.65% nil 70.83% nil nil +LTIP vesting (% of maximum) 62.6% 25.3% nil 40.0% 40.0% 40.0% n/a n/a 100% nil nil +1. 2014 to 2019(a) figures for the CEO are in respect of Simon Fox. Simon Fox resigned on 16 August 2019 +2. 2019(b) to 2023 figures reflect Jim Mullen +Relative importance of spend on pay +The table below shows shareholder distributions (dividends and any share buy-backs) and total +employee pay expenditure for 2022 and 2023, along with the percentage change in both. +2023 +£’000 +2022 +£’000 +% change +2022–2023 +Shareholder distributions (dividends) 23,100 22,900 0.9% +Total employee expenditure 221,700 233,200 (4.9)% +Directors’ beneficial interests shareholding requirements (audited) +The table below sets out the beneficial interests of the current non-executive directors in the share +capital of the Company as at 31 December 2023. +Non-executive directors +Ordinary shares at +31 December 2023 +Ordinary shares at +25 December 2022 +Anne Bulford 11,953 11,953 +Priya Guha – – +Steve Hatch1 10,207 10,207 +Denise Jagger2 – – +Barry Panayi 3,979 3,979 +Nick Prettejohn 131,640 131,640 +Wais Shaifta – – +Olivia Streatfeild 55,255 55,255 +1. Steve Hatch left the Board in May 2023 +2. Denise Jagger joined the Board in December 2022 +The table below sets out beneficial interests of the executive directors in the share capital of the +Company and achievement against shareholding requirements, being 200% of base salary for +the CEO and CFO. The targets were not met as at 31 December 2023. +The table shows the position as at 31 December 2023 for current executive directors. Until the +relevant shareholding levels are attained, executive directors are required to retain 100% of shares +vesting, after the sale of sufficient shares to meet any income tax or National Insurance obligations +in respect of vested LTIP awards or in respect of vested deferred bonus share awards (such awards +are made under the Restricted Share Plan (RSP)). +Executive directors +Owned +outright +Unvested and +subject to other +conditions1 +Total share +interests +for SOGs2 +Value +of share +interests3 +Current +shareholding +(% salary/fee) +Jim Mullen 741,488 85,514 827,002 £589,321 117% +Darren Fisher 52,345 298,906 351,251 £157,863 44% +1. For the CEO, these are RSP awards in respect of deferred bonus and for the CFO are buy-out awards as +detailed on page 120. The RSP awards and buy-out awards are subject to continuing service requirements +and malus and clawback provisions +2. Share Ownership Guidelines +3. Calculations are based on the share price as at 31 December 2023. Value of the RSP and the CFO’’s buy-out +awards are reduced by 47% to reflect estimated tax and NI due at time of vesting in line with Investment +Association guidelines +None of the directors has a beneficial interest in the shares of any other Group company. +Since 31 December 2023 and up to the latest practicable date (27 February 2024), there have been +no changes in the directors’ interests in shares. +The lowest closing price of the shares during the year was £0.6605 and the highest price was £1.108. +The share price as at 29 December 2023 (the last trading day before 31 December 2023) was £0.749. +Remuneration Report continued +123 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_126.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_126.txt new file mode 100644 index 0000000000000000000000000000000000000000..599b2c1c49fc5b463e13abc1c07307b386c2be70 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_126.txt @@ -0,0 +1,92 @@ +Director +Date +of grant +Share price +used at date +of grant +At 26 +December +2022 Granted +Exercised +LTIPs/released +RSPs 1 Lapsed +At 31 +December +2023 +Performance +period +Exercise period +(holding period) +Jim Mullen +LTIP2 27.03.20 £0.969 782,346 – – (782,346) – 30.12.19-25.12.22 27.03.23-27.06.25 (27.03.23-27.03.25) +RSP 27.03.20 £0.969 34,932 3,3983 (38,330)4 – – – Restricted until 27.03.23 +LTIP 11.05.21 £2.3517 364,430 – – – 364,430 28.12.20-31.12.23 11.05.24-11.11.24 (11.05.24-11.05.26) +Sharesave 14.07.21 £2.46 3,6585 – – – 3,658 01.09.21-01.09.24 01.09.24-01.03.25 +LTIP 11.04.22 £2.207 399,974 - – – 399,974 27.12.21-31.12.24 11.04.25-11.10.25 (11.04.25-11.04.27) +RSP 11.04.22 £2.207 85,514 - – – 85,514 – Restricted until 11.04.25 +LTIP 13.04.23 £0.848 – 1,040,970 – – 1,040,970 26.12.22-31.12.25 13.04.26-13.10.26 (13.04.26-13.04.28) +Darren Fisher +LTIP 13.04.23 £0.848 – 582,708 – – 582,708 26.12.22-31.12.25 13.04.26-13.10.26 (13.04.26-13.04.28) +Buy-out6 06.06.23 £0.7771 – 95,760 (95,760)7 – – – 06.06.23–06.12.23 +Buy-out6 06.06.23 £0.7771 – 61,164 – – 61,164 – 13.05.24-12.11.24 +Buy-out6 06.06.23 £0.7771 – 80,816 – – 80,816 – 28.03.25-28.09.25 +Buy-out6 06.06.23 £0.7771 – 77,360 – – 77,360 – 28.03.25-28.09.25 +Buy-out6 06.06.23 £0.7771 – 79,566 – – 79,566 – 28.03.26-28.09.26 +Simon Fuller +LTIP8 11.03.19 £0.646 871,664 – – – 871,664 01.01.19–26.12.21 11.03.22-11.06.24 (11.03.22-11.03.24) +LTIP8 27.03.20 £0.969 488,299 – – (261,563) 226,736 30.12.19-25.12.22 27.03.23-27.06.25 (27.03.23-27.03.25) +RSP 27.03.20 £0.969 15,597 1,5179 (17,114)10 – – – Restricted until 27.03.23 +LTIP 11.05.21 £2.3517 243,706 – – (53,096)11 190,610 28.12.20-31.12.23 11.05.24-11.11.24 (11.05.24-11.05.26) +LTIP 11.04.22 £2.207 267,474 - – (139,955)11 127,519 27.12.21-31.12.24 11.04.25-11.10.25 (11.04.25-11.04.27) +RSP 11.04.22 £2.207 36,061 - – – 36,061 – Restricted until 11.04.25 +Directors’ interests in shares under the Reach share plans (audited) 1. The aggregate amount of gains made by +the directors on the exercise of share options in +the year was £64,925 and release of vested RSP +awards in the year was £27,943 (2022: £983,532 +and £159,650) +2. Jim Mullen’s 2020 LTIP award was cancelled and +lapsed at his request, as described on pages 120 +and 121 of the 2022 Annual Report +3. On vesting of this award, another 3,398 shares in +respect of dividends in the period to vesting were +credited to this award in accordance with the +terms of the RSP plan rules +4. Of the 38,330 RSP shares which vested and were +released on 27 March 2023, 18,080 were sold to +cover tax & NI liabilities +5. These shares were granted as options under +the Reach Savings-Related Share Option Scheme +6. These awards represent a buy-out of awards +previously held by Darren Fisher that were forfeited +on his joining the Company. The buy-out awards +will vest on the original vesting dates of the forfeited +awards, subject to Darren’s continued employment +with Reach up to the relevant vesting dates. The +number of shares under the buy-out awards +are equivalent in value to the awards forfeited, +calculated using a three-month average share +price of £0.7771 per share +7. Of the 95,760 LTIP shares which were awarded on +6 June 2023, all of the shares vested on the same +date and were exercised on 22 June 2023. 45,168 +shares were sold to cover tax & NI liabilities. +The share price on 22 June 2023 was £0.668 +8. These shares have vested but have not yet +been exercised +9. On vesting of this award, another 1,517 shares in +respect of dividends in the period to vesting were +credited to this award in accordance with the +terms of the RSP plan rules +10. Of the 17,114 RSP shares which vested and were +released on 27 March 2023, 8,105 were sold to +cover tax & NI liabilities +11. When Simon stepped down from the Board +he retained an interest in the 2021 and 2022 +LTIP awards which were pro-rated to reflect +time served. These awards will continue to vest +at the usual times subject to achievement of the +respective performance conditions. Following +the FY23 year end, the 2021 LTIP lapsed in full +Remuneration Report continued +124 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_127.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_127.txt new file mode 100644 index 0000000000000000000000000000000000000000..43c86a9d4c24ae72baacf414a8760077df9d50c6 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_127.txt @@ -0,0 +1,70 @@ +Details of plans +Long Term Incentive Plan +Vesting of LTIP awards is subject to continued employment and the Company’s performance over +a three-year performance period. If no entitlement has been earned at the end of the relevant +performance period, awards will lapse. There is a two-year holding period on vested LTIP shares, +with malus and clawback provisions. The 2021, 2022 and 2023 LTIP awards are granted as nil-cost +options, with a six-month exercise period post vesting. +Plan +TSR targets Cumulative Net Cash Flow targets +Weighting +Threshold +(20% vesting) +Full vesting +(100% vesting) Weighting +Threshold +(20% vesting) +Full vesting +(100% vesting) +2021 LTIP (relative TSR) 70% Median +Upper +quartile 20% £345m £395m +2022 LTIP (relative TSR) 70% Median +Upper +quartile 20% £285m £330m +2023 LTIP (relative TSR) 75% Median +Upper +quartile n/a n/a n/a +Relative TSR for the 2021 and 2023 LTIP is measured against the constituents of the FTSE SmallCap +(ex. IT). For 2022’s award, it is measured against the constituents of the FTSE 250 Index (ex. IT). +Cumulative Net Cash Flow under each of the awards is defined consistently with past years. +In addition, the 2021 and 2022 LTIP each has a 10% weighting on ARPU. The 2023 LTIP has a 12.5% +weighting on ARPU and a 12.5% weighting on RPM. +Restricted Share Plan +Awards under the RSP are deferred bonus share awards. These awards may not be transferred or +otherwise disposed of by a participant for a period of three years from the date of grant subject to +malus and clawback provisions. Participants beneficially own the restricted shares from the date +of grant. Legal title is held by the RSP Trustees until the restricted shares are released into the +participant’s name. Additional shares representing reinvested dividends may be released +following the vesting of share awards. +Restrictions on the shares end on the third anniversary of the grant, when the shares will be +released into the participant’s name. +Share plans dilution +Overall dilution from share plans for our share plans dilution limit is 4.3% as at 31 December 2023. +This comprises 3.6% in respect of LTIP and 0.7% in respect of Sharesave and other all-employee +plans. These figures consider all share plan awards made in the last 10 years, excluding awards +which have lapsed and awards which have been or are proposed to be satisfied by shares +purchased on the market by Reach’s employees’ share trust. +Implementation of Remuneration Policy for 2024 +Base salary +The Group-wide salary review date is 1 April 2024. As at the date of this report, the salary of the CEO +is £504,425 and the salary of the CFO is £360,000. +Pension and benefits +Jim Mullen and Darren Fisher each have a 7.5% of salary pension allowance for 2024. +Annual bonus and RSP +For 2024, the maximum annual bonus opportunity will be 125% of salary for the CEO and 100% of +salary for the CFO. +The annual bonus plan for our executive directors in 2024 will be fully assessed on Group adjusted +operating profit. +Before any 2024 annual bonus outcomes are confirmed, the Committee will conduct an overview +assessment of performance in the year and consider progress against a wider range of factors. +Performance targets for the 2024 financial year are considered to be commercially sensitive and +are not disclosed on a prospective basis. However, it is intended that performance against targets +will continue to be disclosed in next year’s Annual Remuneration Report. +Any bonus earned in excess of 50% of salary will be deferred in shares under the RSP for three years. +LTIP awards to be awarded in 2024 +In 2024, LTIP awards will be made to each of the CEO and CFO at the levels allowed by the Policy +(175% base salary for the CEO and 150% base salary for the CFO). +Remuneration Report continued +125 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_128.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_128.txt new file mode 100644 index 0000000000000000000000000000000000000000..19d003f936d0ae9d7c708d13154347b2f0936bdb --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_128.txt @@ -0,0 +1,53 @@ +The three-year performance period for all metrics for the 2024 LTIP awards is the period from +1 January 2024 to 31 December 2026. The balance of metrics will be: +• Relative TSR (40%); +• Absolute TSR Growth (20%); +• Revenue per thousand page views (RPM) (25%); +• ESG – reduction in Scope 1 and Scope 2 emissions (15%). +The following paragraphs describe the targets for each metric. +TSR performance relative to constituents of FTSE SmallCap (ex. IT) % of award that can be exercised +Upper quartile or above 40% +Between median and upper quartile Straight-line vesting between 8% and 60% +Median 8% (being 20% weighting of this part) +Below median Nil +Absolute growth in TSR (three-year CAGR) % of award that can be exercised +20% or above 20% +Between 10% and 20% Straight-line vesting between 4% and 20% +10% 4% (being 20% weighting of this part) +Below 10% Nil +For both TSR conditions, measurement will be on the basis of three-month average return figures +at the start and end of the performance period. In the three-month average base period to +31 December 2023, Reach’s average share price was 75.4p. +The FTSE SmallCap (ex. IT) is used for relative TSR as Reach was a member of that index at the start +of the performance period. +The RPM metrics relate to Reach’s Customer Value Strategy. For RPM the range of targets has been +set by the Committee for 2024’s awards by reference to the three-year business plan, and the +Committee considers the ranges set to require stretching growth over the period 2024–2026. +Remuneration Report continued +The Committee regards the RPM targets for the 2024 LTIP awards as commercially sensitive at +the current time and, accordingly, will not be disclosing the target ranges on a prospective basis. +The information will be disclosed when it is appropriate to do so, and no later than on the +publication of the Directors’ Remuneration Report for the year of vesting. +The environmental metrics will measure the absolute reduction in Scope 1 and Scope 2 emissions +(tCO2e) over the period 1 January 2024 to 31 December 2026. +% reduction from 2023 base line % of award that can be exercised +19% or above 15% +Between 16% and 19% Straight-line vesting between 3% and 15% +16% 3% (being 20% weighting of this part) +Below 16% Nil +The targets for this metric are aligned to Reach’s near-term science-based targets for Scope 1 +and 2 emissions in 2030 which were approved by the Reach Sustainability Committee in +December 2023 and the measurement will be subject to external verification. +If there are changes to the business that would result in significant changes in the emissions +inventory, Reach plc’s 2030 baseline and targets would be recalculated in line with best practice in +a process overseen by the Sustainability Committee with external validation. The Remuneration +Committee will continue to work closely with the Sustainability Committee to ensure the +environmental metrics for LTIP continue to be an appropriate incentive as the business evolves. +Chairman and non-executive director fees +The fees for the Chairman and non-executive directors for 2024 will apply as described on page 119. +Olivia Streatfeild +Remuneration Committee Chair +5 March 2024 +126 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret tool is a "ruler". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_129.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_129.txt new file mode 100644 index 0000000000000000000000000000000000000000..5aeb80c79116d898c4a0d5e18f9c75afc9d45123 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_129.txt @@ -0,0 +1,24 @@ +COMPLIANCE WITH THE 2018 UK +CORPORATE GOVERNANCE CODE +The Board considers that, during 2023, the Company applied the principles and complied with all +of the provisions set out in the 2018 UK Corporate Governance Code (the 2018 Code), for the period +under review. Details on how Reach has applied the principles set out in the 2018 Code and how +governance operates at Reach have been summarised throughout this Governance section and +elsewhere in this Annual Report as set out below. The full 2018 Code is available on the Financial +Reporting Council’s (FRC) website at www.frc.org.uk. +1. Board leadership and Company purpose +A. Board’s role The Board is collectively responsible for promoting the long-term success of the Company for its shareholders and other stakeholders. It is also responsible for establishing the +Company’s purpose, values and strategy, and for promoting the desired culture. The Board also provides entrepreneurial leadership within a framework of prudent and effective +controls, which enables risk to be assessed and managed. +Matters and decisions that require Board approval are set out in a formal schedule of matters reserved for its decision, which was last reviewed and updated in February 2024. +The full schedule of matters reserved is available at www.reachplc.com/investors/corporate-governance/accountability. +A summary of the Board’s activities during 2023 can be found on pages 79 to 84. +B. Purpose +and culture +Since 2020, the Board has overseen the implementation and delivery of the Customer Value Strategy, designed to ensure the Group remains aligned to our purpose. +The Board held meetings in April and September 2023 to consider the Group’s strategy. More information can be found on page 80. +Board members also made site visits, enabling them to meet with colleagues and gain first-hand insight into the culture of various areas of the business. The CEO and CFO also +hosted virtual town hall events throughout the year, and the non-executive directors attended and participated in lunches with leaders and breakfasts with wider colleagues. +More information can be found about these events on pages 82 and 83. +127 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_13.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..6cd6a5b0c18743a48aa7c1abf6e75e7695c10957 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_13.txt @@ -0,0 +1,79 @@ +FOCUSING +5.7% +Like-for-like cost savings 2022-23 +17% +Adjusted operating margin +£91.9M +Adjusted operating cash flow +Responsible cost management +We have a proven track record in meeting +challenges and managing costs responsibly, +as evidenced over the past few years. +In 2020 we undertook a transformation +programme to reshape the Group into a +more efficient organisation, and as part of this +closed two of our print plants. These decisions +are always carefully weighed, but when well +executed allow us to mitigate the structural +decline in print and ensure we have a +sustainable unit cost of production. +In 2021, we adopted a hybrid working model, +following employee feedback largely in favour +of retaining more remote working options +post-Covid. This allowed us to streamline +our property portfolio and reduce those +costs, while also providing many of our +teams with greater flexibility. +During 2022, high levels of inflation drove +an unprecedented increase in like-for-like +newsprint costs (+£40m). In response, we +identified numerous ways to optimise costs, for +example by changing print pagination and +supply as well as managing availability to +reduce the volume of unsold copies. +In 2023, we took a number of actions to +support our 5.7% (like-for-like) operating cost +reduction, across several areas. As a content +business that deals in ideas and creativity, +it is unsurprising but no less challenging that +our workforce represents around half of our +operating cost base. Therefore reducing the +headcount, as we have done across all areas +of the business, has been a necessary step +in our cost management. However we also +carefully reviewed our costs in several other +key areas in 2023, from property to energy +to distribution. +For example we undertook a review of our +primary and secondary distribution plans, +reducing costs by consolidating routes and +sharing vans across both our own and +third-party publications. Print production +accounts for 13% of our costs so we +ON EFFICIENCY +Total adjusted operating costs +2022-23 +continuously review our supply chain, from raw +materials through to production planning, to +drive incremental savings. +We also reassessed our real estate portfolio +in 2023, analysing how our spaces have been +used since we introduced hybrid working, and +decided to replace two larger and underused +spaces with smaller offices. This has enabled +us to manage our costs while still providing +teams with flexibility and a place to work or +collaborate when needed. +In addition we installed solar panels at all +three of our print sites in 2023, which will +mitigate some of the increases we have seen +in energy costs – more on these on page 47. +Through these changes and alongside steady +Customer Value Strategy progress, we are +able to meet our obligations as well as +position the business for the future. +2022 2023 +/sterling.cap/four.cap/seven.cap/five.capM +/sterling.cap/four.cap/nine.cap/eight.capM +11 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_130.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_130.txt new file mode 100644 index 0000000000000000000000000000000000000000..1ab812f42f030d45bef4aeb9bd01cd5c3595e174 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_130.txt @@ -0,0 +1,38 @@ +1. Board leadership and Company purpose continued +C. Resources +and controls +The Board’s agenda is set by the Chairman and deals with matters reserved for the Board, including those relating to the Group’s strategic plan, risk appetite, systems of internal +control and corporate governance policies. +The Audit & Risk Committee helps the Board to oversee the risks to which the Group may be exposed and provides the Board with strategic advice in relation to current and +potential risk exposures. More information on risk management can be found on pages 66 and 67. +D. Stakeholder +engagement +The Board fully considered shareholders’ and wider stakeholders’ views when making strategic decisions in 2023. More information can be found in the section 172 statement on +pages 85 to 87. +The AGM provides a valuable opportunity for the Board to engage with shareholders and listen to their feedback. At the 2023 AGM, the Board’s proposals received a high level of +support and all resolutions were passed with over 96% of votes cast in favour. +A General Meeting was held in 2023 to approve a capital reduction of the share premium account. This was passed with 99.98% votes cast in favour. +E. Workforce +engagement +Olivia Streatfeild is the designated non-executive director responsible for workforce engagement. More information can be found about this work on page 82. +The Group has a whistleblowing charter and provides a confidential, independent whistleblowing line that employees can use to report any concerns about the integrity of the +business or breaches of the Group’s policies. Colleagues are also encouraged to share their views through regular engagement surveys, and the results of these are reported to +the Board. +2. Division of responsibilities +F. Role of +the Chair +The Chairman is responsible for: +• the leadership of the Board, including setting its agenda and chairing Board meetings; +• promoting a culture of openness and debate to encourage constructive challenge; and +• ensuring the Board receives accurate, clear and timely information to support sound decision-making. +G. Composition +of the Board +The composition of the Board is set out in Our Board on pages 76 to 78. Excluding the Chairman, Nick Prettejohn, 66.67% of the Board are independent non-executive directors, +and their independence is assessed annually. The Chairman was deemed independent on appointment in 2018 and continues to demonstrate objective judgement. +There is a clear division of responsibilities between the Board and executive leadership. The responsibilities of the Chairman, CEO and Senior Independent Director are set out in +full at www.reachplc.com/investors/corporate-governance/accountability. +The Board has a Conflicts Policy in place. This provides a formal system for directors to declare conflicts, which those directors who have no formal interest in the matter then +consider for authorisation. +Compliance with the 2018 UK Corporate Governance Code continued +128 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_131.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_131.txt new file mode 100644 index 0000000000000000000000000000000000000000..375332b4692c4de378759b133e591d171a1d6045 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_131.txt @@ -0,0 +1,42 @@ +2. Division of responsibilities continued +H. Role of the +non-executive +directors +The main responsibilities of the non-executive directors are to provide an external perspective in Board discussions, to be responsible for scrutinising executive management on +behalf of shareholders, and to constructively challenge Board discussions and help develop proposals on strategy. +The non-executive directors’ letters of appointment set out the time commitment expected from them. The Board is satisfied that each director has sufficient time to devote to +discharging their responsibilities as a director of the Company. The Board reviews and approves as necessary any additional external appointments the directors may look to obtain. +In addition, the Senior Independent Director acts as a sounding board, provides support to the Chairman, acts as an intermediary for other directors when necessary, is available +to shareholders to help address any concerns and reviews the Chairman’s performance with other non-executive directors. +I. Role of the +Company +Secretary +The Company Secretary enables effective communication flows between the Board and its Committees, and between senior management and the non-executive directors. +They also provide effective support to the Board during meetings and when setting agendas and ensure the Board operates in accordance with the Company’s corporate +governance framework. All directors have access to the advice and services of the Company Secretary, who also facilitates any other professional development that directors +consider necessary to help them carry out their duties. +3. Composition, succession and evaluation +J. Appointments +to the Board and +succession +planning +The Nomination Committee is responsible for reviewing Board composition and diversity, leading the process for new Board appointments and ensuring there are plans in +place for Board and senior management succession planning and talent. Appointments are based on merit, against objective criteria, with the aim of bringing a range of skills, +knowledge and experience to Reach. This involves a formal, rigorous and transparent process to source strong candidates from diverse backgrounds, promoting cognitive and +personal strengths. More information can be found in the Nomination Committee Report on pages 88 to 93. +K. Skills, +experience and +knowledge of +the Board +In making recommendations for appointments, the Nomination Committee considers the balance of skills, experience and knowledge needed to enhance the Board and +support the Group in executing its strategy. Darren Fisher was appointed to the Board as CFO in February 2023. There were no other appointments made during the year. +All directors are subject to shareholder election or re-election at the AGM, with the exception of those directors who are retiring at the conclusion of the meeting. The Chairman, +on behalf of the Board, has confirmed each non-executive director continues to be an effective member of the Board and will stand for re-election at the 2024 AGM. +None of the non-executive directors have currently served more than nine years on the Board. +L. Board +evaluation +The last external Board evaluation, facilitated by Sam Allen Associates Limited, was undertaken during 2021. An internal evaluation was carried out in 2023. More information about +the progress made against the recommendations from the 2022 evaluation, and actions to be undertaken in 2024 from the 2023 internal evaluation, can be found on page 90. +Compliance with the 2018 UK Corporate Governance Code continued +129 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_132.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_132.txt new file mode 100644 index 0000000000000000000000000000000000000000..59f99307845e10360bdc07f21fa978e6d0cd9f44 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_132.txt @@ -0,0 +1,40 @@ +4. Audit, risk and internal control +M. Internal and +external audit +The Audit & Risk Committee is responsible for monitoring the integrity of the financial statements, reviewing the Group’s internal controls and risk management systems, and +overseeing the auditor relationship and work undertaken by internal audit. +More information about how the Audit & Risk Committee assesses the effectiveness and independence of the external auditors can be found on pages 97 and 98. +N. Fair, +balanced and +understandable +The Strategic Report (pages 1 to 73) sets out the performance of the Company, the business model, strategy and the risks and uncertainties relating to the Company’s future +prospects. When taken as a whole, the directors consider the Annual Report is fair, balanced and understandable and provides information necessary for shareholders to assess +the Company’s performance, business model and strategy. More information about the review and assessment of the Annual Report can be found on page 97. +O. Risk +management +and internal +control +framework +The Board sets the Company’s risk appetite and annually reviews the effectiveness of the Company’s risk management and internal control systems. A description of the +principal risks facing the Company can be found on pages 68 to 72. Page 73 sets out how the directors have assessed the prospects of the Company, over what period they +have done so and why they consider that period to be appropriate (the viability statement). +5. Remuneration +P. Remuneration +policies and +practices +The Company aims to reward employees fairly, so its remuneration policy is designed to promote the long-term success of the Company while aligning the interests of both the +executive directors and shareholders. +Shareholders approved the updated Remuneration Policy at the 2021 Annual General Meeting, and the Company is required to seek approval for the new Policy at the AGM to be +held on 2 May 2024, from which date the Policy will apply. The proposed Remuneration Policy can be found on pages 107 to 115. +Q. Executive +remuneration +The Remuneration Committee is responsible for setting the remuneration for executive directors. No director is involved in deciding their own remuneration arrangements +or outcome. +R. Remuneration +outcomes and +independent +judgement +Details of the composition and work of the Remuneration Committee can be found in the Remuneration Report on pages 116 to 126. +Compliance with the 2018 UK Corporate Governance Code continued +130 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_133.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_133.txt new file mode 100644 index 0000000000000000000000000000000000000000..c22a8db40aa345555b85f042d5a0eccfd6c9218c --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_133.txt @@ -0,0 +1,42 @@ +The Directors’ Report +comprises the Governance +Report (on pages 74 to 103), +the Directors’ Report (on pages +131 to 135) and the Shareholder +information section (on pages +207 and 208). The following +information is provided in +other appropriate sections +of the Annual Report and is +incorporated by reference +in this table. +Information Reported in Page number(s) +Likely future developments and performance of the Company Strategic Report 29 +Stakeholder engagement Strategic Report 30 to 53 +Governance Report 74 to 103 and 127 to 130 +Engaging with employees Strategic Report 44 +Employment of disabled persons Strategic Report 43 and 44 +Greenhouse gas emissions Strategic Report 52 and 53 +Task Force on Climate-related Financial Disclosures (TCFD) report Strategic Report 54 to 64 +Viability statement Strategic Report 73 +Compliance with the 2018 UK Corporate Governance Code Governance Report 127 to 130 +Directors Our Board 76 to 78 +Directors’ Remuneration Report 104 to 126 +Directors’ Remuneration Report – +directors’ beneficial interests and +shareholding requirements +123 and 124 +Details of Long Term Incentive Plan Directors’ Remuneration Report 125 +Dividend waiver Directors’ Report 134 +Statement of Directors’ responsibilities Directors’ Report 135 +Going concern Financial statements 149 and 150 +Accounting policies, financial instruments and financial risk management Financial statements 149 to 157 +179 to 182 +191 and 192 +To comply with DTR 4.1.5R(2) and DTR 4.1.8R, the required content of the Management Report can be found in the Strategic Report or this Directors’ +Report, including the material incorporated by reference. +DIRECTORS’ +REPORT +Directors’ Report +131 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_134.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_134.txt new file mode 100644 index 0000000000000000000000000000000000000000..637595cd0005d5b803cbee879b818120eb5b15e9 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_134.txt @@ -0,0 +1,111 @@ +Articles of Association +The Company’s Articles of Association +(the Articles) set out the internal regulations +of the Company and cover such matters as +the rights of shareholders, the appointment +and removal of directors, and the conduct +of the Board and general meetings. +The Articles can only be amended by at +least a 75% vote in favour from those voting +in person or by proxy at a general meeting +of the shareholders. +A copy of the Articles is available to view on +our website at www.reachplc.com/investors/ +corporate-governance. +Directors +The directors of the Company who were in +office during the year and up to the date of +signing the financial statements are listed on +pages 76 to 78, together with details of each +director’s skills, experience and current external +appointments. Details of directors’ beneficial +and any non-beneficial interests in the shares +of the Company are shown on pages 123 and +124. Options granted to directors under the +Sharesave, the Long Term Incentive Plan and +the Restricted Share Plan are shown on page +124. More information regarding employee +share option schemes is provided in note 32 +to the consolidated financial statements on +pages 178 to 179. +Appointment and replacement +of directors +The Articles give the directors the power to +appoint and replace directors. Under the terms +of reference of the Nomination Committee, +appointments must be recommended by +the Nomination Committee for approval +by the Board. +The Articles also require directors to retire +and submit themselves for election to the first +Annual General Meeting (AGM) following their +appointment and to retire at the AGM held in +the third calendar year after election or last +re-election. However, to comply with the 2018 +UK Corporate Governance Code, all the +directors will submit themselves for +election or re-election at each AGM. +Compensation for loss of office +There are no agreements in place between +the Company and any director or employee +for loss of office in the event of a takeover. +Directors’ indemnity and insurance +The directors have the benefit of an indemnity, +which is a qualifying third-party indemnity +provision as defined by section 234 of the +Companies Act 2006. This provision was in +force during the financial year and when +the Directors’ Report was approved. +The Company maintains appropriate liability +insurance for its directors and officers, which +provides cover for any legal action brought +against them. +Share capital +As at 31 December 2023, the Company’s issued +share capital comprised 322,085,269 ordinary +shares with a nominal value of 10 pence each. +The Company held 4,110,884 ordinary shares +in Treasury. Therefore, the total number of +voting rights in the Company was 317,974,385. +All shares other than those held in Treasury are +freely transferable and rank equally for voting +and dividend rights. The Company is not +aware of any agreements between holders +of shares that result in any restrictions. +As at 31 December 2023, the Trinity Mirror +Employees’ Benefit Trust held 3,271,758 +shares (2022: 3,503,358). The TIH Employee +Benefit Trust was wound up on 31 August 2023, +and the 94,740 shares held in this trust were +transferred to the Trinity Mirror Employees’ +Benefit Trust. The Trustees of both Employee +Benefit Trusts have elected to waive dividends +on shares held under the trusts relating +to dividends payable during the year. +Details of the authorised and issued share +capital, share premium account, Treasury +shares and Employee Benefit Trusts can be +found in notes 29 to 32 in the notes to the +consolidated financial statements. +As at the latest practicable date (27 February +2024), the Company held 4,110,579 shares +in Treasury, representing 1.28% of the issued +share capital of the Company. Treasury shares +do not receive dividends and are not included +when calculating the total voting rights in the +Company. The Company, if deemed fit, can +sell the shares for cash or transfer the shares +for use in an employee share scheme. +During the year, the following transfers from +Treasury were made: +Date Transfer +3 April 2023 – +13 October 2023 +903,526 shares +were withdrawn from +Treasury and transferred +to Equiniti to satisfy +Reach share plans +Directors’ Report continued +132 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_135.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_135.txt new file mode 100644 index 0000000000000000000000000000000000000000..e66930e048bbcb6dd68b8a6b4e898f37fe1e96df --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_135.txt @@ -0,0 +1,108 @@ +Substantial shareholdings +The Company has been notified, in accordance with Chapter 5 of the Disclosure Guidance and +Transparency Rules, of the following direct or indirect holdings of voting rights, including shares +and other financial instruments, in the Company’s shares: +Name +As at +31 December +2023 +Number of +voting rights +As at +31 December +2023 +% of total voting +rights +As at 27 February +2024 +Number of +voting rights +As at 27 February +2024 +% of total voting +rights +Aberforth Partners 31,795,824 10.03% 31,795,824 10.03% +Dimensional Fund Advisor1 12,843,108 4.98% 12,843,108 4.98% +FMR LLC 16,057,004 5.05% 16,057,004 5.05% +Lombard Odier Asset +Management (Europe) Limited 15,955,434 5.02% 15,955,434 5.02% +M&G plc2 44,209,812 14.03% 44,209,812 14.03% +Premier Miton Group plc3 15,597,514 5.00% 15,597,514 5.00% +Schroders plc4 14,488,704 4.63% 14,488,704 4.63% +Slater Investments2 15,789,961 5.02% 15,789,961 5.02% +Wellcome Trust 13,044,412 4.11% 13,044,412 4.11% +1. Disclosure made in 2015 and prior to 2020 bonus issue and increases in the share capital pursuant to +transactions that took place in 2015 and 2018 +2. Disclosures made in 2022 +3. Since the 2021 disclosure, Premier Miton Group plc has sold shares and as at 27 February 2024 holds 0.93% +voting rights, making it no longer a substantial shareholder +4. Disclosures made in 2021 +Purchase of own shares +At the Company’s AGM on 3 May 2023, shareholders approved an authority for the Company to +make market purchases of its own shares up to a maximum of 31,707,085 shares (being 10% of the +issued share capital less Treasury shares at that time) at prices not less than the nominal value +of each share (being 10 pence each) and not exceeding 105% of the average mid-market price +for the preceding five business days. No use was made of this authority during the period. +The Company intends to renew this authority at its 2024 AGM. +Allotment of shares +At the Company’s AGM on 3 May 2023, +shareholders approved an authority for +the Company to allot ordinary shares up to +a maximum nominal amount of £10,569,028 +(being one-third of the Company’s issued +share capital less Treasury shares at that +time). The Company intends to renew this +authority at its 2024 AGM. +Change of control provisions +The directors are not aware of there being +any significant agreements that contain any +material change of control provisions to which +the Company is a party other than in respect +of the financing facilities that expire in +November 2026. Under the terms of these +facilities, and in the event of a change of +control of the Company, the banks can +withdraw funding; and all outstanding loans, +accrued interest and other amounts due and +owing become payable within 30 days of +the change. +AGM +The AGM provides an opportunity for directors +to engage with shareholders, answer their +questions and meet them informally. +The next AGM is planned to take place on +2 May 2024 in London. More details of the +arrangements will be posted on our website, +www.reachplc.com, and will be contained +within the Notice of Meeting. +The Notice of Meeting and proxy form for the +2024 AGM will be shared with shareholders +at least 20 working days prior to the meeting +date, as required by the FRC’s Guidance on +Board Effectiveness. A detailed explanation +of each item of business to be considered at +the 2024 AGM will be included in the Notice +of Meeting, which will either be sent by post +to the shareholders in advance of the 2024 +AGM or will be available to download from +our website, www.reachplc.com. +Shareholders who are unable to attend +the 2024 AGM are encouraged to vote +in advance of the meeting, either online at +www.shareview.co.uk or by using the proxy +form, which will be sent to all shareholders. +Dividends +The Board proposes a final dividend for 2023 +of 4.46 pence per share (2022: 4.46 pence per +share), which, subject to shareholder approval, +will be payable on 31 May 2024 to shareholders +on the register on 10 May 2024. The proposed +final dividend together with the interim dividend +of 2.88 pence per share (2022: 2.88 pence per +share) results in a total dividend for 2023 of +7.34 pence per share (2022: 7.34 pence +per share). +Directors’ Report continued +133 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #2 is a "penguin". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_136.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_136.txt new file mode 100644 index 0000000000000000000000000000000000000000..39b11a896293388674f245750379fdc77e082af9 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_136.txt @@ -0,0 +1,137 @@ +Dividend waivers +There is a waiver in place in respect of all or any +future right to dividend payments on shares +held in the Trinity Mirror Employees’ Benefit Trust +(3,271,758 shares as at 31 December 2023) and +shares held in Treasury (4,110,884 shares as at +31 December 2023). +Dividend Policy +The Board recognises the importance of +growing dividends for shareholders while also +investing to grow the business and meeting +our funding commitments to the defined +benefit pension schemes. The Board expects +to continue to adopt a policy of paying +dividends that are aligned to the free cash +generation of the Group. Free cash generation +for this purpose is the net cash flow generated +by the Group before the repayment of debt, +dividend payments, other capital returns to +shareholders and additional contributions +made to the defined benefit pension schemes. +The Board will also continue to consider, +if appropriate, the return of capital to +shareholders through a share buy-back if +it has generated surplus cash and sees an +opportunity to enhance earnings per share +and therefore shareholder value. Prior to +initiating a share buy-back programme, the +Board will carefully consider the cash generation +of the business and the Group’s obligations to +its defined benefit pension schemes. +The risks associated with delivering the +Dividend Policy are: +• the availability of distributable reserves – in +2014, an impairment of the carrying value of +investments held by the Company resulted +in a negative balance on the profit and loss +reserve, so the Company had no distributable +reserves. This was addressed by undertaking +a court-approved capital reduction to +eliminate the negative balance in the +profit and loss reserve and, since then, +the distributable reserves have been rebuilt +through dividends received from subsidiary +companies from profits. The Company +has subsequently performed another +court-approved capital reduction in 2023, +converting the total £605.4m within the +share premium account into distributable +reserves within the profit and loss reserve; +• a significant fall in profit and cash flow that +materially reduces free cash flow – under +these circumstances, the Group would +review all investment requirements and +pension obligations. In such circumstances, +we would seek to hold dividends unless +it would place increased pressure on +the Group’s ability to fund investment +to deliver its strategy or if it was to +create any financing issues; and +• the payment of dividends would potentially +restrict the ability of the Group to meet +payments due under the recovery plans +agreed with the Group’s defined benefit +pension schemes. The Group agrees +recovery plans with the Trustees of the +Group’s defined benefit pension schemes +at each triennial valuation based on +developments in the funding position between +valuations and these may be also revised +as a result of material corporate activity. +As part of the 2019 triennial valuations of +four of the Group’s defined benefit pension +schemes which remain not fully bought-in, +the Group has committed to dividend +sharing arrangements whereby it would +pay to each scheme a pro-rated share of +the excess in dividend payment increases +greater than 5% in any year for so long +as the schemes continue to receive +contributions. Further, the Group has agreed +that dividend payments or any other return +of capital to shareholders in any year will not +be in excess of the aggregate contributions +due to the defined benefit pension schemes +in the same year to address past deficits. +These obligations may restrict future +increases in dividends. +Political donations +At the Company’s AGM held on 3 May 2023, +the Company and its subsidiaries received +authority from shareholders under the +Companies Act 2006 to make donations to +political parties of up to £75,000 in aggregate +each year. The resolution passed, with 92.31% +of participating shareholders voting in favour. +This resolution was proposed to ensure that +neither the Company nor its subsidiaries +inadvertently commits any breaches of the +Companies Act 2006 through undertaking +routine activities. No political donations +were made during 2023 (2022: nil). +Strategic Report +The Company’s Strategic Report is set out +on pages 1 and 73. It sets out the Company’s +business model and strategy, principal risks +and uncertainties facing the Group and how +these are managed and mitigated. +Results +A review of the Company’s consolidated +results can be found on pages 22 to 29. +Modern slavery +In compliance with the Modern Slavery +Act 2015, the Company’s Modern Slavery +Statement can be found on our website at +www.reachplc.com/investors/corporate- +governance/policies. +Disclosure table pursuant to +Listing Rule 9.8.4R +In accordance with LR 9.8.4R, the table +below sets out the location of the information +required to be disclosed, where applicable. +Applicable sub-paragraph +within LR 9.8.4R Page number +(6) Waivers of future +emoluments +Remuneration +Report page 106 +(12) Waivers of dividends Directors’ Report +page 134 +(13) Waivers of future +dividends +Directors’ Report +page 134 +Directors’ Report continued +134 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_137.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_137.txt new file mode 100644 index 0000000000000000000000000000000000000000..ec77751f4db1f03f36e8c34ec4bc294ce8d48b76 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_137.txt @@ -0,0 +1,133 @@ +Environmental management +Reach continues to comply with the +Companies Act 2006 (Strategic Report and +Directors’ Report) Regulations 2013. We are also +reporting in compliance with the Companies +(Directors’ Report) and Limited Liability +Partnerships (Energy and Carbon Report) +Regulations 2018, known as SECR (Streamlined +Energy and Carbon Reporting). We have +fully disclosed our Scope 1 and 2 emissions +as well as all relevant Scope 3 emissions +for the reporting period 1 January 2023 to +31 December 2023. We also comply with +the Climate Change Agreements (Eligible +Facilities) Regulations. Energy consumption +and greenhouse gas emissions have been +calculated in line with the UK Government’s +Regulations as published in Environmental +reporting guidelines: including Streamlined +Energy and Carbon Reporting requirements. +Statement of directors’ +responsibilities in respect +of the financial statements +The directors are responsible for preparing the +Annual Report and the financial statements in +accordance with applicable law and regulation. +Company law requires the directors to +prepare financial statements for each +financial year. Under that law, the directors +have prepared the group financial statements +in accordance with UK-adopted international +accounting standards and the parent +company financial statements in accordance +with United Kingdom Generally Accepted +Accounting Practice (United Kingdom +Accounting Standards, comprising FRS 101 +Reduced Disclosure Framework, and +applicable law). +Under company law, directors must not +approve the financial statements unless they +are satisfied that they give a true and fair view +of the state of affairs of the group and parent +company and of the profit or loss of the group +for that period. In preparing the financial +statements, the directors are required to: +• select suitable accounting policies +and then apply them consistently; +• state whether applicable UK-adopted +international accounting standards have +been followed for the group financial +statements and United Kingdom Accounting +Standards, comprising FRS 101, have been +followed for the parent company financial +statements, subject to any material +departures disclosed and explained +in the financial statements; +• make judgements and accounting +estimates that are reasonable and +prudent; and +• prepare the financial statements on the +going concern basis unless it is inappropriate +to presume that the group and parent +company will continue in business. +The directors are responsible for safeguarding +the assets of the group and parent company +and hence for taking reasonable steps to +prevent and detect fraud and other irregularities. +The directors are also responsible for keeping +adequate accounting records that are +sufficient to show and explain the group’s and +parent company’s transactions. The records +must enable the directors to disclose with +reasonable accuracy at any time the financial +position of the group and parent company +and enable them to ensure that the financial +statements and the Directors’ Remuneration +Report comply with the Companies Act 2006. +In addition, the directors are responsible for +the maintenance and integrity of the parent +company’s website. Legislation in the United +Kingdom governing the preparation and +dissemination of financial statements may +differ from legislation in other jurisdictions. +Directors’ confirmations +The directors consider that the Annual +Report and Accounts, taken as a whole, is fair, +balanced and understandable and provides +the information necessary for shareholders +to assess the Group’s and parent company’s +position and performance, business model +and strategy. +Each of the directors, whose names and +functions are listed in the Our Board section +on pages 76 to 78 of the Annual Report, +confirm that, to the best of their knowledge: +• the Group financial statements, which +have been prepared in accordance with +UK-adopted international accounting +standards, give a true and fair view of the +assets, liabilities, financial position and profit +of the Group; +• the parent company financial statements, +which have been prepared in accordance +with United Kingdom Accounting Standards, +comprising FRS 101, give a true and fair view +of the assets, liabilities and financial position +of the parent company; and +• the Strategic Report includes a fair review +of the development and performance +of the business and the position of the +Group and parent company, together +with a description of the principal +risks and uncertainties that it faces. +In the case of each director in office at the +date the Directors’ Report is approved: +• so far as the director is aware, there is +no relevant audit information of which the +Group’s and parent company’s auditors are +unaware; and +• they have taken all the steps that they +ought to have taken as a director to make +themselves aware of any relevant audit +information and to establish that the +Group’s and parent company’s auditors +are aware of that information. +The Directors’ Report was approved on behalf +of the Board on 5 March 2024. +Darren Fisher +Chief Financial Officer +5 March 2024 +Directors’ Report continued +135 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_138.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_138.txt new file mode 100644 index 0000000000000000000000000000000000000000..bff83d1d972b92023df4d6aa2e89423bae4892e7 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_138.txt @@ -0,0 +1,132 @@ + Reach plc Annual Report 2023 136 +Independent auditors’ report to the members of Reach plc + +Report on the audit of the +financial statements +Opinion +In our opinion: +• Reach plc’s group financial statements +and company financial statements (the +“financial statements”) give a true and fair +view of the state of the group’s and of the +company’s affairs as at 31 December 2023 +and of the group’s profit and the group’s +cash flows for the 53 week period then ended; +• the group financial statements have been +properly prepared in accordance with +UK-adopted international accounting +standards as applied in accordance with +the provisions of the Companies Act 2006; +• the company financial statements have +been properly prepared in accordance +with United Kingdom Generally Accepted +Accounting Practice (United Kingdom +Accounting Standards, including FRS 101 +“Reduced Disclosure Framework”, and +applicable law); and +• the financial statements have been +prepared in accordance with the +requirements of the Companies Act 2006. +We have audited the financial +statements, included within the Annual +Report, which comprise: the Consolidated +and Parent company balance sheets as at +31 December 2023; the Consolidated income +statement, the Consolidated statement of +comprehensive income, the Consolidated +cash flow statement and the Consolidated +and Parent company statements of changes +in equity for the period then ended; and +the notes to the financial statements, which +include a description of the significant +accounting policies. +Our opinion is consistent with our reporting to +the Audit & Risk Committee. +Basis for opinion +We conducted our audit in accordance with +International Standards on Auditing (UK) (“ISAs +(UK)”) and applicable law. Our responsibilities +under ISAs (UK) are further described in the +Auditors’ responsibilities for the audit of the +financial statements section of our report. +We believe that the audit evidence we have +obtained is sufficient and appropriate to +provide a basis for our opinion. +Independence +We remained independent of the group in +accordance with the ethical requirements +that are relevant to our audit of the financial +statements in the UK, which includes the FRC’s +Ethical Standard, as applicable to listed public +interest entities, and we have fulfilled our other +ethical responsibilities in accordance with +these requirements. +To the best of our knowledge and belief, we +declare that non-audit services prohibited by +the FRC’s Ethical Standard were not provided. +Other than those disclosed in Note 6, we +have provided no non-audit services to the +company or its controlled undertakings in the +period under audit. +Our audit approach +Overview +Audit scope +• The group’s core publishing operations are +accounted for on one general ledger. We +performed full scope audits over this and +the parent company ledger. This involved +work undertaken at locations where the +group’s main financial business processes +are managed, which are the central +accounting function in Liverpool, the group’s +London headquarters and print operations +in Watford. +• Our audit scoping gave us coverage of 99% +(2022: 99%) of revenue. +Key audit matters +• Carrying value of intangible assets (group) +and investments in subsidiaries (parent) +• Provision for historical legal issues (group) +• Valuation of pension liabilities and pension +assets (group) +Materiality +• Overall group materiality: £4.90m +(2022: £5.70m) based on 5% of a three +year average of profit before tax and +before impairment charges and reversals, +significant restructuring charges and costs +associated with historical legal issues. +• Overall company materiality: £6.00m +(2022: £7.90m) based on 1% of total assets. +• Performance materiality: £3.74m +(2022: £4.27m) (group) and £4.50m +(2022: £5.93m) (company). +The scope of our audit +As part of designing our audit, we determined +materiality and assessed the risks of material +misstatement in the financial statements. +Key audit matters +Key audit matters are those matters that, in +the auditors’ professional judgement, were of +most significance in the audit of the financial +statements of the current period and include +the most significant assessed risks of material +misstatement (whether or not due to fraud) +identified by the auditors, including those +which had the greatest effect on: the overall +audit strategy; the allocation of resources +in the audit; and directing the efforts of the +engagement team. These matters, and any +comments we make on the results of our +procedures thereon, were addressed in the +context of our audit of the financial statements +as a whole, and in forming our opinion thereon, +and we do not provide a separate opinion on +these matters. +This is not a complete list of all risks identified +by our audit. +The key audit matters below are consistent +with last year. +136 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_139.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_139.txt new file mode 100644 index 0000000000000000000000000000000000000000..6354fe8b3ce42130d752076156a6728f75c0fe2b --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_139.txt @@ -0,0 +1,86 @@ + Reach plc Annual Report 2023 136 +Independent auditors’ report to the members of Reach plc + + Reach plc Annual Report 2023 137 +Independent auditors’ report to the members of Reach plc continued + + + +Key audit matter How our audit addressed the key audit matter +Carrying value of +intangible assets +(group) and +investments in +subsidiaries (parent) +Refer to Note 3 of the +consolidated financial +statements for the directors’ +disclosure on the critical +accounting judgements, Notes +15 and 16 of the consolidated +financial statements and Note 4 +of the parent company +financial statements for the +directors’ disclosure of the +key sources of estimation +uncertainty, and pages 99 +and 100 for the views of the +Audit & Risk Committee. +At 31 December 2023, the group +held indefinite life intangibles +(being the carrying value of +acquired publishing rights and +titles, after previous impairment +charges) of £818.7m +(2022: £818.7m) and goodwill +of £35.9m (2022: £35.9m). +The parent company held +investments with a carrying +value before impairment of +£708.9m that has been +impaired to £541.1m during the +current financial year. A similar +impairment was recognised +in the previous year, with the +carrying value of investments +held impaired from £773.3m +to £708.2m. +Indefinite life consideration +In assessing whether the indefinite life judgement was appropriate, we examined management’s evaluation of the life of the intangible assets, considering criteria in International +Accounting Standard 38, “Intangible assets”. We found that the group has established digital capabilities and earns significant amounts of digital revenue which together supported +the principle of a potentially sustainable digital business without a finite life. In particular we found the group continues to develop its ‘data driven’ revenues, which have increased as +a proportion of overall digital revenue, and has made operational and strategic progress in developing its customer value strategy; both of which supported management’s position. +Impairment assessment +Appropriateness of a 10 year modelling period +We satisfied ourselves that it was valid, in the context of a business in a long term transition from print based to digital, to model over a longer period than the group’s budget and that +10 years was an appropriate period. +Key assumptions in the impairment model +We met with management to understand the basis of preparation of the FY24 budget, and challenged management to provide internal and market evidence for the key assumptions +(which we then evaluated and tested to source data and to our own external sources as relevant), including: historical trend data for circulation revenues (considering both volumes and +pricing), decline rates for print advertising, digital revenue growth rates, and cost reduction plans to mitigate inflationary factors. We paid specific attention to the group’s cost reduction +plans and its impact on the budget, and the group’s digital revenue budget. +In assessing the assumptions used, we also considered management’s historical forecasting accuracy, including the degree to which variances noted could have been forecast in +advance, and the degree to which changes in digital revenue growth assumptions would lead to an impairment of the group’s intangible assets. +We assessed the discount rates that management’s experts calculated using our valuations experts. They benchmarked the discount rates used and found that the rates used were +materially reasonable. +When considering print circulation revenue decline assumptions, we challenged management’s forecast of future changes to prices and whether the assumptions made were compatible with +the forecast declines in circulation volumes. Taking into account the group’s performance when compared to market analysis, we found the forecast decline in circulation revenue was reasonable. +When considering digital revenue growth assumptions, we considered the degree to which these took account of the events which led to a reduction in average UK page views per +month, with resulting reduction in digital revenue, and market analysis. +The revenue decline in FY23 was lower than the reduction in the number of page views because a focus on ‘data driven’ revenues and those less dependent on page views led to yields +increasing. These products allow Reach to secure a higher yield as a result of Reach’s ability to direct advertising to specific users or content. Revenue from these products are now 43% +of digital revenue and fell at a lower rate (4% decline) than digital revenue as a whole (15% decline). Considering management forecasts of future page views and market analysis, we +found the forecast future growth for digital revenue was reasonable. +We challenged management on the difference between the current market capitalisation and the outcome of the value in use model, after allowing for a reasonable control premium. +We evaluated management’s explanations as part of assessing the reasonableness of the assumptions used. For the parent company investment impairment consideration, we also +considered management’s approach to modelling past service pension contributions and compared this with the IAS 19 deficit and the funding commitments made with the Trustees +of the pension schemes and evaluated the relative merits of alternative approaches and their impact on the resulting carrying value. The pension amounts are included in the model +for the parent company investment impairment because the subsidiaries are required to fund these liabilities. +We found that the group’s impairment model supported the carrying value of the group’s intangible assets and was based on reasonable assumptions. We note that the headroom +in the impairment model has reduced compared to the prior year and that it is sensitive to changes in assumptions in the model, in particular, to the group’s ability to grow its digital +revenues to the scale forecast. We agree that the carrying value of the parent company’s investments is impaired and consider the charge recognised to be reasonable. +We also evaluated the group’s disclosures and sensitivity analysis in notes 3, 15 and 16 to the group financial statements and note 4 of the parent company financial statements. +We consider these to be appropriate. +137 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_14.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..f0cb77beb60ecb04c6364e3cd92b7e75767f594f --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_14.txt @@ -0,0 +1,109 @@ +Chief Executive’s review +2023 was far from a straightforward year, but +it was an important and necessary one for the +business. We can now look to the future having +removed several long-term uncertainties and +delivered market expectations, while also +having progressed our Customer Value +Strategy (CVS) and more firmly pointed +the business towards our digital audiences. +Much of this progress was several years +in the making, for example the preparation +that supported us in 2023’s trial around several +long-standing historical legal issues. While +confronting the past in this way is not easy, the +resulting judgment on time limitation for future +claims around historical legal issues means +that a significant number of outstanding +claims can be resolved, and this should +largely bring an end to future claims. +We also took decisive action to resolve the +outstanding pension funding valuations, which +has similarly given us a firm end in sight for an +obligation that has hindered this organisation +for several decades. Together these two +achievements give the business much- +needed financial clarity and allow us to +plan for the future with far greater certainty. +Throughout the year, we made significant +progress in becoming a data-driven, digitally- +focused business, supported by a predictable +and reliable print business. +The average revenue (RPM) we generate from +our digital page views is now up over 10% from +last year, not something I take for granted +against a challenging backdrop. While we +have seen yields decline in our open market +programmatic advertising, we have been +able to add increased value by growing +non-advertising revenue streams like +ecommerce, affiliates and partnerships, +reinforcing the benefit of our Customer Value +Strategy (CVS). Crucially this has reduced the +impact from the industry-wide decline in +referral traffic, a trend that we have long +expected – albeit not as quickly and severely +as it came – and which CVS was always +intended to mitigate. +We continued our transformation in the year, +taking action to ensure that our cost base +reflects the economic environment in which +we operate, and to enable us to become +a digital-first organisation. To achieve this, +we needed to reduce the size of some of +our teams. This is not a decision I or my +management team take lightly. However, +recent trends have only reinforced our belief +that we must be willing to make big changes +to exert more control over our own destiny +and protect our brands in the long term. +The strong yield performance and efficient +management of our cost base meant we +delivered a sustainable operating margin of +17%, broadly in line with last year and giving +us a strong foundation for 2024. +A fast-changing environment +We operate in a dynamic, competitive and +constantly evolving market and 2023 was no +exception. The period of economic volatility +that began in 2020 has continued to impact +the market, placing pressure on advertising +spend and inflating costs for both businesses +and consumers. Throughout the year, our +entire industry saw a fall in referral traffic +from tech platforms and we were not immune +from that. Facebook, one of our largest traffic +referrers, has shifted away from news content +and we have contended with numerous +Google core algorithm updates, each one +requiring us to pivot on how we deliver +content to our audiences. +These changes have impacted our organic +search traffic and therefore our growth in the +near term, with page views down 24% versus +last year, in line with the wider news publishing +market. Despite the decline in volume, our +commercial teams have expertly traded +the value of our content and ad space, +capitalising on our Customer Value +Strategy progress to drive our revenue. +Telling the stories that matter +It’s clear that audience behaviour and digital +trends can shift rapidly, but what remains +constant is our core purpose to enlighten, +empower and entertain our mainstream +audiences, wherever they might find us. +A PATH TO +PROGRESS +Jim Mullen +Chief +Executive +Officer +“We can now look to the +future having removed +several long-term +uncertainties and +delivered market +expectations.” +12 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_140.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_140.txt new file mode 100644 index 0000000000000000000000000000000000000000..a80829906eba370eb7c0f6ec174a0c3dd7a0cbdb --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_140.txt @@ -0,0 +1,54 @@ + Reach plc Annual Report 2023 140 +Independent auditors’ report to the members of Reach plc continued + + Key audit matter How our audit addressed the key audit matter +Provision for historical legal issues (group) +Refer to Note 3 for the key sources of estimation uncertainty, Note 27 for further details on +the provision recognised and page 101 for the views of the Audit & Risk Committee. +The Group has a provision of £18.2m in respect of historical legal issues as at 31 December +2023 (2022: £43.0m). The provision relates to a number of claims arising from suspected +phone hacking and unlawful information gathering in the past. +During 2023, a release of £20.2m (2022: charge of £11.0m) to the income statement was +recognised due to the Judgment handed down on 15 December 2023 in respect of claims +of four test claimants. As a result of the Judgment, management has determined that any +claims issued after 31 October 2020 are time-barred under the Limitation Act 1980, unless +individual claimants can demonstrate specific exceptional circumstances. Therefore, this +has significantly reduced the amounts that are expected to be settled with claimants. +As at 31 December 2023, there are now two parts to the provision: known claims and common +court costs. The basis for the known claims is the average of past settlements, depending on +the stage that the claim has reached. Common costs and generic costs are court costs +incurred which are based on information provided by a third party. +As expected by management and their legal advisors, the claimants have made an +appeal in the hearing held on 29 January 2024. Having read the skeleton argument, both +management and their legal advisors consider the likelihood of success to be remote. On +9 February 2024, the Judge refused permission for the claimants to appeal so the claimants +will now have to seek permission from the Court of Appeal. The claimants have 21 days from +that date to submit an appeal, but the outcome will not be known until later. +There was also a Judgment handed down on 9 February 2024 in relation to generic costs and +common costs. In terms of interim payments of costs, the Judgment states the claimants are +requesting that the Group pays the claimants’ common costs for the trial of the generic issues. +This provision for historical legal issues is recognised as a key source of estimation uncertainty. +The audit procedures we performed in respect of this matter included: +• Evaluating developments during the year and up to the date of this report, by holding meetings with +management, internal legal counsel, external legal counsel and those charged with governance. These +meetings enabled us to understand the impact of the Judgment on 15 December 2023 on time limitation +and damages and the Judgment on 9 February 2024 on generic costs and common costs. We corroborated +our understanding gained through discussion with external legal counsel and with our internal legal expert +throughout the audit process. We challenged management as to how these developments had been +incorporated into the calculation of the provision. +• Testing the calculation of the provision. This included, on a sample basis, agreeing previously settled claim +values to supporting agreements and amounts paid by the Group. The averages of the settlement values +were used by management as the basis for calculating the year-end provision. +• Assessing the completeness of the provision through testing management’s exercise to determine the +likelihood of the appeal by claimants being successful. +• Evaluating whether management’s methods and assumptions for calculating the provision adequately allows +for: the nature of current claims (excluding letters before action and issued claims which are now time- +barred), the value that current claims are being settled at and current claim management strategies. +There is subjectivity and continuing uncertainty involved in estimating this provision. However, based on the +audit procedures performed we concluded the amount provided as at 31 December 2023 was reasonable. +We also evaluated the related disclosures included in notes 3 and 27 to the group financial statements by +reference to the audit procedures outlined above. We consider them to be appropriate. We concur with +management’s view that any further contingent liability is deemed remote. +138 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_141.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_141.txt new file mode 100644 index 0000000000000000000000000000000000000000..450200b5777bb003b3b0c2b514c81ada83b95fe8 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_141.txt @@ -0,0 +1,78 @@ + Reach plc Annual Report 2023 140 +Independent auditors’ report to the members of Reach plc continued + + + Reach plc Annual Report 2023 141 +Independent auditors’ report to the members of Reach plc continued + + Key audit matter How our audit addressed the key audit matter +Valuation of pension liabilities and pension assets (group) +Refer to Note 3 for the directors’ disclosure on the critical accounting judgements +and key sources of estimation uncertainty, Note 21 for details of the schemes and +amounts recognised in respect of defined benefit pension schemes and page 101 +for the views of the Audit & Risk Committee. +Pensions obligations are significant in the context of the overall balance sheet of the +group. The group has six defined benefit pension plans which comprise total pension +liabilities of £1,835.6m (2022: £1,860.0m). The net pension deficit (pre deferred tax) on +the consolidated balance sheet is £102.8m (2022: £149.7m). +The valuation of the schemes’ liabilities requires a significant level of judgement +and the Audit & Risk Committee has therefore highlighted this key audit matter +as a significant financial issue in their report. +The following factors have led to us classifying pension liabilities as a key audit matter: +• Determining the assumptions to be applied requires technical expertise. +• Changes in a significant assumption can have a material impact on the overall +defined benefit obligation and ultimately the net asset/liability which sits in the +balance sheet. +• Developing actuarial models and selecting appropriate assumptions to estimate +the present value of the pension liabilities is complex. Specialist actuarial knowledge +is required to understand this process and to critically assess the output. +The total scheme assets across the six schemes totalled £1,733.0m (2022: £1,710.3m). +Approximately 42% of the total assets are held in pooled investment vehicles (“PIVs”), +of which approximately 30% are considered more complex. +PIVs categorised as “more complex” require additional audit work to ensure that +the year-end valuation is appropriate. The complex categorisation is linked to the +underlying assets, pricing frequency, location of the fund as well as any trading +restrictions. Where a significant proportion of the underlying assets of the funds being +level 2 or 3 and as such there is no observable market price, the fund is not priced +frequently (i.e. either daily or weekly) or there are restrictions over the purchase or sale +of the units or underlying asset of the fund, there are therefore added complexities +involved in determining an appropriate fair value at the year end. Where a +combination of these factors exist, the fund is classified as more complex. +We reviewed the pension assumptions, including, but not limited to the key assumptions: discount rates, +inflation and mortality. In doing this we utilised our expert actuarial team and considered and challenged the +reasonableness of the actuarial assumptions against our internally developed benchmark ranges, finding them +to be within a materially acceptable range. +We verified that the valuation of the pension liabilities is reasonable based on the following: +• Reviewing the methodology used to determine the liabilities. Our expert actuarial team has built up a detailed +understanding of this methodology through meetings with the group’s actuary and management. The group’s +discount rates were found to be, on average, towards the optimistic end of our range having been, on average, +in the middle of the range at the previous year end. Inflation rates used were found to be reasonable. +• Testing that the movement in the liabilities over the financial year is reasonable. Our expert actuarial team +supported us in reviewing these movements. They concluded that the movements and resulting liability +values were materially reasonable. +• Examining the membership data which drives the year-end liability calculation was examined for all +six schemes to confirm that the data was complete and accurate. No issues were noted with the testing +performed. The liabilities have been updated to reflect the 2022 funding valuations for MGN, TRBS, MINPS and +EN88,whereas WFPPS and ENSM schemes continue to be based off the 2019 funding valuation and adjusted for +events since 2019. This rollforward was assessed by our expert actuarial team who concluded the approach +followed complied with the requirements of IAS 19 and noted no material exceptions. +We verified that the valuation of the more complex pooled investment vehicles (PIVs) is reasonable based on +the following: +• Independent investment manager confirmations were obtained for all material PIVs. The total value was +agreed to the group’s asset listing. +• An assessment was performed on each PIV to determine whether it is straightforward or more complex in +nature. More complex funds are subject to additional procedures and evidence obtained to corroborate the +valuation. This included, where available, a review of the transactions surrounding the year end to establish +the completeness and accuracy of the valuation, obtaining and reviewing the investment manager’s latest +internal controls report to assess any issues with the control environment or exceptions noted with controls +relating to the valuation of assets (and obtaining bridging letters for any gap between the report and the +year end). +The latest fund financial statements were also obtained and reviewed in comparison with unaudited statements +as at the same date, to understand any updates to valuations, once the fund audit is complete, indicating +issues with the valuation process. +All evidence received regarding the valuation of PIVs was reviewed to ensure it did not contradict the year end +valuation and we considered if there were any indications of valuation uncertainty. No issues were identified in +the testing performed. +139 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_142.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_142.txt new file mode 100644 index 0000000000000000000000000000000000000000..ee117957ac7d410a73811f6eca4309ec9cde9926 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_142.txt @@ -0,0 +1,115 @@ + Reach plc Annual Report 2023 142 +Independent auditors’ report to the members of Reach plc continued + + How we tailored the audit scope +We tailored the scope of our audit to ensure +that we performed enough work to be able to +give an opinion on the financial statements as +a whole, taking into account the structure of +the group and the company, the accounting +processes and controls, and the industry in +which they operate. +The group operates from a number of locations +in the UK. From a financial reporting perspective, +the most significant are the group’s London +office and headquarters, its Liverpool shared +service centre and the operational centre of +its print activities in Watford. The group’s core +publishing operations are accounted for +through the Liverpool shared service centre +and in a single general ledger, that is then +disaggregated for statutory reporting +requirements. Our group audit scope focused +on the core publishing operations and the +parent company, which account for over 99% +of the group’s revenue. The materiality level +applied in our audit of the two component +entities was £4.36m. At the parent company +level, we also tested the consolidation process, +tax and pensions. +The impact of climate risk on our audit +As part of our audit we made enquiries of +management to understand the process +they have adopted to assess the extent of +the potential impact of climate change risk on +the group’s financial statements. In addition to +these enquiries, we also read Reach’s external +reporting including its 2023 Carbon Disclosure +Project public submission. +Management has assessed the key risks and +opportunities for the group and has begun +to quantify the financial impact of the most +material climate-related risks within the +Annual Report. They have noted that climate +risks identified and their environmental +sustainability related targets and +commitments may impact future forecasts, +such as those used when considering if +assets are impaired. +Using our knowledge of the business, we +evaluated management’s risk assessment and +their assessment of the impact of climate risks +identified and their environmental sustainability +related targets and commitments on +the discounted cash flow model used by +management to assess whether the group’s +publishing rights and titles and the parent +company’s investment are impaired. +We also considered the consistency of +the disclosures in relation to climate change +(including the disclosures in the Task Force on +Climate-related Financial Disclosures (TCFD) +section) within the Annual Report with the +financial statements and our knowledge +obtained from our audit. +Our procedures did not identify any material +impact in the context of our audit of the +financial statements as a whole, or our key +audit matters for the 53 week period ended +31 December 2023. +Materiality +The scope of our audit was influenced by our application of materiality. We set certain quantitative +thresholds for materiality. These, together with qualitative considerations, helped us to determine +the scope of our audit and the nature, timing and extent of our audit procedures on the individual +financial statement line items and disclosures and in evaluating the effect of misstatements, both +individually and in aggregate on the financial statements as a whole. +Based on our professional judgement, we determined materiality for the financial statements as a +whole as follows: + Financial statements – group +Financial statements – +company +Overall materiality £4.90m (2022: £5.70m). £6.00m (2022: £7.90m). +How we determined it5% of a three year average of profit +before tax and before impairment +charges and reversals, significant +restructuring charges and costs +associated with historical legal issues +1% of total assets +Rationale for +benchmark applied +Based on the benchmarks used in +the annual report, profit before tax +is the primary measure used by +the shareholders in assessing the +performance of the group and is a +generally accepted auditing benchmark. +This has been adjusted for significant +restructuring charges, impairment +charges and reversals and costs +associated with historical legal issues, +consistent with previous years. A number +of external events during the period +have led to volatility in the group’s +results and so we have used a three +year average in determining materiality +for the current period. +As the parent entity, Reach plc +is essentially a holding company +for the group and therefore the +materiality benchmark has been +determined to be based on total +assets, which is a generally +accepted auditing benchmark. +140 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_143.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_143.txt new file mode 100644 index 0000000000000000000000000000000000000000..ed86469cf81f125543fd4102e3d8f7791b6e0ae5 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_143.txt @@ -0,0 +1,131 @@ + Reach plc Annual Report 2023 142 +Independent auditors’ report to the members of Reach plc continued + + + Reach plc Annual Report 2023 143 +Independent auditors’ report to the members of Reach plc continued + + For each component in the scope of our +group audit, we allocated a materiality that +is less than our overall group materiality. The +materiality allocated to both components was +£4.36m. Certain components were audited to +a local statutory audit materiality that was +also less than our overall group materiality. +We use performance materiality to reduce to +an appropriately low level the probability that +the aggregate of uncorrected and undetected +misstatements exceeds overall materiality. +Specifically, we use performance materiality +in determining the scope of our audit and the +nature and extent of our testing of account +balances, classes of transactions and +disclosures, for example in determining +sample sizes. Our performance materiality +was 75% (2022: 75%) of overall materiality, +amounting to £3.74m (2022: £4.27m) for the +group financial statements and £4.50m +(2022: £5.93m) for the company +financial statements. +In determining the performance materiality, +we considered a number of factors – the +history of misstatements, risk assessment +and aggregation risk and the effectiveness +of controls – and concluded that an +amount at the upper end of our normal +range was appropriate. +We agreed with the Audit & Risk Committee +that we would report to them misstatements +identified during our audit above £249k (group +audit) (2022: £285k) and £300k (company +audit) (2022: £395k) as well as misstatements +below those amounts that, in our view, +warranted reporting for qualitative reasons. +Conclusions relating to going concern +Our evaluation of the directors’ assessment +of the group’s and the company’s ability to +continue to adopt the going concern basis +of accounting included: +• Evaluating the going concern cash +flow model, including agreeing amounts +included to internal forecasts and assessing +the reasonableness of these forecasts +• Evaluating the working capital movements +and other cash items such as pension and +tax cash outflows included in the cash +flow model +• Reading the revolving credit facility +agreement and agreeing key terms such +as length of facility and covenants used +in management’s assessment to +the agreement +• Evaluating the forecast available facility +headroom and compliance with financial +covenants during the going concern +assessment period. This included +considering the appropriateness of +management’s downside scenarios and +the adequacy of headroom in this scenario. +Based on the work we have performed, we +have not identified any material uncertainties +relating to events or conditions that, +individually or collectively, may cast significant +doubt on the group’s and the company’s +ability to continue as a going concern for a +period of at least twelve months from when +the financial statements are authorised +for issue. +In auditing the financial statements, we have +concluded that the directors’ use of the going +concern basis of accounting in the preparation +of the financial statements is appropriate. +However, because not all future events or +conditions can be predicted, this conclusion +is not a guarantee as to the group’s and +the company’s ability to continue as a +going concern. +In relation to the directors’ reporting on +how they have applied the UK Corporate +Governance Code, we have nothing material +to add or draw attention to in relation to +the directors’ statement in the financial +statements about whether the directors +considered it appropriate to adopt the +going concern basis of accounting. +Our responsibilities and the responsibilities of +the directors with respect to going concern +are described in the relevant sections of +this report. +Reporting on other information +The other information comprises all of the +information in the Annual Report other than +the financial statements and our auditors’ +report thereon. The directors are responsible +for the other information. Our opinion on the +financial statements does not cover the other +information and, accordingly, we do not +express an audit opinion or, except to the +extent otherwise explicitly stated in this +report, any form of assurance thereon. +In connection with our audit of the financial +statements, our responsibility is to read the +other information and, in doing so, consider +whether the other information is materially +inconsistent with the financial statements +or our knowledge obtained in the audit, or +otherwise appears to be materially misstated. +If we identify an apparent material +inconsistency or material misstatement, +we are required to perform procedures +to conclude whether there is a material +misstatement of the financial statements +or a material misstatement of the other +information. If, based on the work we +have performed, we conclude that there +is a material misstatement of this other +information, we are required to report that +fact. We have nothing to report based on +these responsibilities. +141 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_144.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_144.txt new file mode 100644 index 0000000000000000000000000000000000000000..b64bbdfa04f1f83c1e1273129315da57c90b52c2 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_144.txt @@ -0,0 +1,123 @@ + Reach plc Annual Report 2023 142 +Independent auditors’ report to the members of Reach plc continued + + With respect to the Strategic report and +Directors’ report, we also considered whether +the disclosures required by the UK Companies +Act 2006 have been included. +Based on our work undertaken in the course of +the audit, the Companies Act 2006 requires us +also to report certain opinions and matters as +described below. +Strategic report and Directors’ report +In our opinion, based on the work undertaken in +the course of the audit, the information given in +the Strategic report and Directors’ report for the +period ended 31 December 2023 is consistent +with the financial statements and has been +prepared in accordance with applicable legal +requirements. +In light of the knowledge and understanding +of the group and company and their +environment obtained in the course of +the audit, we did not identify any material +misstatements in the Strategic report and +Directors’ report. +Directors’ Remuneration +In our opinion, the part of the Remuneration +Report to be audited has been properly +prepared in accordance with the +Companies Act 2006. +Corporate governance statement +The Listing Rules require us to review the +directors’ statements in relation to going +concern, longer-term viability and that part of +the corporate governance statement relating +to the company’s compliance with the +provisions of the UK Corporate Governance +Code specified for our review. Our additional +responsibilities with respect to the corporate +governance statement as other information +are described in the Reporting on other +information section of this report. +Based on the work undertaken as part of +our audit, we have concluded that each +of the following elements of the corporate +governance statement is materially consistent +with the financial statements and our +knowledge obtained during the audit, and +we have nothing material to add or draw +attention to in relation to: +• The directors’ confirmation that they have +carried out a robust assessment of the +emerging and principal risks; +• The disclosures in the Annual Report +that describe those principal risks, what +procedures are in place to identify emerging +risks and an explanation of how these are +being managed or mitigated; +• The directors’ statement in the financial +statements about whether they considered +it appropriate to adopt the going concern +basis of accounting in preparing them, +and their identification of any material +uncertainties to the group’s and company’s +ability to continue to do so over a period of +at least twelve months from the date of +approval of the financial statements; +• The directors’ explanation as to their +assessment of the group’s and company’s +prospects, the period this assessment +covers and why the period is appropriate; +and +• The directors’ statement as to whether +they have a reasonable expectation that +the company will be able to continue in +operation and meet its liabilities as they +fall due over the period of its assessment, +including any related disclosures drawing +attention to any necessary qualifications +or assumptions. +Our review of the directors’ statement +regarding the longer-term viability of the group +and company was substantially less in scope +than an audit and only consisted of making +inquiries and considering the directors’ process +supporting their statement; checking that the +statement is in alignment with the relevant +provisions of the UK Corporate Governance +Code; and considering whether the statement +is consistent with the financial statements and +our knowledge and understanding of the group +and company and their environment obtained +in the course of the audit. +In addition, based on the work undertaken +as part of our audit, we have concluded +that each of the following elements of the +corporate governance statement is materially +consistent with the financial statements and +our knowledge obtained during the audit: +• The directors’ statement that they consider +the Annual Report, taken as a whole, is fair, +balanced and understandable, and +provides the information necessary for +the members to assess the group’s and +company’s position, performance, business +model and strategy; +• The section of the Annual Report that +describes the review of effectiveness of risk +management and internal control systems; +and +• The section of the Annual Report describing +the work of the Audit & Risk Committee. +We have nothing to report in respect of our +responsibility to report when the directors’ +statement relating to the company’s +compliance with the Code does not properly +disclose a departure from a relevant provision +of the Code specified under the Listing Rules +for review by the auditors. +142 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information +The secret object #4 is a "pillow". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_145.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_145.txt new file mode 100644 index 0000000000000000000000000000000000000000..ecef35658fac3125e4a67277322a53aab1321add --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_145.txt @@ -0,0 +1,125 @@ + Reach plc Annual Report 2023 141 +Independent auditors’ report to the members of Reach plc continued + + + Reach plc Annual Report 2023 142 +Independent auditors’ report to the members of Reach plc continued + + Responsibilities for the financial +statements and the audit +Responsibilities of the directors for +the financial statements +As explained more fully in the Statement +of directors’ responsibilities in respect of +the financial statements, the directors are +responsible for the preparation of the financial +statements in accordance with the applicable +framework and for being satisfied that they +give a true and fair view. The directors are +also responsible for such internal control as +they determine is necessary to enable the +preparation of financial statements that are +free from material misstatement, whether +due to fraud or error. +In preparing the financial statements, the +directors are responsible for assessing the +group’s and the company’s ability to continue +as a going concern, disclosing, as applicable, +matters related to going concern and using +the going concern basis of accounting unless +the directors either intend to liquidate the +group or the company or to cease operations, +or have no realistic alternative but to do so. +Auditors’ responsibilities for the audit of the +financial statements +Our objectives are to obtain reasonable +assurance about whether the financial +statements as a whole are free from material +misstatement, whether due to fraud or error, +and to issue an auditors’ report that includes +our opinion. Reasonable assurance is a high +level of assurance, but is not a guarantee +that an audit conducted in accordance +with ISAs (UK) will always detect a material +misstatement when it exists. Misstatements +can arise from fraud or error and are +considered material if, individually or in +the aggregate, they could reasonably +be expected to influence the economic +decisions of users taken on the basis of +these financial statements. +Irregularities, including fraud, are instances of +non-compliance with laws and regulations. +We design procedures in line with our +responsibilities, outlined above, to detect +material misstatements in respect of +irregularities, including fraud. The extent +to which our procedures are capable of +detecting irregularities, including fraud, +is detailed below. +Based on our understanding of the group and +industry, we identified that the principal risks of +non-compliance with laws and regulations +related to employment law, data privacy +law and the Listing Rules of the UK Financial +Conduct Authority, and we considered the +extent to which non-compliance might have +a material effect on the financial statements. +We also considered those laws and regulations +that have a direct impact on the financial +statements such as UK tax legislation and +the Companies Act 2006. We evaluated +management’s incentives and opportunities +for fraudulent manipulation of the financial +statements (including the risk of override of +controls), and determined that the principal +risks were related to management’s estimates +and the posting of inappropriate journal +entries so as to manipulate revenue +(particularly digital revenue) and expenditure +or to conceal the misappropriation of cash. +Audit procedures performed by the +engagement team included: +• Discussions with management, internal +audit and the group’s legal advisors, +including consideration of known or +suspected instances of non-compliance +with laws and regulation and fraud. +• Requesting legal confirmations from +external lawyers and reviewing the +nature of legal expenses. +• Challenging assumptions and judgements +made by management in their significant +accounting estimates, including impairment +of intangible assets and investments and +the provision for historical legal issues as +explained in the key audit matters above. +• Identifying and testing journal entries to +address the risk of inappropriate journal +entries being posted, as referred to above. +• With regards to data privacy law, +procedures in respect of historical legal +issues set out in the key audit matter above. +• Assessing the classification of items as +adjusting within the determination of +adjusted profit. +• Assessing financial statement disclosures +and agreeing these to underlying +supporting documentation for +compliance with laws and regulations. +There are inherent limitations in the audit +procedures described above. We are less +likely to become aware of instances of +non-compliance with laws and regulations +that are not closely related to events and +transactions reflected in the financial +statements. Also, the risk of not detecting a +material misstatement due to fraud is higher +than the risk of not detecting one resulting +from error, as fraud may involve deliberate +concealment by, for example, forgery or +intentional misrepresentations, or +through collusion. +143 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_146.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_146.txt new file mode 100644 index 0000000000000000000000000000000000000000..d690f1bd77f82e63ae5b7f2b3b4f249a9f79e512 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_146.txt @@ -0,0 +1,81 @@ + Reach plc Annual Report 2023 142 +Independent auditors’ report to the members of Reach plc continued + + Our audit testing might include testing +complete populations of certain transactions +and balances, possibly using data auditing +techniques. However, it typically involves +selecting a limited number of items for testing, +rather than testing complete populations. +We will often seek to target particular items +for testing based on their size or risk +characteristics. In other cases, we will +use audit sampling to enable us to draw +a conclusion about the population from +which the sample is selected. +A further description of our responsibilities for +the audit of the financial statements is located +on the FRC’s website at: www.frc.org.uk/ +auditorsresponsibilities. This description forms +part of our auditors’ report. +Use of this report +This report, including the opinions, has been +prepared for and only for the company’s +members as a body in accordance with +Chapter 3 of Part 16 of the Companies Act +2006 and for no other purpose. We do not, +in giving these opinions, accept or assume +responsibility for any other purpose or to any +other person to whom this report is shown or +into whose hands it may come save where +expressly agreed by our prior consent +in writing. +Other required reporting +Companies Act 2006 +exception reporting +Under the Companies Act 2006 we are +required to report to you if, in our opinion: +• we have not obtained all the information +and explanations we require for our audit; or +• adequate accounting records have not +been kept by the company, or returns +adequate for our audit have not been +received from branches not visited by us; or +• certain disclosures of directors’ +remuneration specified by law are +not made; or +• the company financial statements and +the part of the Remuneration Report to +be audited are not in agreement with +the accounting records and returns. +We have no exceptions to report arising from +this responsibility. +Appointment +Following the recommendation of the Audit & +Risk Committee, we were appointed by the +members on 7 June 2019 to audit the financial +statements for the year ended 29 December +2019 and subsequent financial periods. The +period of total uninterrupted engagement +is 5 years, covering the years ended +29 December 2019 to 31 December 2023. +Other matter +In due course, as required by the Financial +Conduct Authority Disclosure Guidance and +Transparency Rule 4.1.14R, these financial +statements will form part of the ESEF-prepared +annual financial report filed on the National +Storage Mechanism of the Financial Conduct +Authority in accordance with the ESEF Regulatory +Technical Standard (‘ESEF RTS’). This auditors’ +report provides no assurance over whether the +annual financial report will be prepared using the +single electronic format specified in the ESEF RTS. +Colin Bates (Senior Statutory Auditor) +for and on behalf of PricewaterhouseCoopers LLP +Chartered Accountants and Statutory Auditors +London +5 March 2024 +144 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_147.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_147.txt new file mode 100644 index 0000000000000000000000000000000000000000..c628a639d086f8805b5c511bad0658679ea45bc9 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_147.txt @@ -0,0 +1,61 @@ + Reach plc Annual Report 2023 142 +Independent auditors’ report to the members of Reach plc continued + + + Reach plc Annual Report 2023 145 +Consolidated income statement +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + + + notes +Adjusted +2023 +£m +Adjusted +items +2023 +£m +Statutory +2023 +£m +Adjusted +2022 +£m +Adjusted +items +2022 +£m +Statutory +2022 +£m +Revenue 5 568.6 – 568.6 601.4 – 601.4 +Cost of sales (344.7) – (344.7) (375.7) – (375.7) +Gross profit 223.9 – 223.9 225.7 – 225.7 +Distribution costs (36.9) – (36.9) (38.1) – (38.1) +Administrative expenses 8 (93.4) (48.9) (142.3) (84.3) (33.4) (117.7) +Share of results of associates 20 2.9 (1.5) 1.4 2.8 (1.4) 1.4 +Operating profit 6 96.5 (50.4) 46.1 106.1 (34.8) 71.3 +Interest income 9 1.0 – 1.0 0.1 – 0.1 +Finance costs 10 (4.5) – (4.5) (2.9) – (2.9) +Pension finance charge 21 – (5.9) (5.9) – (2.3) (2.3) +Profit before tax 93.0 (56.3) 36.7 103.3 (37.1) 66.2 +Tax charge 11 (24.6) 9.4 (15.2) (18.8) 4.9 (13.9) +Profit for the period attributable to equity holders of the parent 68.4 (46.9) 21.5 84.5 (32.2) 52.3 + +Earnings per share notes +2023 +Pence +2023 +Pence +2022 +Pence +2022 +Pence +Earnings per share – basic 13 21.8 6.8 27.1 16.8 +Earnings per share – diluted 13 21.6 6.8 26.7 16.5 +The above results were derived from continuing operations. Set out in note 35 is the reconciliation between the statutory and adjusted results. + +145 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information +The secret object #2 is a "bottle". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_148.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_148.txt new file mode 100644 index 0000000000000000000000000000000000000000..4f24d7cb822050a900e591392fb706071c71766d --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_148.txt @@ -0,0 +1,60 @@ + Reach plc Annual Report 2023 146 +Consolidated statement of comprehensive income +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + + notes +2023 +£m +2022 +£m +Profit for the period 21.5 52.3 +Items that will not be reclassified to profit and loss: +Actuarial loss on defined benefit pension schemes 21 (0.5) (35.0) +Tax on actuarial loss on defined benefit pension schemes 11 0.1 7.4 +Share of items recognised by associates after tax 20 0.4 (1.7) +Other comprehensive loss for the period – (29.3) +Total comprehensive income for the period 21.5 23.0 +Consolidated statement of changes in equity +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + +Share +capital +£m +Share +premium +account +£m +Merger +reserve +£m +Capital +redemption +reserve +£m +(Accumulated +loss)/retained +earnings and +other reserves +£m +Total +£m +At 27 December 2021 32.2 605.4 17.4 4.4 (20.6) 638.8 +Profit for the period – – – – 52.3 52.3 +Other comprehensive loss for the period – – – – (29.3) (29.3) +Total comprehensive income for the period – – – – 23.0 23.0 +Purchase of own shares (note 29) – – – – (1.0) (1.0) +Credit to equity for equity-settled share-based payments – – – – 1.8 1.8 +Deferred tax charge for equity-settled share-based payments (note 28) – – – – (2.2) (2.2) +Dividends paid – – – – (22.9) (22.9) +At 25 December 2022 32.2 605.4 17.4 4.4 (21.9) 637.5 +Profit for the period – – – – 21.5 21.5 +Other comprehensive loss for the period – – – – – – +Total comprehensive income for the period – – – – 21.5 21.5 +Credit to equity for equity-settled share-based payments – – – – 1.3 1.3 +Dividends paid (note 12) – – – – (23.1) (23.1) +Capital reduction (note 31) – (605.4) – – 605.4 – +At 31 December 2023 32.2 – 17.4 4.4 583.2 637.2 + +146 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_149.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_149.txt new file mode 100644 index 0000000000000000000000000000000000000000..1d15e9c2e2584c2202449e6d4c7b19c83d5e22df --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_149.txt @@ -0,0 +1,96 @@ + Reach plc Annual Report 2023 146 +Consolidated statement of comprehensive income +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + + notes +2023 +£m +2022 +£m +Profit for the period 21.5 52.3 +Items that will not be reclassified to profit and loss: +Actuarial loss on defined benefit pension schemes 21 (0.5) (35.0) +Tax on actuarial loss on defined benefit pension schemes 11 0.1 7.4 +Share of items recognised by associates after tax 20 0.4 (1.7) +Other comprehensive loss for the period – (29.3) +Total comprehensive income for the period 21.5 23.0 +Consolidated statement of changes in equity +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + +Share +capital +£m +Share +premium +account +£m +Merger +reserve +£m +Capital +redemption +reserve +£m +(Accumulated +loss)/retained +earnings and +other reserves +£m +Total +£m +At 27 December 2021 32.2 605.4 17.4 4.4 (20.6) 638.8 +Profit for the period – – – – 52.3 52.3 +Other comprehensive loss for the period – – – – (29.3) (29.3) +Total comprehensive income for the period – – – – 23.0 23.0 +Purchase of own shares (note 29) – – – – (1.0) (1.0) +Credit to equity for equity-settled share-based payments – – – – 1.8 1.8 +Deferred tax charge for equity-settled share-based payments (note 28) – – – – (2.2) (2.2) +Dividends paid – – – – (22.9) (22.9) +At 25 December 2022 32.2 605.4 17.4 4.4 (21.9) 637.5 +Profit for the period – – – – 21.5 21.5 +Other comprehensive loss for the period – – – – – – +Total comprehensive income for the period – – – – 21.5 21.5 +Credit to equity for equity-settled share-based payments – – – – 1.3 1.3 +Dividends paid (note 12) – – – – (23.1) (23.1) +Capital reduction (note 31) – (605.4) – – 605.4 – +At 31 December 2023 32.2 – 17.4 4.4 583.2 637.2 + + Reach plc Annual Report 2023 147 +Consolidated cash flow statement +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + + notes +2023 +£m +2022 +£m +Cash flows from operating activities +Cash generated from operations 14 76.4 80.1 +Pension deficit funding payments 21 (60.0) (55.1) +Income tax paid (0.5) (5.0) +Net cash inflow from operating activities 15.9 20.0 +Investing activities +Interest received 9 0.6 0.1 +Dividends received from associated undertakings 20 1.9 2.5 +Proceeds on disposal of property, plant and equipment 0.9 0.4 +Purchases of property, plant and equipment (3.5) (3.0) +Expenditure on capitalised internally generated development 16 (12.8) (10.7) +Interest received on leases 19 0.4 – +Finance lease receipts 19 0.2 – +Deferred consideration payment 24 (7.0) (17.1) +Net cash used in investing activities (19.3) (27.8) +Financing activities +Interest and charges paid on borrowings (3.1) (1.9) +Dividends paid 12 (23.1) (22.9) +Interest paid on leases 19 (1.2) (1.1) +Repayment of obligation under leases 19 (4.7) (5.6) +Purchase of own shares 29 – (1.0) +Drawdown of borrowings 24 15.0 15.0 +Net cash used in financing activities (17.1) (17.5) +Net decrease in cash and cash equivalents (20.5) (25.3) +Cash and cash equivalents at the beginning of the period 24 40.4 65.7 +Cash and cash equivalents at the end of the period 24 19.9 40.4 + +147 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_15.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..60bf71df47e96adb4182b685ba74b13c06b7bbc2 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_15.txt @@ -0,0 +1,75 @@ +Great content will always be at the heart of our +business and this year our teams produced an +abundance of it. The editorial highlights that +come to mind for me personally include the +Sunday Mail’s exclusive scoop on the SNP +scandal, the Mirror’s campaign for free school +meals which so far has seen Sadiq Khan +announce free hot meals for all primary pupils, +and the Express’s campaign calling for the +Government to invest more in radiotherapy +and increase services for cancer patients. +Meanwhile, the Manchester Evening News’ +award-winning Awaab’s Law campaign has +made its way through Parliament and will +change many people’s lives for the better. +And while it’s always an honour to watch +everyday heroes at the Mirror’s Pride of Britain +Awards, in 2023 it was particularly inspiring to +see members of the Windrush generation be +recognised for their outstanding contribution +to British life since the first passengers on that +vessel arrived 75 years ago. +These highlights all wield the power and +impact they do precisely because of our wide +reach, with our scale and editorial purpose +working hand in hand. Despite the challenges +of the business environment, Reach remains +the largest publisher in the UK and Ireland, and +continues to command the sixth largest digital +audience of any UK business, reaching 36m +adults digitally every month which is 72% of the +online population. Our transformation actions +in 2023 will ensure the continuation of our core +purpose into 2024 and beyond. +Enhancing resilience and efficiency +Our print business continues to generate strong +returns, despite the falling demand across the +sector. Our experienced circulation teams +use decades of data to expertly inform our +approach to price increases and availability, +both of which are critical to underpinning +sales volumes. We maintain a track record of +effective cost management and are constantly +reviewing and making changes to our supply +chain, optimising distribution and right-sizing +our property footprint. +Across the business, we successfully +delivered a 5.7% reduction in operating +costs (on a like-for-like basis), against the +5-6% reduction we targeted at the start of +the year. As announced in November 2023, to +set ourselves up for success in 2024 we have +committed to and already started to deliver +a further 5-6% reduction in our operating cost +base. In the wider industry context, with many +organisations now making similar decisions to +those we took in late 2023, we believe our early +action demonstrates responsible foresight +and planning. +As labour represents our single largest cost, +there is no getting away from the fact that +we have had to reduce the size of our teams +to save cost and re-shape for the future. +I do not underestimate the impact of these +decisions on all of our people. With that +in mind I committed to working through +them with fairness and integrity, and to +communicating openly throughout. During +this period, I led a programme of small group +discussions and town hall meetings with +Manchester Evening News reporter delivers the Awaab’s Law petition +to Downing Street alongside Awaab’s father and campaigners +Chief Executive’s review continued +13 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information13Reach plc Annual Report 2023 13Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_150.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_150.txt new file mode 100644 index 0000000000000000000000000000000000000000..b4924022c0a4c177e84a60d27ee2257a7c2d1ae4 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_150.txt @@ -0,0 +1,69 @@ + Reach plc Annual Report 2023 148 +Consolidated balance sheet +at 31 December 2023 (at 25 December 2022) + notes +2023 +£m +2022 +£m +Non-current assets +Goodwill 15 35.9 35.9 +Other intangible assets 16 840.8 832.9 +Property, plant and equipment 17 113.6 140.1 +Right-of-use assets 18 13.0 10.9 +Finance lease receivable 19 – 10.4 +Investment in associates 20 14.5 14.6 +Retirement benefit assets 21 66.0 51.2 + 1,083.8 1,096.0 +Current assets +Inventories 22 11.4 12.9 +Trade and other receivables 23 85.1 95.2 +Current tax receivable 11 8.1 13.9 +Finance lease receivable 19 – 0.6 +Cash and cash equivalents 24 19.9 40.4 + 124.5 163.0 +Assets classified as held for sale 25 11.0 – + 135.5 163.0 +Total assets 1,219.3 1,259.0 +Non-current liabilities +Trade and other payables 26 (1.1) (4.5) +Lease liabilities 19 (28.5) (26.8) +Retirement benefit obligations 21 (168.8) (202.1) +Provisions 27 (26.6) (36.6) +Deferred tax liabilities 28 (200.1) (191.6) + (425.1) (461.6) +Current liabilities +Trade and other payables 26 (96.2) (106.7) +Deferred consideration 24 – (7.0) +Borrowings 24 (30.0) (15.0) +Lease liabilities 19 (4.7) (4.9) +Provisions 27 (26.1) (26.3) + (157.0) (159.9) +Total liabilities (582.1) (621.5) +Net assets 637.2 637.5 + notes +2023 +£m +2022 +£m +Equity +Share capital 29,30 32.2 32.2 +Share premium account 29,31 – 605.4 +Merger reserve 29 17.4 17.4 +Capital redemption reserve 29 4.4 4.4 +Retained earnings/(accumulated loss) and other reserves 29 583.2 (21.9) +Total equity attributable to equity holders +of the parent 637.2 637.5 +These consolidated financial statements on pages 145 to 187 were approved by the Board of +directors and authorised for issue on 5 March 2024. +They were signed on its behalf by: + + +Jim Mullen Darren Fisher +Chief Executive Officer Chief Financial Officer + + + +148 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_16.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..7c53838d524b8911c59f796ea39850b3be4c59da --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_16.txt @@ -0,0 +1,122 @@ +leaders and colleagues, to share updates, +provide important context about the need for +change, and facilitate open dialogue. Honest +colleague communication remains something +that I’m passionate about and committed to +investing time into, all year round. +Our emphasis on efficiency goes beyond +traditional cost-cutting measures as we +must also organise our ways of working to put +ourselves in the best position to achieve our +strategic aims and accelerate our journey to +being a digital-first content organisation. As +part of this work we created the Reach Studio +team, which pools all of our video and audio +talent in one super team that will provide +multimedia content for both editorial +audiences and commercial partners, +maximising the value for both. +Progressing our strategic priorities +During volatile times it is all the more +important to pursue a strategy that gives us +greater long-term stability and control over +our business. +Over the year, our Customer Value Strategy +(CVS) continued to progress on key metrics. +Against falling referral traffic, we continued +to grow our yield or RPM (+11% from 2022), an +increasingly important metric as we focus +on controlling digital revenue. +We also see that as a result of our CVS +progress, the return on data-driven advertising +is currently 10 times more valuable than +volume-related programmatic advertising +returns. These figures demonstrate that +whatever market trends may come, we are +able to consistently adapt to optimise the +value of our content, data and audience. +Our commercial activity continues to be led +by data, while focusing on direct customer +relationships and more diversified revenues +that support higher-quality digital earnings. +These efforts are reflected in our mix, which +is now made up of 43% of digital revenues +generated by data-driven, higher value and +better performing advertising, a trend which +will continue. +Part of the strategy has been to strengthen +and expand our audience base with key +demographics and into valuable regions. +In 2023 we successfully launched three ‘.com’ +websites from a new US operation, which by +the end of the year were regularly attracting +an audience of a million a day. +Additionally, we have worked to secure our +audience, which will make us less vulnerable +to changing tech platform algorithms and +better able to directly engage with our millions +of customers and drive them to our content. +There have been several initiatives on this +front, including an award-winning project to +reach people via WhatsApp Communities and +Channels, through which we reach more than +1.65m people directly as of February 2024. +One early standout in this area is our Arsenal +channel which sends multiple stories a day +directly to over 600k people, making it the +biggest Arsenal channel in the world. Through +work like this we are able to speak to our +audiences on our own terms and ensure +that our great content reaches them. +Our tech and commercial teams have played +a key role in supporting our discoverability +challenge, further developing in-house +recommender tools powered by AI that +point readers to content we know they’ll be +interested in. One of these tools alone has +reduced customer bounce rate by over 10% +and generated 2bn page views through the +year. Our in-house first-party data capabilities, +in particular our proprietary Mantis tool, will +stand us in good stead as Google continues +to phase out third-party cookies, a process we +have now seen beginning in 2024. This will be a +major shift in the landscape for publishers and +advertisers, who for years have depended on +third-party data to target their advertising. +We will be significantly ahead of the curve on +this front, with 12.3m registered customers, of +which approximately 4m are active over each +four-week period, and advanced capability +to effectively place advertising using +contextual targeting. +43% +of digital revenues now data-driven +We have further strengthened our position +by growing our revenue streams outside +traditional advertising revenue, with +important work being done with affiliates +and ecommerce. It’s great to see the +continued success of the OK! Beauty Box, +which we launched in late 2020 as one of +our first Customer Value Strategy initiatives, +and now has c.12k paying subscribers. +Our goal with this work is not to replace our +business model but to continuously evolve, +strengthen and broaden it, and to give our +audiences more choice about how they +engage with our content. +“As a result of our +Customer Value +Strategy progress, the +return on data-driven +advertising is currently +over 10 times more +valuable than +volume-related +programmatic +advertising returns.” +Chief Executive’s review continued +14 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret flower is a "daisy". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_17.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..9f816bee86d36d50dee7219657750e0d07dcdca2 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_17.txt @@ -0,0 +1,125 @@ +Resolving long-term uncertainties +For several years now, the leadership team +and I have been working to resolve a number +of long-standing hurdles facing this business. +Over the past months I am proud to say we +have made real headway in clearing these. +Ahead of 2023 we took the decision to go to +trial to achieve greater certainty around the +future impact of long-standing historical +legal issues. The judgment we received in +December set out very clear parameters on +time limitation which enables us to draw a line +under these issues. Simply, this means we now +have a much clearer view on the estimated +cost of resolving these long-standing issues +and, crucially, these costs are expected to be +materially lower than our previous estimates. +Over the last four years we had not been +able to come to an agreement with the +MGN Pension Trustees on the 2019 triennial +valuation. I cannot overstate the importance +of having successfully concluded both the +2019 and 2022 triennial pension reviews for +the MGN pension scheme. Agreement with +our other schemes is also expected to be +completed by the 31 March 2024 due date. This +provides much needed clarity on the scale of +our funding obligations, which are scheduled +to materially step down in early 2028. +These developments will both benefit the +wider business and enable better planning +for our future. Thank you to all the teams who +have been involved in bringing these matters +to a close. +Exploring AI as a tool +At the start of 2023 the conversation around +how businesses and media organisations +use AI was only beginning to take shape. Our +editorial leaders created a cross-functional +workstream to manage this complex issue, +exploring the many opportunities while also +gaining a firmer understanding of the risks. +Their primary focus has been to test tools that +help journalists to tell their stories more quickly +and effectively. As a result of this work, the +team has identified several areas with +strong potential, such as spotting trends +and analysing large volumes of data. +We have steadily increased our use of AI +through the year, while carefully controlling its +roll-out, and by the end of 2023 over a dozen +newsrooms were set up to use an AI tool to +support their work. As we continue to test AI’s +potential, we ensure that every story is edited +and approved by a journalist, maintaining our +commitment to responsible journalism. + +Fighting our case +I have also been putting our case to political +decision-makers, ensuring that those in power +and in opposition understand the issues facing +Reach and the entire media industry. The stakes +are high and I have had many encouraging +discussions this year on the crucial questions +that will decide the future of journalism in this +country, such as: how can tech platforms work +fairly with the media to support a free press +and functioning democracy? +2023 marked my last year as chair of the NMA +(News Media Association), but I will continue +to discuss these vital issues in 2024 with our +legislators, particularly as we watch the Digital +Markets Bill progress through Parliament. +Looking after our people and +our future +All of this progress is made possible by our +talented and passionate colleagues in all +departments. We have made many necessary +changes to our teams this year but I remain +committed to retaining and developing the +great people who are shaping the future of +this business. +Developing our teams is just one pillar of our +formalised responsible business framework, +now one year in (read more on this on page +40). We continue to prioritise becoming a +more inclusive organisation, and in 2023 +were once again recognised by Inclusive +Companies with our highest ranking yet and +testament to the dedication of many people +here. We’re also working to protect all our +futures through our environmental efforts, +which continued to progress this year as we +implemented the systems and gathered the +data that will inform our path to net zero. +Looking ahead +2023 was a critical moment for this business, +allowing us to put several significant issues +in the past and to focus instead on looking +forward, and I am confident that we are +now well positioned to take on the future. +As always, there are challenges ahead. +The macro environment is unlikely to provide +much relief over the near term and we are +working to secure our audience and build +our data-driven digital business. This will be +achieved through small incremental gains +and by continuing to build direct relationships +with our audiences. +Our industry has a history of change and the +future will undoubtedly see yet more. That’s +why it’s essential we set ourselves up to +win by making our operations suited to +an increasingly fast-paced, competitive +and digital world. +Jim Mullen +Chief Executive Officer +5 March 2024 +“We now have a much clearer view on the estimated +cost of resolving these long-standing issues and, +crucially, these costs are expected to be materially +lower than our previous estimates.” +Chief Executive’s review continued +15 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_18.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..747bfd2029570f1ba7bbc0e675cea958929e5bb9 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_18.txt @@ -0,0 +1,82 @@ +DELIVERING VALUE +Our business model +We are transforming how we deliver value to our stakeholders, evolving and growing a digitally-focused business while +maintaining our strong foundations in print. This transition is underpinned by the strength of our talented people and our +iconic brands, united and guided by our purpose and focused on providing the content that attracts the largest audience +of any commercial news publisher in the UK and Ireland. +Our people +The talent and commitment of our employees +are central to our success as we transform and +become more digitally-oriented. We’re building +a workplace where our people are empowered +to deliver excellence and facilitate change, while +enjoying balance in their lives. +Our audience +We have the largest audience of any commercial +news publisher in the UK and Ireland. Every month, +47m people come to us, in print and online, across +our national and local titles, for news, entertainment +and sport they can trust. We are a proudly +mainstream publisher, reaching 72% of the UK’s +online population, and now bring that approach +to our US-based sites. +Our technology +Vital to our transformation is investment in data and +technology, which helps us better understand our +customers and drive digital revenue. Our in-house +adtech tool Mantis enables us to capture consented +customer data to improve our content and provide +targeted advertising for the brands we work with. +Our infrastructure +Our newspapers are produced at our three +printing sites and, with the help of our distribution +partners, reach all corners of the UK and Ireland. +Our newsrooms, local and national, are +increasingly integrated, and strategically share +data, content and expertise. Reach operates a +range of larger office hubs as well as smaller +workplaces throughout the country, serving a +now well-established hybrid working model. +Our brands +We are home to over 120 titles in the UK and Ireland. +Our portfolio is unique, including iconic national +titles such as the Mirror, Express, Daily Star and Daily +Record, and local ones which sit at the heart of their +communities, such as the Manchester Evening +News, Liverpool Echo and MyLondon. While our +titles share key central services, they each have +a strong identity, together reaching a broad +demographic across the political spectrum. +Our news coverage is award-winning, with our +titles reflecting the diverse interests and political +leanings of our audiences. We aim to inform and +explain, as well as lending a voice to the causes +that matter to the communities we represent. +While our news coverage is often serious, some +of our titles excel in finding the funny side of the +day’s biggest stories. +We cover a range of sport, from English Premier +League to Scottish football, to Welsh Rugby, +Formula 1 and our industry-leading coverage of +the Cheltenham Festival. Meanwhile our local titles +remain the ‘go to’ sources of information for local +sports fans supporting a range of levels, whether +the Liverpool Echo for LFC or Hull Live for Hull City FC. +We are proudly mainstream, which is key to our +broad appeal and widespread audience. From +celebrities to science, TV to travel and beauty to +bingo, our brands cover a huge number of topics. +Providing content for a wide range of interests +has helped us become part of our customers’ +daily lives. +Entertainment +Sport +Enabled by our assets Focused on contentDriven by +our purpose +through brilliant +journalism. +News +Read more about our purpose +on page 2. +16 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_19.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..7c39fd74e80d303965ecdef9db83598ad31629de --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_19.txt @@ -0,0 +1,102 @@ +Delivering stakeholder valueOur transformational operating model +Long-term revenue driver +Reinvestment to fund growth +Print +Market dynamic +We sell hundreds of thousands of copies +daily. While volumes are in decline, cover +price rises alongside loyal demand +support significant print cash flows. +Demographics +The average age of a print customer is +52 and this older demographic have a +high degree of loyalty and are of high +value to advertisers. +How we generate revenue +Newspaper sales account for +approximately 71% of our print revenue. +We also generate revenue from +advertising and printing for third parties. +Digital +Market dynamic +Large tech platforms continue to shape +the market – a key driver of our data- +led approach. +Demographics +We develop our evolving audience base +by evolving our formats and building +niche ‘fan’ communities across sport +and entertainment content. +How we generate revenue +Advertising-led, sold directly by our sales +teams or programmatically via auction +platforms. Increasingly our advertising is +supported by data, resulting in higher +yields, and we have also increased our +non-advertising mix with affiliates +and ecommerce. +Our brands and products +National +Our portfolio has a strong heritage. +The Mirror and Express have been a key +part of British culture and society for over +120 years. +Local +What makes us different is our unique +combination of national and local titles, +such as the Manchester Evening News +and Newcastle Chronicle, which lie at +the heart of their communities. +Magazines +OK! and New focus on celebrity news, +pop culture, fashion and real-life reader +stories. We also produce the Sunday +supplement magazines Notebook +and S Magazine. +Foundation revenue driver +More engaging +experience +More customer +data +More targeting +capabilities +More effective +advertising +More relevant +content +Increasing +yield +Increasing +volume Underpinned by data +Our people By setting the business up for a sustainable future +we’re able to invest in the teams we need for long- +term growth, and in fostering an inclusive culture. +Customers Delivering our digital strategy enables us to provide +increasingly engaging and relevant content that +maintains and builds audiences. +Communities We’re committed to contributing positively to the +diverse communities we serve, discussing issues +and supporting causes that matter to them. +Advertisers Building a deeper understanding of our customers +enables us to help advertisers deliver more targeted +campaigns that reach the right audiences. +Suppliers +and partners +Our supply chain includes distributors, retailers and +newsprint suppliers. We work closely with all to ensure +fair economics. +Shareholders Working in the interest of our shareholders and other +stakeholders by removing long-term uncertainties +and providing balanced and clear communications +for investors that set out our prospects for growth. +Pension funds Delivering our strategy and maximising business +performance demonstrate that Reach is being +managed responsibly and sustainably. +Government +and regulators +A vibrant news sector is key to a functioning +democracy. Our transition to digital is a key part +of the sector’s future, as is the right regulation. +Our business model continued +17 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_2.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..24c2fc22cfb2e89961c55b78cbc475377dc99055 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_2.txt @@ -0,0 +1,71 @@ +CONTENTS +Disclaimer +This Annual Report is sent to shareholders who have elected to receive a hard copy and is available on our website www.reachplc.com for those shareholders who have elected to receive a copy +electronically. In this document, references to ‘the Group’, ‘the Company’, ‘we’ or ‘our’ are to Reach plc and its subsidiaries. A reference to a year expressed as 2023 is to the 53 weeks ended 31 December +2023 and a reference to a year expressed as 2022 is to the 52 weeks ended 25 December 2022. Where we reference ‘like-for-like’, we are comparing a 52 week period. References to ‘the year’ and ‘the +current year’ are to 2023 and references to ‘last year’ and ‘the prior year’ are to 2022. The Annual Report contains forward-looking statements. By their nature, forward-looking statements involve a number +of risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to +differ materially from those expressed in or implied by the forward looking statements. No assurance can be given that the forward-looking statements will be realised. Statements about the directors’ +expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors +which are in some cases outside the Company’s control. The Annual Report has been prepared on the basis of the knowledge and information available to directors at the date of its preparation and +the Company does not undertake any obligation to update or revise the information during the financial year ahead. It is believed that the expectations set out in these forward-looking statements are +reasonable, but they may be affected by a wide range of variables which could cause actual results or trends to differ materially. The forward-looking statements should be read in the context of the +principal risk factors set out in the Strategic Report. +Strategic Report +2 Our purpose +3 Reach in numbers +4 Chairman’s statement +6 A powerful portfolio +7 Developing our audience +8 A resilient business +9 Diversifying our revenue +10 A proactive approach +11 Focusing on efficiency +12 Chief Executive’s review +16 Our business model +18 Our strategy +20 Key performance indicators +22 Financial review +30 Responsible business overview +32 Creating trusted, quality content +36 Operating with integrity +40 Developing our team +46 Protecting our environment +54 Task Force on Climate-related Financial +Disclosures (TCFD) +65 Non-financial and sustainability +information statement +66 Risk report +73 2023 Viability statement +Governance +74 Chairman’s statement +76 Our Board +79 Board in action +85 Section 172 statement +88 Nomination Committee Report +94 Sustainability Committee Report +96 Audit & Risk Committee Report +104 Remuneration Report +127 Compliance with the 2018 UK Corporate +Governance Code +131 Directors’ Report +Financial Statements +136 Independent auditors’ report +145 Consolidated income statement +146 Consolidated statement of +comprehensive income +146 Consolidated statement of +changes in equity +147 Consolidated cash flow statement +148 Consolidated balance sheet +149 Notes to the consolidated financial +statements +188 Parent company balance sheet +189 Parent company statement of +changes in equity +190 Notes to the parent company +financial statements +Other Information +205 2023 SASB index +207 Shareholder information +209 Group five-year summary \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_20.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d608e650a863a0005816b2bf037899b8953d1f2 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_20.txt @@ -0,0 +1,73 @@ +Driving revenue growth +A STRATEGY FIT FOR THE FUTURE +Our strategy +Our strategy is to get to know our customers better, drawing on behavioural insights to create +a virtuous circle of value that delivers more relevant content, a more engaging experience and +greater loyalty. This all drives sustainable, data-led revenue for our business as we continue to +strengthen our digital position. +In summary +We’re constantly working towards making Reach +a more data-led, digitally-focused business. +The enduring appeal of our print titles supports +the investment we need to make in our digital +infrastructure and platforms, and in ensuring we +have a diverse range of talent in our teams. These +investments enable us to deliver a strategy focused +on our customers – a Customer Value Strategy, +or ‘CVS’ – which enables our brands to continue +pursuing our purpose in an increasingly online world. +Why data matters +The success of our CVS relies on us forming a new +kind of relationship with the people who come to us +for news, entertainment and sport – our ‘customers’. +As a largely ad-funded model, page views are our +digital currency. And while customers do not pay +directly for their content, they give us their time and +attention which we measure most simply via these +page views. With the CVS, a further exchange occurs +– in return for more relevant content, our customers +share data about themselves. This could be declared +or personal data such as their email address or +postcode, or it could be behavioural or contextual +data based on the type of content they consume. +The more our customers engage, the more +we learn about their preferences, enabling us to +further enhance and personalise their experience. +The more we understand the behaviour of our +customers, the more valuable their profiles +become, which enables advertisers to more +accurately target their own customers through us. +A critical mass +With data the key to unlocking customer value, an +initial objective of our strategy was to encourage +more customers to register with us. We achieved +our original 2022 target of 10m registered customers +that same year, and now have over 12m, or about a +third of our UK digital audience. +We’re now focused on forging deeper engagement, +understanding each customer better, and delivering +content that encourages them to visit us more +frequently and for longer, making us part of their +daily lives. +For more on how we’re measuring strategic +progress, see our KPIs on page 20. +Building a +culture where +people thrive +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +loyalty +Greater More +relevant content +Moreengaging experience +STRATEGIC OBJECTIVES +18 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_21.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..be20aac75e145168575182120b50ff436487018d --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_21.txt @@ -0,0 +1,44 @@ +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +Our strategy continued +Launched in +August 2023 +Launched in +February 2023 +Launched in +June 2023 +• Continued to deliver stories that embody our purpose such as M.E.N.’s +award-winning campaigning for Awaab’s Law and the Sunday Mail’s +exclusive reporting on the SNP scandal +• Created a new, centralised Studio team which brings together all of our +video and audio talent to produce content for our editorial brands and +commercial partners +• Developed the Belonging Project which ensures the Mirror and regional +newsrooms are producing more inclusive content for the communities +they serve +• Strengthened our AI-powered contextual targeting capabilities with our +in-house ad tech Mantis. Now set up to license to other publishers in 2024 as +a B2B revenue stream – particularly relevant against backdrop of ongoing +third-party cookies deprecation +• Generated 10 times more value from our data-driven advertising versus +volume-related programmatic advertising +• Further developed our in-house recommender tools, powered by AI, that +point readers to content we know they’ll be interested in +• Successfully launched three new ‘.com’ websites from a new US operation +• Establishing and growing secure audience channels – for example via our +award-winning WhatsApp Communities and Channels work which now +allows us to contact over 1m subscribers direct to their phones +• Continued progress reaching the youth audience, with rapidly growing TikTok +follower numbers across key brands +STRATEGY IN ACTION IN 2023 +19 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret kitchen appliance is a "microwave". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_22.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..800025e5a0fd0a7e85f7f6757c72f233f01a0eda --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_22.txt @@ -0,0 +1,101 @@ +17.0 +17.6 +23.7 +22.3 +21.8 +2019 2020 2021 2022 2023 +HOW WE PERFORMED +Target: Year-on-year growth in digital revenue. +Why it matters to us: Growth in digital revenue +is key to demonstrating progress against our +strategy, as we become a more data-led, digital +business. Our digital revenue is predominantly +driven by advertising. The advertising revenues +have been depressed from the macroeconomic +environment and the reduction in referral traffic +from the major platforms. We are making the +business more resilient by diversifying our mix of +digital revenue and securing our digital audience, +so that the performance is more sustainable over +the long term. +Target: Improving year-on-year percentage +decline rate. +Why it matters to us: Although sales of physical +news publications are in structural decline, print still +generates over three-quarters of our total revenue. +With over 250m copies sold a year, sales from +circulation remain a resilient source of revenue, +with cover price increases helping to offset the +impact of people buying printed titles less often. +Print revenue continues to drive the strong cash +flows which supports our digital transformation. +Target: Continue to grow operating margin. +Why it matters to us: Operating margin is a +measure of our profitability, as we aim to grow +digital revenue and carefully manage print decline. +While the effects of the loss of referral traffic have +impacted revenue and profitability over the near +term, over the longer term we expect increasing +digital revenues and lower levels of required +investment in our strategy, relative to its earlier years, +to support a structurally higher operating margin. +Digital revenue growth (£m) +(15.0)% +(2022: +1.0%) +Print revenue decline (£m) +(2.2)% +(2022: (3.5)%) +Adjusted operating margin (%) +(0.6)PP +(2022: (6.1)PP) +Financial KPIs +For our strategy and our business to succeed, we need to maximise growth in digital revenue and optimise our print revenue despite +the structural decline in print. The combination of declining open market yields alongside the industry-wide decline in referral traffic +meant that digital revenue declined 15%. Print has continued to be resilient, declining 2% and driven by a strong performance in +circulation revenue. In aggregate, revenue declined 5% and operating costs declined by a similar amount, driven by our efficiency +programme and some unwinding of print inflation. This meant we delivered a stable operating margin of 17%. Operating cash flow +is broadly the same as last year, reflecting the similar levels of profitability and more efficient working capital management. +Key performance indicators +127.4 +149.8 +148.3 +118.3 +107.0 +2019 2020 2021 2022 2023 +438.8 +448.6 +465.1 +479.3 +591.3 +2019 2020 2021 2022 2023 +Target: Maintain operating cash flow to meet our +financial obligations including the pension funding, +historical legal issues, returns to investors and +reinvestment into the business. +Why it matters to us: Operating cash flow supports +our commitments to ongoing pension funding and +payments on historical legal issues, as well as +investment in our strategy and returns to shareholders. +The business is strongly cash generative – due to +the resilience of our print business and efficient +operating model, which has cost management +at its core. Adjusted operating cash flow reported +above has been aligned with the definition of +adjusted operating profit to exclude the cash flow +impact of restructuring payments and other items +classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating +cash flow. Previously reported numbers include +2019 £133.1m, 2020 £121.8m, 2021 £141.3m and +2022 £64.8m. +Adjusted operating cash flow (£m) +£91.9M +(2022: £92.1M) +91.9 +92.1 +173.9 +154.6 +161.1 +2019 2020 2021 2022 2023 +20 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_23.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..edfa8942e81d7a01dca169c8a16648b8aaa76558 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_23.txt @@ -0,0 +1,113 @@ +Target: 10.0m end of 2022. +Why it matters to us: A registered customer is +a customer who has provided their information +in order to receive a service. This includes email +addresses and phone numbers, which enable us +to build a relationship with more of our audience, +and help advertisers share more geographically +relevant ads. Knowing our customers is an important +part of the Customer Value Strategy and therefore, +it felt appropriate to have a non-financial measure +for customer registrations when we first defined +our strategy in 2020. During the course of 2023 the +referrals from major platforms adversely impacted +our page views and so we took the decision to +turn off the customer login which has reduced +customer registrations from the peak of 13.5m in +August to 12.3m in December. We have surpassed +our original target which was set at 10m for the end +of 2022 and given the current level of registrations +is now at critical mass, we will no longer be +reporting this as a key KPI within this report. +Target: Year-on-year growth. +Why it matters to us: Digital growth can come +from increased supply of advertising and/or an +increased traded price. Increasing supply for +example by increasing the number of ad units +is becoming more challenging due to the direct +impact and trade off with audience experience. It’s +important to examine and understand traded price +which is a key driver of our digital performance. +There are a few factors which drive more revenue +per thousand pages. Firstly we either have insights +into customer and customer behaviour, which can +then be used to offer opportunities to brands to +adopt better-targeted campaigns and customer +offers. Or we drive non-advertising revenues +which are not directly related to volume such as +partnerships, affiliates and ecommerce. Both of +these factors link directly to our Customer Value +Strategy and therefore we are focused on +understanding how RPM trends over time. The final +reason that this metric could move is changes in +page views, and therefore it is important that RPM +performance is considered alongside page views. +Ideally both of these KPIs would trend upwards +over time. +Total average UK page views per month +(m)1 +(21)% +(2022: 0%) +Customer registrations +(m) +12.3 +(2022: 12.5) +Revenue per 1,000 pages +(£) +£8.18 +(2022: £7.36) +Non-financial KPIs +As our strategy progresses, we are considering +evolving our KPIs. One of the key KPIs we are +tracking and considering regularly is RPM – revenue +per thousand pages. RPM is a yield measure and +gives the financial return from digital pages traded. +This has now been included as a strategic KPI and +is described below. Customer registrations were +critical to the Group’s success when the Customer +Value Strategy was relatively nascent. We have +now achieved a critical mass of registrations and +therefore this will be the last year we report on it +within the Annual Report. +1. The non-financial target relates to UK page views +which are more significant to revenue, whereas +worldwide page views are disclosed throughout +the Annual Report as an indicator of the total +reach of our content. +Key performance indicators continued +964 +1,217 +1,210 +1,234 +870 +2019 2020 2021 2022 2023 +8.18 +7.36 +7.55 +5.88 +7.02 +2019 2020 2021 2022 2023 +12.3 +12.5 +9.1 +5.0 +0.8 +2019 2020 2021 2022 2023 +Target: Year-on-year growth in total UK page views. +Why it matters to us: Page views are a strong +measure of whether customers like our content +online. As a customer views more pages, we get +to know more about them – and can collect more +valuable data. However, in 2023 we have seen +some major online platforms, most notably +Facebook, deprioritise news. This has massively +reduced the referral traffic to our site and impacted +page views by 24% globally. We are now focused +on securing our audiences to ensure a more direct +relationship, while also increasing the amount of +content our audience consumes. We’re doing this by +using data to give customers more of the content +they like to read, driving more interactions +and engagement. +21 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_24.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..509c2d67294dc598c70949c710fe07aee412043b --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_24.txt @@ -0,0 +1,72 @@ +BUILDING LONG-TERM RESILIENCE +Financial review +Looking back over the year, we have made +demonstrable progress to ensure the business +is more resilient and able to continue its digital +transformation. During a year of macroeconomic +uncertainty and some significant shifts across +the media sector, we delivered a resilient +financial performance and made significant +progress in resolving the long-standing +uncertainties. +We concluded the 2019 triennial valuation, +along with the 2022 valuation, for the MGN +pension scheme, and have subsequently +reached agreement in principle with our other +schemes and are expected to be concluded +satisfactorily by the 31 March 2024 due date. +This provides a clear view of our future pension +commitments which will materially step down +from the current rate of £60.0m in 2028. +In December, the High Court’s judgment on +the Group’s historical legal issues (HLI) provided +clarity around time limitation. This has resulted +in a material reduction in the cost of settling +outstanding claims and should largely bring an +end to future claims. This has led to a £20.2m +year-on-year release in the HLI provision. We +expect the majority, if not all, of the issued +claims to be resolved during 2024 and 2025 +which is a much shorter time frame than +previously anticipated. Resolving these two +matters has reduced uncertainty and allows +us to plan more effectively for the long term. +The macroeconomic environment in 2023 +impacted advertising spend, and there was +a material step down in digital referral traffic +from major platforms such as Facebook, +which has deprioritised news content. This has +driven a 24% year-on-year decline in digital +page views, which alongside depressed open +market yields (year on year decline 25%), +adversely impacted digital revenue, which +declined by £22.4m or 15% to £127.4m in 2023. +Conversely, our data-driven revenues +performed robustly, only declining 4% year-on +year, to now represent 43% of digital revenues +(2022: 38%). To compensate for the industry +headwinds we took clear actions to continue +to diversify our digital revenues and trade +our digital assets harder. We prioritised areas +within our Customer Value Strategy which +are higher yielding and within our control. +As a result revenue per thousand pages +(RPM) across our digital estate increased +by 11%. These actions have resulted in +improved resilience, with areas of strong +growth including curated marketplaces, +ecommerce and affiliates. +Darren Fisher +Chief Financial Officer +Revenue +568.6M +5.4% decrease on 2022 +43% +of digital revenues +now data driven +5% increase on 2022 +Adjusted operating margin +17.0% +0.6pp decrease on 2022 +22 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_25.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..133dbc426242b2162ebb23187454009d8e404e80 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_25.txt @@ -0,0 +1,75 @@ +Financial review continued +We continued to invest in our digital expansion. We launched our three US-based sites, invested +in Curiously, our social-first, video-focused brand, and invested in new products to develop our +curated marketplace capability. +The print business remained robust and delivered £438.8m (2022: £448.6m) of revenue, +representing just over 75% of the Group’s revenue with a strong performance in circulation and +print advertising. The teams have access to a significant amount of data which has built up over +many years and this is used to determine optimal levels of availability and cover price increases. +These dynamics have offset the volume decline with circulation revenue growing 1.6%. Print +advertising declined by £10.3m, or 11.9% year-on-year; this was a solid performance, +outperforming volume trends which were down 17% year-on-year. +Focus on efficiency +Through our cost action plan we continue to focus on efficiency, setting up our operations +to adapt and thrive in a fast-paced and competitive digital landscape. At the start of the year +we committed to reducing total operating costs by 5-6%, and on a 52 week like-for-like basis we +achieved a 5.7% reduction. Inflation moderated through the year following the material increase in +the cost of newsprint in 2022, some of which unwound in 2023. Overall newsprint costs reduced by +21%, mainly driven by the decline in production volumes. We have implemented restructuring and +efficiency programmes and as part of these, headcount has reduced by 14% over the year. Our +largest operating cost, labour, reduced by 5% year-on year. Together these actions have driven +higher levels of efficiency, protecting the strong operating margin of 17% and mean we are better +positioned for the long term. +Strong balance sheet +The Group has a robust balance sheet with a closing cash balance of £19.9m, and net debt of +£10.1m (inclusive of £0.9m restricted cash). The Group has £30.0m drawn down on its revolving +credit facility. The Group’s revolving credit facility of £120.0m is in place until November 2026. +Cash management remains a priority. Group cash conversion was strong at 95% supported +by efficient working capital management. Pension scheme contributions during the year were +£60.0m, HLI claim settlements totalled £4.6m and we incurred £18.8m of restructuring payments. +Together these non-operating cash outflows amount to £83.4m. +In December 2023 the Group completed a £605.4m capital reduction, converting the entirety +of the share premium account into distributable reserves, which will support the payment of +dividends into the future. This did not involve any return of capital or payment to shareholders. +Looking ahead +The strength of our print business underpins the cash generation and profitability of the Group. +We will continue to carefully balance cover price increases and availability to deliver a robust +circulation performance despite the falling demand for print. Print revenue funds the Group’s +financial commitments and enables investment as we continue to build our digital business. +This year we will continue to invest in product and new markets including the US and developing +the AI-powered Mantis ad tech. We will also increase our use of AI tools to support increased +productivity in the newsrooms, under the continued guidance of our journalists. +Across our digital business we continue to build a more sustainable higher-quality digital mix, with +43% of digital revenue now data-driven. The depressed open market yields, compounded by the +decline in page views, have reinforced the benefits of our data-driven Customer Value Strategy. +This strategy will continue to increase yields and grow data-driven revenues. +As communicated in 2023, we have already actioned a further programme of cost reduction +for 2024, which we are confident will support a 5-6% in-year reduction in our operating costs and +protect our operating margin. Savings have been generated throughout the business and include +further steps in creating a digitally-led editorial business, for example the creation of a single +video studio. +Summary income statement +Adjusted 2023 +£m +Adjusted 2022 +£m +YOY change +% +Statutory 2023 +£m +Statutory 2022 +£m +YOY change +% +Revenue 568.6 601.4 (5.4) 568.6 601.4 (5.4) +Costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Associates 2.9 2.8 3.6 1.4 1.4 0.0 +Operating profit 96.5 106.1 (9.0) 46.1 71.3 (35.3) +Finance costs (3.5) (2.8) (25.0) (9.4) (5.1) (84.3) +Profit before tax 93.0 103.3 (10.0) 36.7 66.2 (44.6) +Tax charge (24.6) (18.8) (30.9) (15.2) (13.9) (9.4) +Profit after tax 68.4 84.5 (19.1) 21.5 52.3 (58.9) +Earnings per share +– basic (p) 21.8 27.1 (19.6) 6.8 16.8 (59.5) +23 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_26.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..414df8998f7facf975cbd5b098942140d17c0957 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_26.txt @@ -0,0 +1,56 @@ +Financial review continued +The results have been prepared for the 53 weeks ending 31 December 2023. The comparative +period has been prepared for the 52 week period ending 25 December 2022. The additional week +contributed £6.2m of revenue and £0.8m of operating profit. The impact of revenue and costs is +shown on a like-for-like basis in the table on page 26. +Group revenue fell by £32.8m or 5.4% to £568.6m with print down 2.2% and digital down 15.0%. +Adjusted costs decreased by £23.1m or 4.6% to £475.0m, partially offsetting the decline in revenue. +This was driven by the reduction in circulation volumes and a small unwinding of some of last year’s +newsprint cost inflation, alongside the ongoing cost reduction programme. Statutory costs were +lower by £7.6m or 1.4%, with the increase in operating adjusted items of £15.5m (£48.9m in 2023 +versus £33.4m in 2022) partially offsetting the reduction in operating costs. +Adjusted operating profit decreased by £9.6m or 9.0% to £96.5m, driven by the decline in revenue +partially offset by the savings in costs. The adjusted operating margin of 17.0% in 2023 compares +to 17.6% for 2022. Statutory operating profit decreased by £25.2m or 35.3% primarily due to the +increase in operating adjusted items which include restructuring charges in respect of cost +reduction measures and impairment of the finance lease receivable and recognition of onerous +costs following the sub-lessee of a vacant print site entering administration, partially offset with +the release of the provision for historical legal issues. +Adjusted earnings per share decreased by 5.3p or 19.6% to 21.8p. Statutory earnings per share +decreased by 10.0p to 6.8p, principally due to the decrease in operating profit. +Revenue +2023 +£m +2022 +£m +YOY change +% +Print 438.8 448.6 (2.2) +Circulation 312.5 307.7 1.6 +Advertising 76.6 86.9 (11.9) +Printing 20.2 23.1 (12.7) +Other 29.5 30.9 (4.5) +Digital 127.4 149.8 (15.0) +Other 2.4 3.0 (16.9) +Total revenue 568.6 601.4 (5.4) +Revenue declined overall by £32.8m or 5.4%. +Print revenue decreased by £9.8m or 2.2% (2022: down 3.5%). Circulation performance was strong +with revenue up 1.6% (2022: down 1.7%) driven by carefully considered cover price increases, which +were above recent historical levels, offsetting the ongoing decline in circulation volumes. +Print advertising revenue declined by £10.3m or 11.9% (2022: down 15.9%); but outperformed the +print volume decline of 17%. During the year the strongest performing sectors for print advertising +include food retail, travel, the government and entertainment and media, which is very similar to +the prior year. +Print revenue also includes external or third-party printing revenues and other print-related +revenues which decreased by £4.3m, or 8.0% (2022: increased 10.4%). These revenues are +largely contracted on a cost-plus basis, and reflect the external market demand for print. +Digital revenue decreased by 15.0% to £127.4m (2022: 1.0% increase). Revenue has been impacted +by lower advertising demand during a period of macroeconomic uncertainty alongside a +material reduction in page views. Major platforms including Facebook have deprioritised news +content over the year which in turn has driven a reduction in referral traffic for publishers across +the sector. These changes have adversely impacted our revenues which were directly impacted +by page view volume. Strategically driven or ‘data-led revenues’, which are more resilient and +higher yielding, performed robustly. Data-driven revenues were £55.3m, down 4.0%, and now +represent 43% of digital (2022: 38%). +24 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_27.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..09d433ecdd36b745f3bcf6e8b54389011211d938 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_27.txt @@ -0,0 +1,69 @@ +Financial review continued +Costs +2023 Adjusted +£m +2022 Adjusted +£m +YOY change +% +2023 Statutory +£m +2022 Statutory +£m +YOY change +% +Labour (223.0) (234.7) 5.0 (223.0) (234.7) 5.0 +Newsprint (59.5) (75.4) 21.1 (59.5) (75.4) 21.1 +Depreciation and +amortisation (21.6) (20.2) (7.0) (21.6) (20.2) (7.0) +Other (170.9) (167.8) (1.9) (219.8) (201.2) (9.2) +Total costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Adjusted costs of £475.0m (2022: £498.1m) decreased by £23.1m or 4.6%. On a 52 week like-for-like +basis adjusted costs declined by 5.7%. Labour costs decreased 5% as we implemented our +restructuring and efficiency programme with headcount falling by 14% over the year. Newsprint +costs reduced from lower volumes, and an unwinding of some of last year’s newsprint cost inflation. +Statutory costs were lower by £7.6m or 1.4%, a less significant reduction due to higher operating +adjusted items which were £15.5m higher (£48.9m in 2023 compared to £33.4m in 2022). +Operating adjusted items included in statutory costs above related to the following: +Statutory 2023 +£m +Statutory 2022 +£m +Provision for historical legal issues 20.2 (11.0) +Restructuring charges in respect of cost reduction measures (26.9) (15.5) +(Impairment of sublease)/sublet of closed print plant (19.4) 16.6 +Other property-related costs (8.0) (4.6) +Pension administrative expenses and past service costs (5.5) (14.8) +Other items (9.3) (4.1) +Operating adjusted items in statutory costs (48.9) (33.4) +The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the provision for historical +legal issues relating to the cost associated with dealing with and resolving civil claims in relation to +historical phone hacking and unlawful information gathering. This material reduction is driven by +the judgment handed down during December 2023 in respect of test claims. As a result of the +ruling, all claims issued after 31 October 2020 are now likely to be dismissed other than where +individuals can demonstrate specific exceptional circumstances, and therefore this has +significantly reduced the amounts that are expected to be paid out. +Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost management actions +taken in the period. +Following the sublet of the vacant print site during 2022 which resulted in the reversal of an +impairment in right-of-use assets of £11.0m and previously onerous costs of the vacant site of +£5.6m, the sub-lessee entered into administration during 2023. As a result, the corresponding +£10.8m finance lease receivable has been impaired along with the subsequent recognition of +onerous costs of £8.6m of the vacant site during the period. +Other property-related costs comprise the impairment of vacant freehold property costs (£4.3m), +vacant freehold property-related costs (£1.4m) and onerous lease and related costs (£2.6m) less +the profit on sale of assets (£0.3m). In 2022, other property-related costs related to the impairment +of vacant freehold property (£4.2m) and plant and equipment (£0.8m) less the profit on sale of +impaired assets (£0.4m). +Pension costs of £5.5m (2022: £14.8m) comprise pension administrative expenses (2022: £4.2m). 2022 +also included £10.6m of past service costs relating to a Barber Window equalisation adjustment. +Other adjusted items comprise the Group’s legal fees in respect of historical legal issues (£5.3m), +adviser costs in relation to the triennial funding valuations (£2.5m), internal pension administrative +expenses (£0.6m), corporate simplification costs (£0.5m), and other restructuring-related project +costs (£0.7m) less a reduction in National Insurance costs relating to share awards (£0.3m). In +2022, other adjusted items comprise the Group’s legal fees in respect of historical legal issues +(£5.2m), adviser costs in relation to the triennial funding valuations (£1.6m), less a reduction in +National Insurance costs relating to share awards (£2.7m). +25 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret sport is "surfing". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_28.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..105cf3785a3b73da96be0530881ec5608e3eaca2 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_28.txt @@ -0,0 +1,73 @@ +Financial review continued +The Group excludes adjusted operating items and the pension finance charge from the adjusted +results. Adjusted items relate to costs or income that derive from events or transactions that fall +within the normal activities of the Group, but are excluded from the Group’s adjusted profit +measures, individually or, if of a similar type in aggregate, due to their size and/or nature in +order to better reflect management’s view of the performance of the Group. +Items are adjusted on the basis that they distort the underlying performance of the business +where they relate to material items that can recur (including impairment, restructuring and tax +rate changes) or relate to historical liabilities (including historical legal and contractual issues, +defined benefit pension schemes which are all closed to future accrual). +Other items may be included in adjusted items if they are not expected to recur in future years, +such as property rationalisation and items such as transaction and restructuring costs incurred +on acquisitions or the profit or loss on the sale of subsidiaries, associates or freehold buildings. +Management excludes these from the results that it uses to manage the business and on which +bonuses are based to reflect the underlying performance of the business and believes that the +adjusted results, presented alongside the statutory results, provide users with additional useful +information. Further details on the items excluded from the adjusted results are set out in note 35. +Like-for-like comparison +53 week +FY 2023 +YOY +% +LFL 52 week +FY 2023 +YOY +% +Digital (15.0) (15.2) +Print (2.2) (3.5) +Circulation 1.6 0.0 +Advertising (11.9) (13.0) +Group revenue (5.4) (6.5) +Adjusted operating costs YoY decline % (4.6) (5.7) +Adjusted operating profit bridge +£6m +£(13)m +£30m +£1m +£(33)m +£106m +£97m £(10)m +FY22 Revenue +mix +Inflation +& volume +Investment Efficiencies Other FY23 +Net cost saving of £23m +Adjusted operating profit of £96.5m was down £9.6m or 9.0% reflecting the decline in revenue +of £32.8m or 5.4%, mitigated by a £23.1m or 4.6% decrease in operating costs. This meant that +adjusted operating margin decreased by 0.6 percentage points from 17.6% in 2022 to 17.0% in 2023. +The net cost saving of £23m was driven mainly from efficiencies (£30m). Half of these efficiencies +related to labour costs which were lower following the cost reduction programmes with the +balance coming from the rationalisation of our property portfolio and other operational costs. +Investments were made into our US operations and youth brand, Curiously, alongside some +digital product development. +Reconciliation of statutory to adjusted results +Statutory results +£m +Operating adjusted +items +£m +Pension finance +charge +£m +Adjusted results +£m +Revenue 568.6 - - 568.6 +Operating profit 46.1 50.4 - 96.5 +Profit before tax 36.7 50.4 5.9 93.0 +Profit after tax 21.5 42.4 4.5 68.4 +Basic earnings per +share (p) 6.8 13.6 1.4 21.8 +26 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_29.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..95510edf7519e39c0e066bd978def5cb943655be --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_29.txt @@ -0,0 +1,60 @@ +Financial review continued +The results have been prepared for the 53 weeks ending 31 December 2023 and the comparative +period has been prepared for the 52 week period ending 25 December 2022. The revenue and +costs have been adjusted to show the numbers on a like-for-like basis. The additional week added +£6.2m to revenue and £0.8m to operating profit. +Balance sheet and cash flows +Historical legal issues provision +The historical legal issues provision relates to the cost associated with dealing with and resolving +civil claims in relation to historical phone hacking and unlawful information gathering. Payments of +£4.6m have been made during the year and the provision has decreased by £20.2m, driven by the +judgment handed down on the test claims during December 2023. At the year end a provision of +£18.2m remains outstanding and this represents the current best estimate of the amount required +to resolve this historical matter. Further details relating to the nature of the liability, the calculation +basis and the expected timing of payments are set out in note 27. +Decrease in accounting pension deficit +The IAS 19 pension deficit (net of deferred tax) in respect of the Group’s defined benefit pension +schemes decreased by £36.8m from £113.9m to £77.1m at the year end. The decrease in the deficit +is due to the net aggregate of many factors, mostly notable changes in market conditions leading +to an increase in discount rate, returns on the schemes’ assets, Group contributions and the +easing of inflation. We concluded the 2019 triennial valuation, along with the 2022 valuation, for the +MGN pension scheme, and have subsequently reached agreement with our other schemes which +are expected to be completed by the 31 March 2024 due date. The Group now benefits from an +agreed position on future pension funding commitments. +During 2022, similar to the West Ferry scheme, the Trustees of the Express Newspapers Senior +Managers Pension Fund purchased a bulk annuity (at no cost to the Group) and the scheme +now has all pension liabilities covered by annuity policies. Group contributions in respect of the +remaining four defined benefit schemes in 2023 were £60.0m (2022: £55.1m). Contributions in +2024 are expected to be £60.9m under the current schedule of contributions for the four schemes. +Deferred consideration +Deferred consideration is attributable to the acquisition of Express & Star. The third and final +payment of £7.0m was made on 28 February 2023. There is no remaining liability in relation to +deferred consideration. +Profit to cash measure +This ratio is a measure of our effectiveness at working capital management. It is calculated as our +adjusted operating cash flow as a proportion of adjusted operating profit. +In order to calculate this measure, adjusted operating cash flow has been aligned to the definition +of adjusted operating profit. The change is largely driven by the exclusion of the cash flow impact +of restructuring payments and other items classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating cash flow in 2022 from £64.8m to £92.1m. +2023 +£m +2022 +£m +Adjusted operating profit 96.5 106.1 +Depreciation and amortisation 21.6 20.2 +Adjusted EBITDA 118.1 126.3 +Working capital movements (3.9) (12.3) +Lease payments (5.3) (6.7) +Capital expenditure (15.4) (13.3) +Other 1.3 0.9 +Associates (2.9) (2.8) +Adjusted operating cash flow 91.9 92.1 +Profit to cash ratio 95% 87% +During the year, adjusted operating profit was £96.5m (2022: £106.1m) and the adjusted operating +cash inflow was £91.9m (2022: £92.1m) with a profit to cash ratio of 95% reflecting ongoing cash +management. Working capital improved year-on-year, predominantly from excess newsprint +inventories which built up during the escalation of the war in Ukraine in 2022 partially unwinding +during 2023. +27 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_3.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..752be29e0c30571e7061d5ede5dd582da85001e0 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_3.txt @@ -0,0 +1,23 @@ +DEVELOPING +OUR AUDIENCE +Page 7 Page 9 +FOCUSING +ON EFFICIENCY +Page 11 +How we’re equipping ourselves for success in a +challenging and competitive market by managing +our cost base carefully and organising ourselves +to better serve a digital audience. +How we’re generating income beyond advertising +with new revenue streams such as ecommerce +and affiliates, while ensuring our printed +products continue to drive revenue. +How we have responded to a major shift in online +traffic trends by strengthening our secure +audience and deepening our relationship +with new demographics. +DIVERSIFYING +OUR REVENUE +1 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret landmark is "Big Ben". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_30.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..2814dd349dd76575c138f6fa5b1abc28028484e6 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_30.txt @@ -0,0 +1,49 @@ +Cash balances +Net debt at the year end is £10.1m (inclusive of £0.9m restricted cash), from a net cash position of +£25.4m at the end of 2022. The Group has £30.0m drawn down on its revolving credit facility, with +the overall total cash position of £19.9m at the year end. The Group has a revolving credit facility +of £120.0m, which expires during November 2026. +Cash generated from operations on a statutory basis was £76.4m (2022: £80.1m). The Group +presents an adjusted cash flow which reconciles the adjusted operating profit to the net change +in cash and cash equivalents, which is set out in note 36. A reconciliation between the statutory +and the adjusted cash flow is set out in note 37. The adjusted operating cash flow was £91.9m +(2022: £92.1m). +Dividends +The Board proposes a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence). The final +dividend, which is subject to approval by shareholders at the Annual General Meeting on 2 May +2024, will be paid on 31 May 2024 to shareholders on the register at 10 May 2024. +An interim dividend for 2023 of 2.88 pence per share was paid on 22 September 2023 (2022: 2.88 +pence per share). +In proposing a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence per share), the +Board has considered all investment requirements and its funding commitments to the defined +benefit pension schemes. +Financial review continued +Uses for cash +The table below shows how the Group is using the cash generated from operations to meet its +financial obligations. Adjusted cash generated from operations is adjusted operating cash flow +excluding the impact of net lease payments and capital expenditure. +2023 +£m +2022 +£m +Adjusted cash generated from operations 112.6 112.1 +Pension payments (60.0) (55.1) +Historical legal issues (4.6) (9.0) +Restructuring (18.8) (13.8) +Capital expenditure (15.4) (13.3) +Final payment on acquisition (7.0) (17.1) +Other (19.2) (21.2) +Cash flow before returns to shareholders (12.4) (17.4) +Dividends paid (23.1) (22.9) +Cash flow after returns to shareholders (35.5) (40.3) +Net (debt)/cash (10.1) 25.4 +Material uses for cash include pension contributions totalling £60.0m (2022: £55.1m) and restructuring +payments of £18.8m (2022: £13.8m) which mainly relate to cost reduction programmes implemented +at the start of the year. The final payment on acquisition of £7.0m (2022: £17.1m) relates to the +Express & Star. Other comprises professional fees in respect of historical legal issues and triennial +funding valuations of £7.8m (2022: £6.8m), net lease payments of £5.3m (2022: £6.7m), interest +paid on borrowings of £3.1m (2022: £1.9m) and other movements which account for the balance +of cash flows. +The Group paid a dividend in the period of £23.1m (2022: £22.9m). +28 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_31.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..ec03acbc149e2ef2eb7bc5a6df03550fb0a2cd5c --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_31.txt @@ -0,0 +1,22 @@ +Current trading and outlook +We remain focused on delivering our Customer Value Strategy and the areas within our control, +building a more resilient growing digital business and delivering efficiencies. The sector-wide +decline in referral traffic will impact Q1 2024. We expect growing momentum across our digital +business thereafter. As previously announced we have made our operations better suited for +a digital world and are on track to deliver a 5-6% reduction in full-year operating costs in 2024. +Our financial priorities remain profitability and cash. Next year we expect working capital +requirements excluding provisions to be broadly neutral, and a small step down in our capital +expenditure. We have started the process to sell a number of our freehold properties which +will support cash generation. Our financial commitments for the year ahead are similar to 2023, +including the pensions contributions which will be broadly unchanged; we expect an acceleration +in the resolution of existing HLI claims and a further £13m restructuring outflow relating to +severance payments for the recent change programme. +Trading performance across the first two months of 2024 has been robust, with print advertising +and digital performing well. We are on track with our full year outlook, but continue to operate in +an uncertain macroeconomic environment. +Darren Fisher +Chief Financial Officer +5 March 2024 +Financial review continued +29 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_32.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..f26d205e0a65356bad5c50872f181d6a49fd0624 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_32.txt @@ -0,0 +1,63 @@ +We aim to act with integrity at all times – not just +because we have a responsibility to stakeholders, +whose lives we affect through our operations and +journalism, but because it’s simply the right thing to do. +In 2023, we built on the progress we made in 2022, +when we introduced a new formal framework to guide +our approach to responsibility and sustainability, +by identifying disclosure gaps and enhancing our +reporting. In particular we focused on progressing our +environmental reporting in 2023, as we implemented +the systems and gathered the data that will guide us +on our path to net zero. +A RESPONSIBLE, +SUSTAINABLE BUSINESS +Responsible business overview +Our responsible business framework +CREATING TRUSTED, QUALITY CONTENT +PROTECTING THE ENVIRONMENT +OPERATING WITH INTEGRITY +• sustainability +governance +and management; +• privacy and security; +• political considerations; +• the supply chain (shared); +• human rights; +• labour rights; and +• health and safety. +See page 36. +• maintaining independent +journalism, campaigning +and the role of a free +press in society; +• product stewardship; +• fair and ethical conduct; +• innovation; and +• making a wider +economic contribution. +See page 32. +• GHG emissions; +• energy and climate change; +• waste; +• biodiversity; +• other emissions, effluents +and pollution; +• water; +• the supply chain; and +• speaking up for +environmental issues in +our editorial content. +See page 46. +• supporting diversity +and inclusion; +• attracting, developing +and retaining talent; and +• supporting a positive +culture and wellbeing. +See page 40.DEVELOPING OUR TEAM +Our responsibilities… +In 2023 we installed 9,000m2 of solar panels at our +owned print sites in Oldham, Watford and Glasgow +30 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information30Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_33.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..61786db91580a26f07f965df87c09c2b8710a7a1 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_33.txt @@ -0,0 +1,101 @@ +OUR STAKEHOLDERS +Our business and brands touch the lives of: +Our people… who work from home and in our offices, in communities +and at print facilities – around the UK, Ireland and US; +Our customers… who give us their data and expect us to look after it, and +who also expect to see themselves represented in our +business, brands and journalism; +Our communities… whose voices we amplify and whose stories we share in +good times and bad; +Our advertisers and +media partners… +who expect our platforms to respect and promote their +messages in a way that’s safe and secure for their +own customers; +Our suppliers and +publishing partners… +many of whom are experiencing increased costs and +supply challenges; +Our shareholders… who are invested in the success of our business; +Pension funds and +their members… +who expect us to deliver on pension commitments and +treat them fairly; and +Government and +regulators… +who we work with to protect journalists and our brands +while setting out plans to bring tighter regulation to global +tech platforms. +Our section 172 statement can be found on pages 85 to 87. It sets out how the Board has, in +performing its duties over the course of the year, considered the matters set out in section 172 +of the Companies Act 2006, alongside examples of how each of our key stakeholders has +been considered and engaged. +We report against the Sustainability Accounting Standards Board (SASB) framework on +page 205. +Building on our responsible +business framework +To ensure that people find our strategy +credible and believe in our purpose, we must +act responsibly with the communities and +society we serve, our teams and the planet. +As a regulated news publisher in an era of +global tech platforms and ‘fake news’, the +responsibility is greater than ever. We must +continue to enlighten, empower and entertain +people everywhere through brilliant journalism +they can trust, and maintain a position +from which we can hold power to account. +Formalising our approach to +responsible business +In 2022, we carried out a detailed materiality +assessment and created a framework to +formalise our approach to being a responsible, +sustainable business – making it easier to +manage and measure our progress. It provided +a clearer articulation of our approach to +environmental, social and governance (ESG) +issues, ensuring it aligned with our purpose +and business strategy, as you’ll see over +the following pages. +This formal framework set out an approach +to responsible business that we had already +in many ways exemplified, for example by +upholding regulations and codes of conduct, +representing and campaigning on behalf of +those who need our voice, and producing our +printed newspapers with as low a carbon +footprint as possible. +In 2023, we built on the framework by +commissioning a gap analysis to define where +disclosure gaps exist against the methodologies +recommended by Sustainalytics, MSCI and +the Sustainability and Accounting Standards +Board (SASB). As a result, we have enhanced +reporting in many of these areas, though in +some – in particular those involving complex +editorial decisions – we agreed as a business +to maintain existing levels of disclosure. +We’re committed to continually challenging +and improving the standard of our reporting, +making sure we stay focused on the issues +that matter most to our stakeholders. +Overview of materiality +Our 2022 materiality assessment +included a review of current policies and +direct engagement with our key internal +and external stakeholders to establish +their priorities in relation to the long- +term sustainability of our business. +In 2023 our Sustainability Steering +Committee reviewed the material +issues within our responsible business +framework and concluded that they +reflect the current ESG challenges and +opportunities affecting Reach and our +stakeholders. We will keep the relevancy +and importance of these issues under +continuous review throughout the +coming year. +Responsible business overview continued +31 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_34.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..bf7ff14da4d6869ea1d9ece721295d0d8c46578a --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_34.txt @@ -0,0 +1,30 @@ +Responsible business continued +Relevant UN SDGs +MyLondon crime reporter talking +to police about knife crime in shops +and restaurants around Croydon +We give a voice to others with our +trusted, quality content +Our titles connect people and communities +across the UK, Ireland, US and English-speaking +countries around the world. We have a +responsibility to our communities to deliver +accurate, independent journalism everybody +can trust and cover the issues that matter +most to them. +Whether it appears in print or online, our +journalism can give a voice to others, and +draw attention to, or amplify, the causes they +care for as we campaign, lobby and fight on +their behalf. At a time when misinformation +and disinformation threaten the credibility +of the industry, our commitment to creating +trusted, quality content as a regulated news +publisher ensures people and communities +have a news provider who will serve and +stand up for them. +CREATING TRUSTED, +QUALITY CONTENT +32 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #3 is a "bowl". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_35.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..560eee2f71e279b02871818d8a19ebbb66dcce20 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_35.txt @@ -0,0 +1,103 @@ +Responsible business continued +Creating trusted, quality content +Playing our part in +a changing industry +We’ve always been proud of the prominent +role our brands play in the vibrant and +energetic free press that underpins our +democracy – and understand the rights, +privileges and responsibilities it brings. +We’re committed to upholding the highest +ethical standards of journalistic practice. As +part of that commitment, we’re a member of +the Independent Press Standards Organisation +(IPSO): an independent regulator of most of +the UK’s newspapers and magazines. As we +say in our annual statement to IPSO: we have +‘no appetite for behaviours or decisions that +knowingly lead to the publication of inaccurate, +misleading or distorted information’. +In 2023, IPSO notified us of outcomes in respect +of 81 complaints, some of which were received +in previous years. These are as follows: 17 +complaints have been upheld by IPSO with +the requirement to publish a full adjudication +or correction; and 13 where the Committee +deemed that sufficient remedial action +(SRA) had been taken by the publication. +49 complaints were not upheld and 65 were +resolved during the referral period. This is a +significant improvement against outcomes +last year – 62% of complaints not being upheld +in 2023 compared with 48% for the same +period in 2022. +Legal and ethics standards +In 2023, our legal and editorial induction +programme became a mandatory part of the +onboarding process, ensuring all new editorial +colleagues receive training in legal and +editorial standards and ethics. +The training touches on all elements of media +law, with modules on IPSO and the Editors’ +Code as well as on Reach’s required editorial +standards. Monthly legal training has been +provided, with a specific focus this year on +refresher training for colleagues as well as +specialist sessions for our magazine teams. +Alongside the training programme, all editorial +employees are sent a monthly legal bulletin +highlighting issues and updates – readership +is mandatory and timely compliance is +monitored and logged. +Regulated by IPSO +While we believe in holding ourselves to high +standards, we’re also an active member of +IPSO, which acts as an independent regulator +across many UK titles and enforces the Editors’ +Code of Practice. +HOW WE ARE USING AI +Our editorial leaders formed a +cross-functional AI steering committee +in January 2023, focusing on productivity, +innovation and governance. The group +has worked together to accelerate AI +experimentation and boost productivity +gains with a primary focus on editorial +uses of generative AI. The main objective +of the group was to develop ways for AI +to support journalists in their daily work, +in combination with continued editorial +judgement and approval. We are rapidly +scaling the most promising AI applications +and in 2024 we will be looking beyond the +editorial teams to explore productivity +gains in other departments. +In 2023, 6,000 articles were written with +the support of AI tools, generating 50m +page views. Our editors notified readers +when we began using AI and made a +public commitment that every piece of +AI-supported content will continue to be +overseen and approved by a journalist. +“We’re committed to +upholding the highest +ethical standards of +journalistic practice.” +We submit an annual statement to IPSO that +sets out how we maintain editorial standards, +our record on editorial compliance during +the year, including any details of complaints +upheld against us and how we handle them, +and training programmes for our journalists. +We publish the statement on our website. +Editorial freedom +Reach is home to many brands that differ in +audience and political ideology but which are +all built on the principles of freedom of speech +and editorial independence. We welcome +lawful expression from different perspectives, +without exclusion. With no single title or +contributor representing Reach as a whole, +we are greater than the sum of our parts. +33 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_36.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..6f0d7a91ec6522651629029fb915ae25d692bcfc --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_36.txt @@ -0,0 +1,68 @@ +Day in, day out, our journalists cover the stories that +matter most to the communities they serve. Our titles +hold power to account on both a local and national level, +give a voice to those who need it most and campaign +against injustice. +This year, we established a group-wide editors’ forum +that meets every quarter to review and document the +positive social impact of the content Reach produces. +DAILY EXPRESS’S TRIPLE LOCK PENSION AND +SAVE OUR HIGH STREET BANKS CAMPAIGNS +In 2023, the Express continued to give a voice to those +who needed it most, as illustrated by its Triple Lock Pension +and Save Our High Street Banks campaigns. The Express +reignited its Triple Lock Pension campaign in 2023, again +calling on the Government to protect and support +pensioners and recommit to the triple lock. The title +launched a petition to persuade the Government to stick +to its manifesto promise, garnering over 300,000 signatures +and resulting in the Government committing to its original +promise. In response to warnings from analysts that almost +all high street banks will be shut within four years, the Save +Our High Street Banks campaign called for high street +branches to be saved from extinction on behalf of the +country’s most vulnerable. Ultimately, the campaign +celebrated a victory in June when Nationwide +promised to keep high street branches open. +THE LIVERPOOL ECHO’S +POLITICIAN PARKING FINE EXPOSÉ +After a 16-month investigation, the Liverpool +Echo revealed 14 local politicians had 51 +penalty charge notices cancelled by officers +over a five-year period which at full price would +total more than £3,500. The investigation revealed +poor practices and behaviours from those who +had been elected to serve Liverpool and its people. +Following the investigation, two senior Liverpool councillors left +the council, with one of them banned from standing again, +and two more councillors also departed after the exposé. +The investigation led to a full audit of the council’s +parking operations. +THE DAILY RECORD’S OUR KIDS +OUR FUTURE CAMPAIGN +In February 2023, the Daily Record +launched the Our Kids Our Future +campaign in response to an epidemic of +teenage violence in Scotland. The campaign +called for the Scottish Government and local +councils to ring-fence funding to ensure +every community has a place for teenagers +to go and demanded online tech giants +fully enforce their policies on tackling harmful +content such as videos of young people attacking others. +The campaign earned its place on the Government agenda +and led to First Minister Humza Yousaf pledging to invest £2m +to protect young people in Scotland. Humza Yousaf also wrote +to the UK Government asking for an amendment to the Online +Safety Bill to help tackle online clips showing attacks on children +and this amendment was successfully approved into the Bill in +July 2023. The Scottish Government held its first emergency +summit on violence in schools as a direct result of the +Record’s reporting. +Responsible business continued +Creating trusted, quality content +CAMPAIGNING +ON BEHALF +OF OTHERS +34 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsOther Information 34Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_37.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..211a5159efb28995c48a781f4525e2a6b8d739f6 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_37.txt @@ -0,0 +1,42 @@ +BIRMINGHAMLIVE’S COVERAGE OF +BIRMINGHAM CITY COUNCIL’S BANKRUPTCY +Fundamental failings at Birmingham City Council resulted +in it filing for bankruptcy, but it was the relentless coverage +from BirminghamLive that brought into sharp relief the +impact that these political decisions have on the people +of Birmingham. +BirminghamLive spent months reporting on the council +and exposed a range of issues, from political coups to the +mismanagement of refuse workers’ hours. The title ensured +that it was represented at every single council meeting +where critical issues were being discussed, further exposing +issues that would otherwise have gone without scrutiny. +THE MIRROR’S SAVE OUR TICKET OFFICES CAMPAIGN +The Mirror launched its Save Our Ticket Offices campaign in +July 2023 after it was revealed the Government had backed +proposals by train firms to shut ticket counters at 974 railway +stations across England. +With this campaign, the Mirror led the efforts to stop the closures, +which would have particularly hit the elderly, vulnerable and +disabled. Thousands of readers took part in an online rally in +August, leading to the Government abandoning the overhaul. +WALESONLINE INVESTIGATION +A WalesOnline investigation led to real-world +consequences for one direct sales firm in Cardiff. For +several months, a member of the WalesOnline team went +undercover to get a job with the company and used a +hidden camera to expose a culture of lies and pressure- +selling to manipulate vulnerable and elderly people into +providing their bank details for charity payments. As our +journalist discovered, staff at the business were lured by +job adverts with empty promises of high salaries, only to +be forced to work round the clock for far less than the +minimum wage. The shocking findings led to the firms +involved having their fundraising contracts terminated, +while the industry regulator is evaluating our footage to +assess further action. +Responsible business continued +Creating trusted, quality content +35 +Reach plc Annual Report 2023GovernanceStrategic Report Financial Statements Other Information +The secret animal #5 is a "squirrel". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_38.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..f99519f3c0ef4ec26c8ba7e3534b43ebefd36e95 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_38.txt @@ -0,0 +1,35 @@ +Responsible business continued +Operating with integrity +Relevant UN SDGs +A proactive approach +We’re committed to acting ethically and +with integrity in everything we do, from how we +source, report and disseminate our journalism, +to how we run our business and treat our people. +By upholding these standards, and meeting +those set by regulators and expected by wider +society, we’re able to support our journalists +and those our journalism empowers in holding +authority to account. +In recent years we have continuously +formalised our approach to key policies and +practices for all our employees, as detailed in +this section. We also have a number of training +processes geared specifically around our +editorial teams – see page 41. +Ahead of 2023 we took the decision to go to +trial around several long-standing historical +legal issues. This step and resulting judgment +has given us the necessary clarity to draw a +line under these issues and move forward as +a business – read more on page 10. +OPERATING +WITH INTEGRITY +Operating in an increasingly digital world +brings additional challenges regarding data +protection and cyber abuse. We now handle +more of our customers’ data than ever – and +we must treat it carefully and give visitors to +our sites a safe online experience. +Strategic Report Governance Financial Statements Other Information +36Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_39.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3fd39a01863a866c5084c4610581578f604620f --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_39.txt @@ -0,0 +1,101 @@ +Responsible business continued +Operating with integrity +Improving ethical standards online +As we move more of our business online, our +responsibility to our customers and advertisers +is greater than ever. Customers deserve and +expect a safe experience, while advertisers +need to trust their ads will appear in +appropriate environments. +Our machine-learning-powered brand safety +tool, Mantis, ensures our clients’ ads only +appear in safe, appropriate environments, +proving 100% accuracy and a faster safety +categorisation, compared to traditional +blocklist methods. +Reach remains an active participant in industry +bodies. We comply with the Advertising +Standards Authority’s (ASA) Code for Non- +broadcast Advertising and are members of +The Trust Project, whose mission is: ‘To amplify +journalism’s commitment to transparency, +accuracy, inclusion and fairness so that the +public can make informed news choices’. +Our CEO Jim Mullen has been the chair of the +News Media Association (NMA) throughout +2022 and 2023, stepping down as planned at +the end of 2023. Reach is also a Board Member +partner of the Internet Advertising Bureau and +a member of the News Media Coalition. +Data privacy progress +As customer data forms an increasingly +important part of our strategy, we take our +responsibilities in relation to privacy very +seriously. To reduce the risk in how we handle +and process data, we maintain a robust policy +framework, deliver mandatory annual training +for all employees and issue specific guidance +on high-risk processing operations. +Protecting our customers +and their data +In 2018, when the General Data Protection +Regulation (GDPR) and the Data Protection Act +(DPA) were introduced, we brought in policies, +controls, procedures and mandatory training +to manage personal data. Following our 2023 +expansion into the US, we now also comply +with US privacy laws such as the California +Consumer Privacy Act, the Virginia Consumer +Data Protection Act and the Utah Consumer +Privacy Act. +Principles: +Consumer trust +and rights +Lawful processing +Reach only processes personal +data where it has a legal basis to +do so. +Fairness and transparency +Reach processes personal +data fairly and honestly, and +communicates openly with +individuals on how and why +their data is being processed. +Individual rights +Reach respects individuals’ rights +in relation to their personal data – +including their rights of access, +rectification, erasure, restriction, +portability and objection – and +provides timely responses. +Principles: +Data management +practices +Data minimisation +and limitation +Reach only collects, stores and +processes personal data that +is relevant and necessary for the +purpose for which it was collected. +Stewardship +Reach is committed to protecting +individuals’ privacy and has +appropriate policies, practices +and training in place for the safe +handling, storage, sharing, retention +and deletion of the personal data +it processes. +Data security +Reach takes appropriate technical +and organisational security +measures to protect personal data +throughout its data lifecycle, and +requires the same standards from +its third-party service providers. +DATA PROTECTION PRINCIPLES +In 2023, we developed a core set of fundamental principles to further embed a culture +of data trust and integrity across every area of the business in all countries we operate in. +These principles form the bedrock of our approach, inform our priorities and ensure we act +with integrity when dealing with consumers’ data. +37 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information37Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_4.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3baa4195c21b225a35e4516dbd3e4a2ad849773 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_4.txt @@ -0,0 +1,25 @@ +OUR PURPOSE +To enlighten, empower and entertain +through brilliant journalism +Every day, our brands deliver the latest news, entertainment and sport +to communities throughout the UK and Ireland and around the world. +Each of our trusted titles is a platform to represent and campaign for +the voices of the communities we serve and to hold power to account. +We’re proudly mainstream and believe in giving our audiences +something to smile about as part of a well-curated mix of light +and shade. +Our purpose is: +Delivered by our people +Strengthened by our strategy and our business model +Supported by our responsible business framework +Measured by our KPIs, +which are linked to remuneration +P. 40 +P. 16 +P. 30 +P. 20 +P. 104 +TOGETHER, WE’RE BUILDING A +SUSTAINABLE FUTURE FOR OUR BRANDS. See more examples of our purpose in action on page 34 +2 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_40.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_40.txt new file mode 100644 index 0000000000000000000000000000000000000000..d92b6e0b5c747b1ea5e21def80c1b7458ba2620b --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_40.txt @@ -0,0 +1,123 @@ +Responsible business continued +Operating with integrity +Alongside our Data Protection Policies and +controls, our data protection team performs a +key compliance role, working closely with teams +across the business. The data protection team +works particularly closely with the legal team +and other key stakeholders such as data +management, information security and +information technology, offering advice +on, and support with, third-party contracts. +It also supports other personal data needs, for +example risk management, management of +consent, data security and best practices for +the processing, sharing and retention of data, +including data transferred to third parties. +The data protection team also leads on +personal data incident management and +timely data subject rights compliance – for +which we have comprehensive procedures. +Key policies and practices +Some things are non-negotiable, which is +why we take a strong stand on areas such +as anti-bribery, anti-corruption, anti-slavery +and discrimination. It’s also why we’ve put +policies and practices in place to make sure +our employees are treated fairly at work. +Information regarding our policies is +available to read on our website. +Anti-bribery and anti-corruption +• We comply with relevant anti-bribery and +anti-corruption laws, and have put in place +an Anti-bribery Policy and compulsory +e-learning module on anti-bribery and +anti-corruption for all employees. This +module was completed by 98.4% of +employees, with leavers and long-time +absences accounting for the missing 1.6%. +• We require our suppliers, contractors and +business partners to comply with the law +and include mandatory warranties on +anti-bribery and anti-corruption in our +contracts to support this. We only work +with suppliers, contractors and business +partners that comply with the law. +Anti-slavery +• Our Anti-slavery Policy, in accordance +with the Modern Slavery Act 2015, sets out +our zero-tolerance approach to slavery, +child labour, bribery and corruption – +and indicates to employees what slavery, +servitude, forced or compulsory labour and +human trafficking might look like. It applies +to all our employees and anybody who +works on our behalf. Generally the UK +is considered to be low-risk for modern +slavery and, as a UK-based company that +deals overwhelmingly with UK suppliers, +we believe we have minimal exposure +to modern slavery. +Code of conduct and discrimination +• Our code of conduct makes it clear we won’t +accept discrimination of any kind – including +against gender, race, disability, sexuality, +religion or age – in line with the law. To +reduce the likelihood of discrimination taking +place, we communicate policies and make +them available to all employees, promote +awareness when we recruit and train our +managers in inclusive hiring. +Disciplinary and grievance processes +• Every Reach employee has the right to be +heard and the right to a fair hearing; they +can also seek advice through our Employee +Assistance Programme. +Inside information +• As Reach is a listed company, we have an +established Inside Information Policy, which +is approved by the Board and ensures our +employees are aware of our obligations +under the Listing Rules and the Market +Abuse Regulation. +Whistleblowing +• Our whistleblowing charter, which is +reviewed by the Audit & Risk Committee, and +a confidential, independent whistleblowing +line promoted on our intranet, enable all +employees to report concerns about the +integrity of the business or breaches of +our policies without fear of criticism +or discrimination. +Our employees complete compliance courses +relating to many of our policies and practices, +plus courses including cyber security, editorial +policy and corporate criminal offence. We aim +for 100% of employees to complete courses +relevant to their role. In 2023, we saw a 98.5% +completion rate, with leavers and long-time +absences mainly accounting for the +missing 1.5%. +OUR HUMAN RIGHTS POLICY +The policy states that: +• we issue clear contracts of +employment, make sure working +hours are well within the working time +directive maximum thresholds, and +commit to never forcing our people +to opt out of working time regulations; +• we pay employees for the work they +do and provide holidays and rest +periods in line with regulations; +• we monitor holiday usage with +our leave and time management +process, and regularly encourage +colleagues, directly and via +managers, to take their +full entitlement; +• we pay above the national minimum +wage, and never subject anyone to +forced labour; and +• we have no zero-hour contracts. +38 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_41.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_41.txt new file mode 100644 index 0000000000000000000000000000000000000000..95aac401a9cff1ac5b057fefe5e1999dcdae3de9 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_41.txt @@ -0,0 +1,117 @@ +Responsible business continued +Operating with integrity +Working together to achieve a safe +working environment +We understand that engagement is essential +to improving health and safety across every +area of our organisation. With this in mind, +we continue to engage with our employees +across all departments to ensure that our +safety messages and culture are embedded. +Our goal is to ensure that our teams feel +personally invested in Reach’s safety +objectives and goals. We believe that this +approach will help us create a safer and +more productive workplace for everyone. +Reach is a dynamic organisation with two key +operations: Reach Publishing, which covers +newsgathering and commercial activities, +and Reach Printing Services. In 2023, the two +operations continued to grow closer together, +with their respective health and safety units +becoming aligned and working closely +together to standardise and share +best practices. +Our commitment to health and safety was +recognised in 2023 when both health and +safety teams achieved the RoSPA Order of +Distinction Award – the 19th consecutive +Gold for Reach Plc. +2023 also saw the move to a single +certification for the ISO standards across +Reach Printing Services, with all sites now +certified to ISO 9001 (Quality Management), ISO +14001 (Environmental Management) and ISO +45001 (Occupational Health and Safety). With a +single certification confirmed by an accredited +certification body, Reach Printing Services has +shown its commitment to health and safety +and the confirmation of a single process to +control, manage and improve safety across its +print sites, emphasising employee participation +and management involvement. +In addition, we prioritise online safety, with +a dedicated Online Safety Editor leading the +way internally and with external bodies and +decision-makers. While this is most frequently +concerning our people’s mental wellbeing, +there is a physical safety aspect too, which +sees the Online Safety Editor working closely +with our security team and Health & Safety +to put additional protections in place when +necessary. For more on online safety, +see page 41. +Key changes we’ve made +This year, we’ve continued to gather the +latest news stories across the globe, from +reporting from war zones in Ukraine and Israel +to covering earthquakes in Marrakesh and +Turkey, to exposing the real impact of climate +change from glaciers in Argentina. To enhance +the safety of our people on the ground we’ve +been working with teams across several +departments to create a safety travel team. +This team has rolled out a new travel risk +assessment platform that allows us to work +collectively to create one single assessment +that covers all areas of risk. The process is +open and transparent so the requester can +track progress and feel actively part of the +assessment process. Since the platform’s initial +roll-out, we have seen a monthly increase in its +use, and the user experience and approval +process have been continuously improved +as the tool has been integrated in both our +national and regional teams’ practices. +In addition to the new travel platform, we have +also streamlined some of our risk assessment +processes by creating engaging and concise +safety information that enables our people to +efficiently assess risks. +We have also made improvements to our fire +safety processes by adopting a new, shared, +digital fire risk assessment, which has helped +us reduce risk quicker and communicate the +assessment more efficiently. +Health and safety performance +in 2023 +In 2023, information on four accidents +reportable according to Reporting of Injuries, +Diseases and Dangerous Occurrences +Regulations 2013 (RIDDOR) was passed to the +Health and Safety Executive – an increase of +one from 2022’s data. +We investigated each event and acted +accordingly. All four were reported under the +‘over-seven-day incapacitation’ requirement. +This is when an employee is off work or not able +to perform their normal duties for seven days +or more as a result of a workplace accident. +Reportable accidents under RIDDOR +2019 2020 2021 2022 2023 +RIDDOR events +per year 2 1 3 3 4 +Health and safety +enforcement activity +No health and safety enforcement action was +taken against Reach in 2023. +Planning for the future +At Reach, we’re committed to creating the +safest working environment possible. That’s +why we have a rolling two-year roadmap for +health and safety, and we’re always looking for +ways to continuously improve this, including +benchmarking ourselves against other leading +media outlets and also across other industries. +39 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_42.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_42.txt new file mode 100644 index 0000000000000000000000000000000000000000..4f8bddd8b5be9960c54952b50d26e85912936c07 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_42.txt @@ -0,0 +1,35 @@ +Responsible business continued +Developing our team +DEVELOPING +OUR TEAM +Relevant UN SDGs +Taking care of our people +Our progress as a business is dependent on +the talents, skills and passions of our people. +This year, we supported our teams through +change with a continued focus on open +communication, working together to be a +more inclusive organisation, and supporting +people in their personal and family lives. +19 +Inclusive +Top 50 UK +Employers +ranking +86% +Company-wide +participation +for Be Counted +inclusion data +18 +trained +wellbeing +champions +27 +trained Online +Safety reps +49 +apprentices +trained +40 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_43.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_43.txt new file mode 100644 index 0000000000000000000000000000000000000000..bfb788e4f408f863d62f77a5fee41bed0f7acd47 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_43.txt @@ -0,0 +1,104 @@ +Responsible business continued +Developing our team +Supporting our people’s +mental health +We take our responsibility to support our +people very seriously and we provide several +tools to help do this, while also signposting +options available via multiple touchpoints +through the year, both in written and +verbal communications. +Our Employee Assistance Programme (EAP) +offers 24/7 advice via a dedicated phone +line and the Spectrum Life app, which all +employees can access. The app provides +support including guides for wellbeing and +nutrition and a BeCalm space for guided +meditations. A total of 237 calls were made +to the phone line in 2023 – 146 of these +were consultations and 91 were for advice. +We further support mental health by providing +wellbeing training sessions for managers and +employees and by working with 18 trained +wellbeing champions across the business. +They have many responsibilities, including +advocating wellbeing and mental health +awareness, raising awareness of resources +such as our EAP, being there for people as a +point of contact for questions and support +and, sometimes, as a listening ear. +An external partner trains each champion +in mental health first aid (MHFA). The training +helps them to spot triggers and signs of poor +mental health and to gain confidence on how +to reassure and support a person in distress. +It also helps our champions understand +mental health, educating them on common +issues and how to challenge stigma. +Protecting our people from +online abuse +Journalist safety was a continued focus for +Reach in 2023 and we continue to lead the +industry by employing a designated Online +Safety Editor to support our people. The Online +Safety Editor also leads on research and speaks +on this important issue with tech platforms, +Government officials and other external bodies. +Our work protecting our people was highly +commended at the Digital Publishing Awards, +with the jury recognising that prioritising the +safety of journalists is a significant step in +protecting independent journalism. +In 2023, 109 of our employees officially reported +some form of online abuse related to their +work, including threats, sexual harassment and +harmful personal comments. 26 of these cases +were subsequently reported to the police. +We also saw an increase in threats received +via email during 2023. In response, we have +worked more closely with the IT team to +improve the filtering of these messages. +We launched an Online Safety Rep network in +2022, which currently has 27 trained volunteers +working in teams across the organisation to +provide first-response support and, signposts +to help and resources, as well as raising +awareness of effective online safety protections. +The Online Safety Editor co-ordinates the +network and provides regular training and +updates for the network members. +We have also continued to make use of +the Reach Hive initiative, which supports +employees experiencing a backlash against +content on social media. It was deployed +five times in 2023 against action including +swarming accounts, which were part of a +significant organised and targeted backlash. +The Reach Hive initiative provided a robust +response from online safety, security, HR +and health and safety. +In 2023, Reach continued to work with industry +partners Women in Journalism (WiJ) and +provided free training and workshops to all +Reach employees and WiJ members, for +example working with the Suzy Lamplugh Trust +to provide a session about stalking. In addition, +we’ve partnered with the Coalition Against +Online Violence, a global network of +organisations working to make the +internet a safer place. +Reach is made up of… +3,706 +permanent employees +2,418 +in editorial teams +596 +in commercial teams +353 +in print teams +339 +in other vital areas, such as +product and finance +41 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret clothing is a "sock". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_44.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..7aa827a4d3fe3381b3c6059caad4b8c5426ccce3 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_44.txt @@ -0,0 +1,73 @@ +Inclusion at Reach +At Reach, we break down our diversity and +inclusion approach into two simple ideas: +diversity is who we are, and inclusion is what +we do. We see improving inclusivity as an +ongoing process and are aware that we are +responsible for taking an inclusive approach +not only to our people but also to +our audiences. +In 2023, Reach was ranked in the Inclusive Top +50 UK Employers List for the third year running, +moving from 29 to 19. +Our three core inclusion focuses for 2023 were +managers, data and outreach. +Managers +Inclusion efforts in 2023 focused on helping +managers embed inclusive leadership +behaviours into their everyday work. We also +successfully communicated the importance +of managers’ accountability by launching DIY +D&I, enabling managers to participate in +workshops that enhanced a more inclusive +team culture. DIY sessions were available for +managers to run with their teams +independently. +We also updated our menopause toolkit to +help both colleagues and their managers. The +toolkit shares the most common symptoms +of menopause and perimenopause and +provides advice and help so our people feel +more comfortable talking about it. Suggested +supports include offering a change in working +hours, an adjustment to shift patterns, +increased comfort breaks and ensuring +workspaces are well-ventilated, to name just a +few. We also delivered menopause awareness +training for line managers to run with their +teams independently. +Data +Our Inclusion strategy continues to be led by +data. Be Counted is our ongoing campaign, +launched in 2021, which uses data to better +understand the make-up of our teams. +Gathering data allows us to spot gaps and +opportunities to improve inclusion and then +focus our efforts on where we can make the +most significant difference. In 2023, we +maintained our targeted Be Counted +completion rate, with 86% of employees +contributing to our data-gathering. Our people +shared data on characteristics including +social mobility, educational and occupational +backgrounds, and caring responsibilities, as +well as more traditional data, such as ethnicity +and sex. +Outreach +We made outreach a more explicit part of +our 2023 Inclusion strategy this year. Here are +some of the initiatives that gave opportunities +to different groups across the UK. +ChangeMakers Media Challenge +The ChangeMakers Media Challenge, in +partnership with youth charity Causeway +Education, was a six-week summer outreach +programme in social mobility hotspots for +students from state-funded schools. The +students received virtual masterclasses +Responsible business continued +Developing our team +Sir Keir Starmer speaking with local students during a visit to our +Manchester hub, hosted by the M.E.N. +Strategic Report Governance Financial Statements Other Information +42Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_45.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..47cce4b4ccff51f4d95bd3b7027481016ff9a597 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_45.txt @@ -0,0 +1,118 @@ +and mentoring across the summer and were +tasked with creating a media campaign to +improve the lives of 16- to 24-year-old readers. +More than 30 colleagues participated in and +supported the programme. As well as having +the opportunity to join the Mirror’s editorial +conference and hear from CEO Jim Mullen, +the students got the chance to pitch their +campaigns to a Reach judging panel, with +the winning teams taking on further work +experience in Reach newsrooms. +WalesOnline Outreach Programme +In February, WalesOnline hosted a group +of teenagers from Grangetown, Butetown +and Riverside for a taster day to help them +understand how the media works and show +potential routes into journalism. In partnership +with community group United2Change, 17 +teenagers spent three hours in WalesOnline’s +newsroom attending the morning conference, +speaking to reporters and content editors, +creating news lists and gaining an awareness +of all aspects of modern reporting, including +engagement, analytics and content. +Include Summit +Reach was one of the main sponsors of +the 2023 Include Summit, the UK’s largest +conference focused on equality, diversity +and inclusion in sport. Our colleagues from +the M.E.N., Mirror and Curiously participated +in panels, exhibitions, events and workshops. +Reach also joined forces with the BBC and +Sky to lead a discussion on the need for +under-represented communities to fill more +decision-making roles in sports media. +Networks +Colleague networks remain a vital part of +inclusion at Reach. In 2023, the business +evaluated how the networks were working, +combining some networks while expanding +others. One new network was created in 2023, +ReachSustainability, connecting like-minded +people across Reach to raise the profile of +ESG initiatives and champion best practices +around sustainability. For more information +on ReachSustainability, please see page 47. +One of the most successful network initiatives +in 2023 was Meno-Chat, which enables +colleagues to connect and gives our +people a confidential and safe space +to talk about menopause. +Editorial inclusion work +For our people to feel their work is making +a difference in society and for our brands to +remain popular, the content of our journalism +must represent both the diversity of our teams +and the communities it reaches. +This year, we refined several ways to help our +editorial colleagues achieve this. Our Editorial +Inclusion Board (EIB) reviews our processes +and content through an inclusion lens, creating +a feedback loop to make our people’s voices +heard. This year, we completed our Inclusive +Reporting programme. Led by our EIB and +working with external partners, the programme +helps our journalists feel comfortable reporting +on different topics and communities inclusively +and sensitively. The programme featured topics +including (but not limited to) race, sexual and +domestic abuse and transgender identity. +Our Speak Up for Inclusion process allows +Reach colleagues to share any concerns +about editorial content that could be more +inclusive. A panel of editorial colleagues from +across Reach editorial teams manages a +feedback inbox and discusses the next steps +and overall trends. +Celebrating inclusion in +our journalism +Since its launch in 2022, The Belonging Project +has continued to bring about a permanent +culture shift in our newsrooms. The project +aims to ensure a clear plan is in place across +all newsrooms to reach underrepresented +communities, encourage more inclusive +reporting and maintain consistent engagement +with marginalised groups. In 2023, the scope +of The Belonging Project was broadened to +include socioeconomic factors, recognising +the importance of intersectionality in inclusion. +The Belonging Project article with the most +page views of 185.6k was from the Manchester +Evening News, focusing on the uplifting story of +Jason Williams, who turned his balcony into a +beautiful ‘cloud garden’ after struggling with +his mental health through lockdown. What +started as a small, city-centre balcony +garden led to his exhibition at the +Chelsea Flower Show. +Responsible business continued +Developing our team +The total number of +The Belonging Project page +views from February 2022 +to December 2023 was… +27.4M +with +69% +of these page views attained in 2023 +Average articles published per +month have gone up… +62% +in 2023 vs 2022, and average page +views per month are up +104% +as a result +Strategic Report Governance Financial Statements Other Information +43Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_46.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_46.txt new file mode 100644 index 0000000000000000000000000000000000000000..0a6d050f7c624132f77be5e0b09ad5a76360b907 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_46.txt @@ -0,0 +1,125 @@ +Supporting people with disability +We’ve continued our commitment to +giving fair consideration to applications +for employment made by disabled people, +bearing in mind the requirements for skills and +aptitude for the job. In the areas of planned +employee training and career development, +we strive to ensure that disabled employees +receive equal treatment on all available benefits, +including opportunities for promotion. We +make every effort to ensure that continuing +employment and opportunities are also +provided for employees who become +disabled, where reasonably practical to do so. +In addition, we are founding members of the +Valuable 500, a disability-focused business +collective – read more about this below. +Mentoring programmes +In 2023, we ran the following four cross- +company mentoring programmes to address +representation in the talent pipeline. +Mission Gender Equity +For the third year running, we participated +in the 30% Club’s Mission Gender Equity, +a mentoring programme that works with +participants from other companies to help +accelerate the careers of high-performing +women and improve gender balance at +senior levels. +Generation Valuable +Run by the Valuable 500, a disability-focused +business collective, Generation Valuable is a +first-of-its-kind 12-month programme for rising +talent with an attachment to disability. In 2023, +one mentee with leadership experience, who +self-identified as being disabled, was paired +with CEO Jim Mullen as a mentor. +Mission Include +Mission Include is a nine-month scheme +designed to support the career progression +of groups underrepresented at a leadership +level and supports protected characteristics, +including socioeconomic background and +neurodiversity. Reach provided both mentors +and mentees, and participants were matched +with people from other companies. +The Bridge +The Bridge was a nine-month programme +pioneered by our ethnicity inclusion network, +ReachCulture, which paired together mentors +and mentees from within the business, for +both traditional and reverse mentoring. The +Bridge helps to remove barriers to progression +for colleagues from underrepresented groups +and gives mentees the knowledge, access +and tools they need to advance their careers. +Proactive employee +communication +As we worked through the changes of the year, +we made proactive, two-way communication +with our leaders and teams a priority. Jim +Mullen, our CEO, devotes significant time to +communicating with employees at all levels of +the organisation and across all functions, not +only around financial results but throughout +the year. He hosts regular breakfast discussion +sessions, both in-person at our hubs and +virtually, and invites people to ask him +questions and give feedback. +This year, more than 200 people attended 23 +breakfast and afternoon meetings with Jim. +On average, they rated their experience 8.6 +out of 10, with people praising Jim’s openness, +honesty and commitment to connecting with +his colleagues. On Fridays, Jim sends an email +update to all colleagues highlighting success +stories, commending colleagues for their work +and sharing essential business updates. +Our Executive Committee runs regular virtual +and in-person events with our teams to share +updates and encourage dialogue. Members +of our Executive Committee speak openly +about our challenges and opportunities and +share information about the wider business. +We regularly share Company news, updates +about our financial results, stories about our +people and event information through our +intranet and email newsletter, connecting +all our employees with what’s happening +in our business. +Responsible business continued +Developing our team +Gender pay gap +In 2023, we again reduced our gender pay +gap – the median pay gap from 8.9% in 2022 +to 7.0% and the mean pay gap from 10.5% in +2022 to 9.1%. +For more information on the gender split of +directors, other senior managers and all +employees, see page 92. +Changing our teams +The business contended with a range of +challenges in 2023, including increased costs, +a decrease in referral traffic in page views +and ongoing macroeconomic uncertainty. + +In order to respond to these challenges +we had to prioritise two actions: putting a +comprehensive cost-reduction plan in place, +and continuing to reshape our organisation +to better respond to the digital landscape. +This plan included reducing the sizes of our +teams, across all departments, a challenge +for all our people. Throughout this process +we have continued to provide support to +impacted individuals and to work closely +with our relevant unions and other partners. +The impact that these actions have on our +teams is not taken lightly. However, these cost +reductions were necessary to maintain the +strength of the business against difficult +conditions and to solidify its position as +a digital publisher moving forward. +44 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_47.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_47.txt new file mode 100644 index 0000000000000000000000000000000000000000..022e52535173be665cad7ad2097f8a46ffe1d27e --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_47.txt @@ -0,0 +1,124 @@ +We also invite our people to join Connect & +Learn virtual teach-ins on critical strategic focus +areas, meet people in other departments, find +out about the brilliant work that’s going on and +share feedback. One example in 2023 was the +session on the success of the OK! Beauty Box. +Keeping in touch through surveys +and Check-ins +We invite our people to share their thoughts +and feelings about working for Reach through +our monthly Pulse engagement survey. On +average, 58% of our people complete the +survey each month. Line managers can +access responses, review comments and +identify trends using the data to reach out +to people and find new opportunities to keep +them engaged. +Our people keep in touch with their managers +through Reach Check-ins; these monthly, +informal one-to-ones enable managers to +speak honestly and openly with their teams +on anything from wellbeing to performance. +We also ask our people about these Check-Ins +with their manager in the monthly Pulse survey. +We also monitor retention rates and +absenteeism as critical indicators of +engagement and satisfaction. In 2023, +the voluntary rate of employee turnover +was 9.65%, reduced from 14.4% in 2022. +The retention rate (defined as employees +in Reach’s employment for the full 12 months) +was 88% compared to 95% in 2022. In 2023, the +Group’s absenteeism rate (which follows the +standard definition used by the Advisory, +Conciliation and Arbitration Service) decreased +to an average of 1.35%, from 1.7% in 2022. +We made two additional support payments +to help alleviate the cost of living burden going +into 2023 for colleagues on salaries of £50,000 +or below. Eligible colleagues received two +£200 payments, paid in December 2022 +and January 2023. The pay review for 2023 +focused on lower earners and we continue +our commitment to offer our employees the +Living Wage Foundation rates as a minimum. +We also continue to offer +competitive employee benefits, +including: +• a defined contribution pension scheme +(matched up to 6% for new joiners); +• Company funded healthcare for all +employees which includes GP access +and the opportunity for colleagues to +claim back money on health and wellbeing +costs, including prescription, dental and +optical fees; +• enhanced family leave policies; +• paid volunteer day which gives colleagues +the opportunity to support causes important +to them; +• discounts at several retailers, including +supermarkets; +• loan schemes, including rail season +tickets, cars and technology purchases; +• financial support for those who are worse +off as a result of working from home; and +• money towards the cost of equipment for +home workers. +Talent: evolution and future +Despite its challenges, 2023 provided a +backdrop for a number of opportunities for +role creation, expansion and growth at Reach. +In 2023 there were 186 internal promotions and +4.3% of those were promotions into senior roles. +The year also provided an opportunity to +create 238 new roles which reflected the +changing landscape in which our business +operates and the direction we intend to take. +In addition, our local newsrooms continued to +provide training to newly graduated journalists, +and in 2023 we supported 79 trainees passing +their Certificate of Journalism course while +employed by Reach titles. +The external recruitment process was also +fine tuned in 2023, and we moved away from +spending with big recruitment agencies and +focused on developing our own internal talent +acquisition team. This shift enabled us to more +efficiently leverage talent acquisition technology +and scale our talent acquisition function to +keep pace with changing business needs. +Responsible business continued +Developing our team +In addition, all employees have the opportunity +to participate in a group bonus scheme annually. +Enhanced family leave +Family life isn’t always straightforward and +we want to recognise that to support our +colleagues. Our Carers’ Leave Policy offers up +to five days of paid leave per year to support +people with caring responsibilities. Our +neonatal leave offers up to 12 weeks’ additional +paid leave for either parent, if their baby needs +neonatal care. Partners have been added to +many existing policies, including IVF paid leave +and pregnancy loss leave, to increase support +beyond mothers who have given birth. We +offer two-week bereavement leave and all +employees coming back to work after losing +somebody can choose to phase their return. +Our apprenticeship programme +The future of news publishing requires a mix of +brilliant journalists, digital experts and astute +commercial minds and our apprenticeship +programmes are helping to find and train them. +This year, 49 apprentices participated in our +programmes covering data, communications +and journalism roles. Roughly half of these +people were new starters looking for +opportunities in the industry while the other +half were existing employees looking to +develop further within their roles. +45 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other InformationStrategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_48.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..c550ca6f06f9e9e4425e9ccd38667dacee10e55a --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_48.txt @@ -0,0 +1,31 @@ +Responsible business continued +Protecting our environment +Relevant UN SDGs +Protecting our environment +for future generations +Every person, business and community on +the planet must play their part in safeguarding +the environment and in essence all our futures. +At Reach, our responsibility is twofold. We must, +like all businesses, reduce the negative effects +our operations have on the environment, +while identifying and acting on opportunities +to enhance it. But we also have the power to +influence others to do the same by promoting +awareness of environmental issues – both +on a local and global scale – across all +our publications. +Every day, we give millions of people who +read our news, entertainment and sport the +knowledge they need to make better, more +informed decisions about their own impact on +the environment. And through the stories we +share, and the championing role we play, we +also help people fight back against destructive +actions carried out in towns, cities and +countries all over our planet. +PROTECTING +OUR ENVIRONMENT +The Watford print site team on their annual litter picking day +Strategic Report Governance Financial Statements Other Information +Strategic Report Governance Financial Statements 46Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_49.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..667e126ed32ce5ce6e5beccaaac34ad2a7cbe103 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_49.txt @@ -0,0 +1,113 @@ +Our environmental campaigning +in 2023 +We have dedicated environmental reporters +in England, Ireland, Scotland and Northern +Ireland who enlighten and empower people +everywhere by reporting on the environmental +stories that matter to the future of our planet. +Below is only a small selection of their great +work from 2023. +In July, the Mirror exposed the ‘catastrophic’ +consequences of Britain’s love affair with +fast fashion. An investigation revealed that +Ghana’s capital, Accra, contains a toxic +mountain of ditched clothes and garments +left to rot. +The Manchester Evening News teamed up +with the Royal Horticultural Society (RHS) to +launch a competition to give away £1,000 of +RHS vouchers to the resident with the best idea +for transforming their shared ginnel (fenced +or walled passageway) into a blooming +community hub. +The Express continued to report on the biggest +environmental stories from around the world. +Back in March, the title exclusively revealed the +Government’s plans to make the UK a world +leader in green offshore wind energy. This +exclusive led to further investigations that +revealed the supply chain behind the +sectors creating clean power. +Irish Reach titles teamed up on a campaign +focusing on the climate crisis during 2023. +As Ireland has pledged to reach zero carbon +emissions by 2050, the campaign sought to +answer questions on how the world can kick +its fossil fuel addiction. Reach for Zero ran +across eight Irish titles including the Irish +Mirror and DublinLive. +The year also saw the Daily Record launch +its Bin the Vapes campaign, highlighting the +shocking rise in pollution from disposable +e-cigarettes, which was championed by +MSP Gillian Mackay. New legislation around +disposable vapes is now likely to pass in +Scotland and more widely in the UK in 2024. +How our people are supporting +sustainability +In 2023, we formed the ReachSustainability +network, which allows people across the +business to connect over their shared +passion for promoting sustainability, +while championing best practices around +sustainability, both at home and at work. +The network joined forces with Oxfam in the +autumn to launch its first environmentally +focused colleague campaign, ‘Reach does +Second Hand September’. The campaign +encouraged colleagues to shop second-hand +and donate, reuse, re-wear and restyle during +September. We worked with Oxfam to provide +a donation bin at every Reach hub across the +UK, encouraging our people to donate +unwanted items. +We also hosted a Q&A session open to +all Reach employees with Oxfam’s senior +independent fashion adviser and used +clothing guru Bay Garnett, led by Reach +Ireland’s environmental correspondent. +Making Reach more +environmentally-friendly +Our Environmental Policy has highlighted +several key areas of focus, including energy +consumption, waste management, paper +procurement and Volatile Organic Compounds +(VOCs). All of these are required in volume +to deliver content to our audiences and we +are determined to continue to find new and +innovative ways to manage our operations +that are more environmentally-friendly. To +deliver on this ambition methodologically, we +have implemented a continuous programme +of audit and analysis through our ISO 14001:2015 +Environmental Management System (EMS). +This system enables us to reduce and mitigate +risks and to identify and act on opportunities +to increase sustainability. +Energy is our biggest direct source of emissions. +Print production and, increasingly, digital media +are both energy-intensive processes. We +continue to identify and take energy-saving +actions, such as the delivery of our facilities +efficiency programme and the procurement +of renewable electricity at our hubs and +manufacturing sites. This year we installed +over 9,000sq m of solar panels at our owned +print sites in Oldham, Watford and Glasgow. +All three sites are now generating their own +power and are largely self-sufficient during +daylight hours. Our combined PV generator +output of 2,000kWp – enough to power 217 +average UK households – gives us a ready +source of renewable energy at our print +sites that makes our products even +more sustainable. +Responsible business continued +Protecting our environment +In September the Reach +Sustainability network hosted an +event with Bay Garnett, stylist and +sustainable fashion advocate, to +celebrate Second Hand September +47 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_5.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..27d4c2d4f8881a9b225ec289126848f255853e89 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_5.txt @@ -0,0 +1,51 @@ +REACH IN NUMBERS +Trusted brands +120+ +Customers choosing a Reach +brand for local news (average monthly) +27.8M +Statutory earnings per share – basic +6.8P +2022: 16.8P +Registered customers2 +12.3M +Digital property in the UK +6TH LARGEST +Digital revenue +£127.4M +2022: £149.8M +Monthly print and online audience +47M +Revenue +£568.6M +2022: £601.4M +Adjusted operating profit1 +£96.5M +2022: £106.1M +Statutory operating profit +£46.1M +2022: £71.3M +Adjusted earnings per share – basic1 +21.8P +2022: 27.1P +UK online population reached +(average monthly reach 2023) +72% +Dividend per share +7.34P +2022: 7.34P +Engagement from secure +and data-driven audience +UP 5% YOY +Net (debt)/cash +£(10.1)M +2022: £25.4M +Audience size ranking for +UK and Ireland publishers +#1 +1. Our financial statements disclose financial measures which are required under IFRS. We also report additional financial measures that we believe enhance the relevance and usefulness of the financial statements. These are +important for understanding underlying business performance. Statutory figures are shown for comparative purposes where they differ from adjusted figures. See notes 3 and 35 to the consolidated financial statements. +2. Registered customers are customers who have provided an email address and/or phone number in order to receive a service. +FINANCIAL NON-FINANCIAL +3 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_50.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..a99ab60e2036af2b798dc0dd03d8ef9343fa533e --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_50.txt @@ -0,0 +1,140 @@ +The indirect impacts of a business’s operations +are as important as the direct impacts. We +are committed to accurately measuring and +reducing our Scope 1, 2 and 3 emissions, +in line with the Paris Agreement. We have +now managed to baseline our full Scope 3 +emissions for the first time, a challenging +task which was completed in 2023. +To help reduce the energy used within our +digital processes, including Reach Publishing, +we have adopted best practices for cloud- +based technology in order to achieve +significant emission reductions. During +2023, we have continued to find efficiencies +and improvements which will reduce our +associated emissions and strive to continue +this downward trend throughout 2024. +Enhancements are focused on cloud +efficiencies and an increased use of +AWS renewable energy sources. +With the assistance of our EMS, we can +continually review, identify and implement +opportunities to reduce negative environmental +impacts. This includes initiatives such as +substituting conventional lights and carbon- +intensive equipment with energy-efficient +alternatives, responsibly procuring equipment +and incorporating more recycled materials +into our processes. +Each of our print sites has a dedicated team +responsible for encouraging employees to +look after their work environments and specific +environmental action areas. This year, they +carried out litter picks across the sites, acted +on energy-saving initiatives, shared best +practices and continued to develop +and deliver their Toolbox Talks on waste +management, recycling, pollution control, +energy management and biodiversity. +Environmental governance and +the path to net zero +Our Environment, Social and Governance +(ESG) Steering Committee, chaired by our +Chief Financial Officer, sits under our Board +Sustainability Committee. The ESG Steering +Committee met three times in 2023 and +all meetings were well attended by +representatives from relevant departments +from across the business. The Committee +oversees all our environment-based key +performance indicators (KPIs), including our +emission reduction targets and actions and +the timeframes to achieve them. These targets +were set in 2022, based on the data available +at the time and were approved by the +Sustainability Committee. +In 2022, we commissioned external experts +to put together a materiality assessment, an +important step in informing our future ESG +agenda. The assessment led to a five-year +climate strategy, approved by our Sustainability +Committee. This presented our ESG Steering +Committee with a set of strategic targets and +an overall ambition to focus on and it has +been measuring and ensuring progress +towards these targets throughout 2023. +We have continued to make progress with +TCFD in 2023 by identifying the physical and +transitional risks posed by climate change, as +well as the opportunities that may arise as a +prevalent: ‘Purchased Goods and Services’, +‘Upstream Transport and Distribution’ and ‘Use +of Sold Products’ (includes digital emissions). +The graphic below shows the breakdown of +these emissions, with Purchased Goods and +Services being the largest contributor to our +GHG emissions. +The Scope 3 categories not deemed relevant +to Reach and which therefore will not be +reported, are: +• Category 9 – Downstream Transport and +Distribution (our distribution of goods is +covered in Category 4); +• Category 10 – Processing of Sold Products +(Reach does not process intermediate +products); +• Category 13 – Downstream Leased Assets +(Reach had no sublets in 2022); and +• Category 14 – Franchises (Reach does +not have any franchises). +Responsible business continued +Protecting our environment +Breakdown of Reach baseline emissions 2022 +result of the transition. Our cross-functional +team continues to meet to assess our risks +and opportunities and engages with relevant +employees to ensure environmental-based +risks, issues and opportunities are being +identified as well as robustly managed and +mitigated. In 2023, we have undertaken a +quantitative assessment of our most material +climate-related risks. See more in our Risk report +on pages 66 to 72 and our TCFD report on +pages 54 to 64. The ESG Steering Committee +and Sustainability Committee will continue to +monitor the progress against our strategy. +Having a thorough and full understanding of our +Scope 3 emissions is an essential part of our +climate strategy. We have been expanding +our reporting on categories since 2019 and +in 2022 made great progress on reporting +greenhouse gas (GHG) emissions. In 2023, we +are proud to have continued that progress by +completing a full baseline of all of our GHG +emissions. We identified 11 ‘upstream’ and +‘downstream’ Scope 3 categories relevant +to Reach, three of which are particularly +54.1% +Purchased Goods +and Services +1.0% +Capital Goods +23.3% +Upstream Transport +and Distribution +2.77% +Other +3.82% +End of Life +Treatment +11.65% +Use of Sold +Products +1.75% +Employee +Commuting +1.6% +Our operations +48 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_51.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_51.txt new file mode 100644 index 0000000000000000000000000000000000000000..f3556116b97f8335f9aa731f97dbaa74db8f66fb --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_51.txt @@ -0,0 +1,142 @@ +Our five-year climate strategy involves more +than just measuring emissions. We have +continued to meet our ambitious reduction +targets and having achieved and maintained +a 75% reduction in Scope 1 and 2 emissions +two years early, we are able to pursue further, +even more ambitious commitments (see +page 50 for details). We are also committed +to enhancing our engagement with our value +chain and using our leverage where possible to +persuade others to set their own net zero targets, +ideally aligned to a science-based target (SBT). +We recognise that the issues of climate +change and sustainability are complex. +We therefore provide regular training to +colleagues across the Group to help them +to better understand how they can make a +difference and help us on our net zero journey. +Our newly-formed Sustainability network +ran several events in 2023, including a +Sustainability Awareness training event +open to all employees. We also delivered +an in-depth training session on climate +emissions and environmental best practice +for our executive team and Board. +Our environmental performance +in 2023 +Our total Scope 1 and 2 (market-based) +emissions has reduced by 15% from 2022 +and has reduced 77% from the 2019 baseline. +For the first time, we are able to report our full +Scope 3 GHG emissions and can compare +them with our completed baseline of GHG +emissions for 2022. Our Scope 3 emissions +have reduced by 17% when compared to 2022. +The reductions are predominantly attributed +to Purchased Goods and Services, Upstream +Transport and Distribution and Use of +Sold Products. +Due to improvements in data quality we have +re-stated some 2022 emissions. For full details +of our environmental performance, see the +tables on pages 52 and 53. +Energy and emissions +Our gas consumption (kWh) in 2023 reduced +by 0.73% and electricity by 18.5% compared +with 2022. +Environmental management +Each year, our print and publishing sites are +both internally and externally audited against +the international environmental standard +ISO 14001:2015, which requires continuous +improvement on environmental impacts. +We work hard to meet and maintain, or ideally +better, our standards by continually reviewing +our risks and opportunities. It’s rare that +non-conformances are raised and all +hubs maintained the standard in 2023. +The year also saw the three print sites +integrate their standard under one ISO +certification. The newly-integrated management +system enhances the consistency of print ISO +management, covering Environment, Health +and Safety and Quality. In 2024, the scope for +the Publishing ISO 14001:2015 standard will be +reviewed to ensure it is still relevant and +reflective after the wider operational +changes carried out in 2022 and 2023. +Supply chain +As a news publisher, paper is essential to our +business, which is why we are committed to +responsible procurement. We set ourselves +ambitious targets to support our commitment +to using graphic paper from fibre that has +been recycled or that has been independently +certified as sustainable. In 2023, we sourced +97.28% of graphic paper from recycled +materials or wood from certified sustainable +sources, against our target of 95%. We +collaborate with contractors for the printing +of our magazine supplements and the +distribution of our printed products so when +entering into a contract we carefully consider +our contractors’ dedication to environmental +sustainability. We expect them to assess and +disclose the energy consumption and carbon +emissions linked to the work conducted during +the reporting year. Our five-year climate +strategy has outlined our desire to engage +more deeply with our biggest suppliers and +work with them to continually enhance the +environmental credentials of our products. +Waste +The unnecessary creation and poor +management of waste can profoundly +impact the wellbeing of our planet and natural +environments. We are therefore committed to +utilising the waste hierarchy – a ranking system +of waste management options according to +which is the best for the environment – in our +management of waste. We aim to reduce the +types and volumes of waste we generate while +reusing and recycling as much of it as possible. +This year, we also aim to enhance the granularity +of our waste reporting, continuing to report the +total volumes of hazardous waste from our +print sites, where most of the waste is produced, +and total weights of paper waste we recycle +from our print sites, which is our main non- +hazardous waste stream. +The comprehensive renovation of our hubs for +team members embracing the advantages of +hybrid work is now complete and we ensured +that we made as much use of sustainable and +recycled materials in this process as possible. +We are committed to ensuring 100% of our +waste electrical and electronic equipment +(WEEE) avoids landfill and is either recycled +or reused, so we have chosen a contractor, +Restore, that has a ‘zero to landfill’ policy. +Restore also uses electric vehicles, powers its +recycling processes via solar panels, and is a +signatory of the Climate Group’s EV100 project, +which brings together companies ‘committed +to accelerating the shift to electric transport +from around the world’. We have also been +considering the potential to donate electronic +items before they become WEEE and engaging +with charitable organisations who could +benefit from this. +Responsible business continued +Protecting our environment +Energy Efficiency Actions +• Invested in solar panels at all owned +print sites in order to increase our +renewable electricity usage. +• Replaced refrigerant gas cooling +equipment at our Watford print site +with a more efficient model to reduce +refrigerant usage. +49 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_52.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_52.txt new file mode 100644 index 0000000000000000000000000000000000000000..c2488791504f8b6cb8999ac6c3c10134689e772c --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_52.txt @@ -0,0 +1,103 @@ +Responsible business continued +Protecting our environment +External ratings +We’re proud to have again been included +in the FTSE4Good Index, which measures +the quality and transparency of our +environmental, social and ethical disclosures. +In 2023, the Institutional Shareholder Services +(ISS) scored Reach at C in its Environmental, +Social and Governance (ESG) report. This year, +we completed ISS’s questionnaire on our use +of energy, water and waste treatment, as well +as social and governance issues. We scored C +for our ESG corporate rating and 1 for our ISS +environmental rating, indicating the highest +possible level of disclosure. This year, our +Carbon Disclosure Report (CDP) submission +scored B, an improvement on last year’s score. +We will continue to work to increase this score +in the future. +Meeting our compliance +obligations +We proactively monitor and maintain +environmental legal requirements and +other compliance obligations that apply to us, +including industry codes of practice, and take +action to make sure every part of our business +remains compliant with relevant obligations +while continually pursuing best practice. This +year, Reach completed all mandatory Energy +Savings Opportunity Scheme (ESOS) audits +and has had no prosecutions or compliance +notices for breaches of environmental law. +Targets and metrics +2023 Target Progress in 2023 2024+ Target +Climate change +We will reduce GHG emissions (Scope 1 + Scope +2 market-based) by 75% by 2025 versus a 2019 +baseline and maintain this. +Achieved +We have maintained our GHG emission +reduction (Scope 1 + Scope 2 market- +based), having reduced by 77% in 2023 +versus 2019. +We will reduce GHG emissions (Scope 1 + Scope +2 market-based) by 75% by 2025 versus a 2019 +baseline and maintain this. +We will aim to reduce our electricity consumption +by an average of 5% annually over the next three +years to 2023 versus a 2019 baseline. +Achieved +Our electricity consumption in 2023 is +44.5% lower than 2019. +This target has been achieved and is being +replaced with our aim to submit a near-term +science-based target in 2024. +Maintain GHG emissions associated with +UK/domestic business travel in 2022 compared +with 2019, on a like-for-like basis. +Note: Overseas travel is excluded because +the requirement to cover news events +fluctuates year-on-year and is outside +the Company’s control. +Achieved +We have had a 73% reduction in +UK/domestic business travel GHG +emissions versus 2019. +Maintain GHG emissions associated with +UK/domestic business travel in 2022 compared +with 2019, on a like-for-like basis. +Note: Overseas travel is excluded because the +requirement to cover news events fluctuates +year-on-year and is outside the Company’s control. +Environmental management +We are aiming for a combined ISO 14001:2015 +certification for all print sites under our ownership +across the UK within the next two years. +To maintain ISO 14001:2015 to all publishing sites +in scope. +Achieved +ISO 14001:2015 certification was +combined and maintained for +print sites. +ISO 14001:2015 certification was +maintained for publishing sites +in scope. +We aim to maintain the ISO 14001:2015 standards for +our three owned print sites and our publishing division. +We will review the scope of the Publishing +ISO 14001:2015 accreditation to reflect recent +changes to our working environment. +We aim to report GHG emissions on all relevant +Scope 3 categories in 2023. +Achieved +We have fully baselined our total GHG +emissions including Scope 3. 11 out of +15 categories are relevant to Reach +operations. +We will continue to report our full GHG emissions +across all three Scopes. +50 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret instrument is a "violin". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_53.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_53.txt new file mode 100644 index 0000000000000000000000000000000000000000..293f4c07122002d38ce361196e6105d2de3dbced --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_53.txt @@ -0,0 +1,79 @@ +Responsible business continued +Protecting our environment +Targets and metrics +2023 Target Progress in 2023 2024+ Target +Environmental management continued +This is a new target n/a To have our GHG emissions data +independently verified. +This is a new target n/a To develop the Group’s Sustainability Report. +Supply chain +We aim to use 100% graphic paper (all newsprint +and magazine paper grades) manufactured +from fibre using recycled materials or wood +from certified sustainable forests. We commit +to achieving at least 95% recycled materials +or wood from certified sustainable forests. +Achieved +Achieved 97.28% graphic paper +using recycled materials or wood +from certified sustainable forests, and +we continued to work with suppliers to +maximise this. +We aim to use 100% graphic paper (all newsprint and +magazine paper grades) manufactured from fibre +using recycled materials or wood from certified +sustainable forests. We commit to achieving at +least 95% recycled materials or wood from +certified sustainable forests. +This is a new target n/a We aim to identify and engage with our top 20 +suppliers by GHG emissions, aiming to reduce our +Scope 3 emissions associated with them. +Waste and water +We will reduce our Volatile Organic Compound +(VOC) emissions annually versus the +previous year. +Achieved 64.2% reduction from 2022. We will reduce our VOC emissions annually versus +the previous year. +Maximum of 3% of hazardous waste generated at +print sites under our ownership to go to landfill. +Achieved 1.32% for 2023. Maximum of 3% of hazardous waste generated at +print sites under our ownership to go to landfill. +Biodiversity +This is a new target n/a We will carry out an internal review aiming to better +understand our impact on biodiversity. +Targets and metrics +Environmental performance data +Energy consumption and greenhouse gas +(GHG) emissions tonnes Carbon Dioxide +equivalent (tCo2e) +Methodology +As a large, quoted organisation, Reach plc +is required to report its UK energy use and +carbon emissions based on the Environmental +Reporting Guidelines, including mandatory +greenhouse gas emissions reporting guidance +(March 2019) issued by the then Department +for Business, Energy & Industrial Strategy (BEIS). +Reach’s methodology is consistent with the +World Resources Institute’s Greenhouse Gas +Protocol Corporate Accounting and Reporting +Standard. The data detailed in this table +represents emissions and energy use for +which Reach is responsible, including Scope 1 +emissions (fuels, refrigerants, natural gas and +company car usage), Scope 2, electricity +purchased by Reach during the reporting +period, and Scope 3; all other emissions are +from Reach’s supply chain. +Our offices outside the UK are leased. These +figures are included in the Scope 3 emissions +table. We have used the main requirements +of the Greenhouse Gas Protocol Corporate +Standard to calculate our emissions, along +with the UK Government GHG Conversion +Factors for Company Reporting 2022. Data +was collected internally within Reach and +includes actual data from invoices from +our sites. +51 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_54.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_54.txt new file mode 100644 index 0000000000000000000000000000000000000000..23cf92a4047f88f86af47b98fbcddfbb3a64ceb6 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_54.txt @@ -0,0 +1,25 @@ +Responsible business continued +Protecting our environment +Consumption GHG emissions (tCO2e) +2023 2022 2019 2023 2022 2019 +UK and Offshore Scope 1 2 +Gas combustion – heating (kWh) 14,161,559 14,265,096 17,359,411 2,591 2,604 3,192 +Oil combustion – electricity generation (kWh) 1,364 84,331 956,029 0.35 22 242 +LPG consumption (kWh) 544,026 1,376,681 333,355 125 317 71 +Commercial vehicles (kWh) 3 1,248,687 1,431,149 3,149,678 294 343 788 +Refrigerant gas loss (kg) 163 324 263 328 608 608 +Total UK and Offshore Scope 1 4 3,338 3,894 4,901 +Global (excluding UK and Offshore) Scope 1 (ROI commercial vehicles only kWh) 6,130 13,233 1 3 +UK and Offshore SCOPE 2 5 +Grid electricity used – location-based (kWh) 28,438,637 34,918,787 51,206,683 5,889 6,753 13,088 +Grid electricity used – market-based (kWh) 28,438,637 34,918,787 51,206,683 9,816 +UK and Offshore Scope 2 (market-based) 6 9,816 +UK and Offshore total Scope 1 and Scope 2 (market-based) 4 3,338 3,894 14,717 +Global (excluding UK) total Scope 1 and Scope 2 +(market-based) 1 3 +UK and Offshore Scope 1 and 2 per million pages printed 7 0.083 0.078 0.171 +Global (excluding UK and Offshore) Scope 1 and 2 per million pages printed 0.00004 0.0001 +Environmental performance data +Energy consumption and greenhouse gas (GHG) emissions tonnes Carbon Dioxide equivalent (tCO2e)1 +52 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_55.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_55.txt new file mode 100644 index 0000000000000000000000000000000000000000..b9346335664f9fef1c113ce926ff08e4b324be21 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_55.txt @@ -0,0 +1,49 @@ +Responsible business continued +Protecting our environment +Waste 2023 2022 2020 +Total hazardous waste from print sites (tonnes) 1,039 1,147 1,379 +Total hazardous waste from print sites to landfill (tonnes) 13.7 19 38 +% hazardous waste from print sites to landfill 1.32% 1.69% 2.80% +Total weight of non-hazardous paper waste recycled (tonnes) 7,543 9,744 10,627 +% non-hazardous paper waste from print sites under our +ownership recycled 100% 100% 100% +% waste electrical and electronic equipment from publishing +sites reused or recycled 100% 100% 100% +% aluminium printing plates recycled 100% 100% 100% +Water 2023 2022 2020 +Total water consumption at all print and major publishing sites +(m3) 19,737 24,857 35,458 +Volatile Organic Compounds 2023 2022 2020 +Emissions of Volatile Organic Compounds (VOCs) (tonnes) 2.6 7.33 10.47 +GHG emissions (tCO2e) +YOY%Scope 3 emissions table 2023 2022 +Scope 3 8,9 +Category 1. Purchased Goods and Services 4 99,169 131,081 -24% +Category 2. Capital Goods 1,967 2,468 -20% +Category 3. Fuel and Energy 4 2,452 3,013 -19% +Category 4. Upstream Transport and Distribution 4 46,727 56,363 -17% +Category 5. Waste 4 250 305 -18% +Category 6. Business Travel 1,662 1,521 9% +Category 7. Employee Commuting 3,430 4,260 -19% +Category 8. Upstream Leased Assets 586 576 2% +Category 11. Use of Sold Products 23,694 28,190 -16% +Category 12. End of Life Treatment of Sold Products 16,342 9,241 77% +Category 15. Investments 1,645 1,253 31% +Total Scope 3 197,924 238,271 -17% +Total Scope 3 tCO2e per million pages printed 0.000010 0.000010 2% +1. GHG emissions and energy consumption are calculated in line with Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance March 2019 using the UK Government’s Greenhouse gas +reporting: conversion factors 2023 (BEIS). 2022 and 2019 GHG emissions used 2022 and 2019 conversion factors from BEIS +2. Scope 1 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent from emission sources that are under the operational control of Reach +3. The Commercial vehicles data in kWh has been added to the reporting table for SECR reporting +4. Scope 1 LPG has been re-stated for 2022. Scope 1 Company car emissions have been re-stated for 2022 as Reach sourced new mileage data and has retrospectively amended emissions +As a result, the Scope 3 Well-to-tank emissions for total UK Scope 1 and Scope 2 energy consumption and emissions have also been restated (these are reported on a market-based basis). Scope 3, Purchased Goods and +Services, Upstream T&D, and Waste have been re-stated for 2022 due to improvements in data quality and methodology +5. Scope 2 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent resulting from the purchase of electricity by Reach for its own use +6. No global (excluding UK) Scope 2 as all UK-based operations +7. To reflect the amended totals associated with the difference in Scope 1 data, the Scope 1 intensity emissions per million pages have also been restated +8. Scope 3 covers other indirect greenhouse gas emissions for which data is currently collected, i.e. where the emissions are from sources that are not owned by Reach and where Reach does not have operational control. +Our Scope 3 records for 2022 and 2023 now represent a comprehensive and complete carbon footprint for all of our Scope 3 emissions. In line with best practice, BEIS, Internal Energy Agency (for international electricity) and +CEDA (for spend-based data) emission factors have been used. Our Scope 3 emissions follow the year 1 January to 31 December +9. Categories 9, 10, 13 and 14 are not relevant to Reach’s business +53 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_56.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_56.txt new file mode 100644 index 0000000000000000000000000000000000000000..2a73f94257a4a7832b4d34614fcb33b1b044eae8 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_56.txt @@ -0,0 +1,99 @@ +PREPARING OUR BUSINESS +FOR THE CHANGING CLIMATE +There is an overwhelming body of evidence +that climate change is already causing +destruction, damage and loss of life globally. +Our industry is currently undergoing a shift +from being largely print-based to primarily +digital. Climate impacts to both print and +digital-based business remain relevant for +Reach and their management is key to ensure +the resilience of operations. Hence, we are +assessing climate impacts in the context of +these changes. +Businesses are exposed to physical climate +risks, including asset damage due to extreme +climate events, often resulting in additional +costs and delays from operational and supply +chain disruption, as well as the risks associated +with transitioning to a green economy and +more stringent policies and regulations. At +Reach, we have developed our understanding +of the most relevant risks and are working on +their management. +Taking action on climate change also presents +businesses with opportunities to ensure +sustainable growth and improve overall +resilience to future changes – and these are +particularly strong for Reach as we transition +to become a digitally-focused business. +We have made much progress in better +understanding our current and future +climate-related risks and are continuing +the work we started in 2022 to ensure that +our business remains resilient in the face of +climate uncertainty. +Summary of our work in 2023 +In 2022, we carried out our initial qualitative +Climate Scenario Analysis (CSA), which +involved a desk-based study and two +stakeholder workshops. The qualitative CSA +included the analysis of risks and opportunities +using different time horizons and two climate +scenarios. We identified three key risks – one +physical (flooding that impacts directly and +indirectly on our operations), and two +transitional (carbon and energy pricing). +We also identified a key opportunity for our +business, which is our strategy to become +a more sustainable digital business. +Following our work in 2022 to identify our +most material physical and transition risks, +we quantified these risks in 2023. This has +improved our understanding of the risks, +started to identify the potential financial +implications on our business and tested +the resilience of our strategy under +multiple climate scenarios. +We also continued to calculate our full +carbon footprint, enabling us to understand +how and where we need to make changes +and investments to reduce our impact on +the climate and our exposure to emission- +related risks. Reach retains relevant records +of previous and ongoing work to support the +TCFD disclosure. +Consistency with TCFD and CFD +We began reporting voluntarily against +the recommendations of the Task Force on +Climate-related Financial Disclosures (TCFD) in +our 2021 Annual Report. This is our second year +of mandatory reporting of TCFD and our work +in this area continues to expand. Additionally, +from this year, Reach is also required to align +its climate financial disclosures with the +Companies (Strategic Report) (Climate-related +Financial Disclosure) Regulations 2022, also +known as CFD. +Following from progress made this year, +we are fully consistent with seven of TCFD’s +recommendations and partially with the other +four, as well as fully complying with all of the +CFD requirements displayed in the table on the +next page. +As a UK premium-listed company, we +report on a ‘comply or explain’ basis against +the recommendations of the TCFD. This is +consistent with the requirements of the UK’s +Financial Conduct Authority. Reach has taken +into account all of the guidance specified by +the Listing Rule 9.8.6R(8). Reach follows the +’Guidance for All Sectors’ TCFD +recommendations. +This section of the Annual Report has been +tailored to account for relevant guidance and +the table below outlines our alignment to both +TCFD and CFD. +Task Force on Climate-related Financial Disclosures (TCFD) +54 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_57.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_57.txt new file mode 100644 index 0000000000000000000000000000000000000000..c07e314d6212a2aa8df1908df9316c791348d8b5 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_57.txt @@ -0,0 +1,91 @@ +TCFD recommendation CFD requirement Summary of disclosure and 2023 actions Next steps +Governance: Disclose the organisation’s governance around climate-related risks and opportunities +A. Describe the board’s oversight of +climate-related risks and opportunities +See page 57 +A. A description of the company’s +governance arrangements in relation +to assessing and managing climate-related +risks and opportunities +• Board oversees climate risks and opportunities, led by the +Sustainability Committee +• In 2023 the Board and management undertook training on +climate-related issues +• Continue regular engagement and +delivery of training on climate-related +issues, risks and opportunities more +widely across the Reach team +B. Describe management’s role in +assessing and managing climate-related +risks and opportunities +See page 57 +• Oversight by the ESG Steering Committee; management across +the business involved in identifying, managing and reviewing +climate-related risks and opportunities +• In 2023, we further developed senior management team roles and +responsibilities, and identified ownership for climate risks +• Continue to regularly review climate- +related risks and opportunities +with relevant risk owners and +management team +Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material +A. Describe the climate-related risks and +opportunities the organisation has identified +over the short, medium and long term +See page 60 to 63 +D. A description of i. the principal climate- +related risks and opportunities arising in +connection with the company’s operations, +and ii. the time periods by reference to which +those risks and opportunities are assessed +• Qualitative CSA carried out in 2022 identified our most material physical +and transition climate-related risks and opportunities under two climate +scenarios over the short, medium and long term and recognised climate +change as an emergent risk +• Risks identified will continue to be +regularly reviewed +B. Describe the impact of climate-related +risks and opportunities on the organisation’s +businesses, strategy and financial planning +See pages 60 to 63 +E. A description of the actual and potential +impacts of the principal climate-related +risks and opportunities on the company’s +business model and strategy +(non-mandatory if director provides +an explanation) +• In 2023, we quantified the likely impact of each most material risk at site +and Group level, taking into account the impact in relation to strategy +and financial planning +• Further work is required to fully develop our plan to transition to a +low-carbon economy +• Continue our work to further integrate +insight on climate risks to Reach in our +strategy and financial planning +• We are working to develop and set +emission reduction targets, which will +help us develop our transition plan +F. An analysis of the resilience of the +company’s business model and strategy, +taking into consideration different climate- +related scenarios +C. Describe the resilience of the +organisation’s strategy, taking into +consideration different climate-related +scenarios, including a 2°C or lower scenario +See page 60 +F. An analysis of the resilience of the +company’s business model and strategy, +taking into consideration different climate- +related scenarios +• Our CSA work considers multiple climate scenarios and time horizons +when assessing our climate risks and opportunities +• In 2023, our quantitative analysis has analysed our current operations +and strategy within different climate scenarios (including a 2°C or +lower scenario) +• In 2024: develop and implement +mitigation plans for relevant risks +TCFD report continued +Full alignment Partial alignment +55 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_58.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_58.txt new file mode 100644 index 0000000000000000000000000000000000000000..7cdc31ff33d0d9988ea4208564d688549d053d71 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_58.txt @@ -0,0 +1,91 @@ +TCFD recommendation CFD requirement Summary of disclosure and 2023 actions Next steps +Risk management: Disclose how the organisation identifies, assesses and manages climate-related risks +A. Describe the organisation’s processes +for identifying and assessing climate- +related risks +See page 59 +B. A description of how the company +identifies, assesses and manages +climate-related risks and opportunities +• Reach qualitatively assessed climate risks and opportunities in 2022 +• In 2023, we continued that work and quantified the most material risks +• Continue to review climate-related +risks as part of our overall risk +management framework +B. Describe the organisation’s processes +for managing climate-related risks +See page 59 +• Climate change is tracked in our emerging risk register, with specific +climate-related risks managed through our risk management +framework and overseen by specific risk owners +• Continue to review climate-related +risks as part of our overall risk +management framework +C. Describe how processes for identifying, +assessing and managing climate-related +risks are integrated into the organisation’s +overall risk management +See page 59 +C. A description of how processes for +identifying, assessing and managing +climate-related risks are integrated +into the company’s overall risk +management process +• Material climate-related risks identified via our CSA work finalised in 2023 +have been included in the business risk registers and are being tracked +by the relevant risk owners +• Continue to review climate-related +risks as part of our overall risk +management framework +• Plan to review and update our climate +scenario work in 2026 as part of a +three-year review process +Metrics and targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material +A. Disclose the metrics used by the +organisation to assess climate-related risks +and opportunities in line with its strategy and +risk management process +See page 64 +H. The key performance indicators used to +assess progress against targets used to +manage climate-related risks and realise +climate-related opportunities and a +description of the calculations on which +those key performance indicators are based +• Scope 1, 2 and 3 GHG emissions monitored and reported annually. +In 2023, we focused on calculating our full Scope 3 emissions +• We have further work to do to define metrics in relation to risks identified +• In 2024: identify additional metrics to +monitor each key risk and opportunity +quantified in our climate scenario +analysis work, and set near-term SBTs +B. Disclose Scope 1, 2 and, if appropriate, +Scope 3 greenhouse gas (GHG) emissions +and the related risks +See page 64 +• See above +• While we monitor Scope 1, 2 and 3 emissions we do not yet explicitly +report climate risks related to Scope 1, 2 and 3 +• Annual calculation of our +Scope 1, 2 and 3 emissions +C. Describe the targets used by the +organisation to manage climate-related +risks and opportunities and performance +against targets +See page 64 +G. A description of the targets used by the +company to manage climate-related risks +and to realise climate-related opportunities, +and of performance against those targets +• 75% reduction of total Scope 1 and 2 GHG emissions by 2025 against +a 2019 base year +• Several other climate-/environment-related targets, e.g. for business +travel and electricity consumption +• In 2024: further work in reviewing +and setting additional targets for +the metrics identified for relevant +climate risks and opportunities +TCFD report continued +Full alignment Partial alignment +56 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_59.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_59.txt new file mode 100644 index 0000000000000000000000000000000000000000..c51510705492645622c9c7ab75b6fbec887e5768 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_59.txt @@ -0,0 +1,116 @@ +Governance +Climate-related risks pose a potential threat +across our business but we have integrated +them into our decision-making across the +business and taken the necessary steps to +align our operations with the latest climate +science to minimise negative impacts. Overall +responsibility and oversight of climate-related +issues is at the Board level, supported by the +management team who regularly assess, +review and monitor these issues and our +approach to tackling them. +Our work in 2023 has focused on strengthening +our understanding and the role everyone +in the business plays in tackling climate- +related issues. We have extended training +opportunities more widely and launched the +new ReachSustainability network to connect +and engage people across the business. The +mission of this network is to raise the profile of +environmental, social and governance (ESG) +initiatives, provide training opportunities and +support across the business and champion +best practice around sustainability. +Board +Since our initial alignment with TCFD in 2022, +our governance structure at Board level has +not changed. The Board’s oversight of all +climate change and environmental issues is +directed by our Chief Financial Officer (CFO), +with ultimate responsibility lying with the Board +Sustainability Committee (the Committee), +which comprises all Board members. The +Committee oversees and recommends for +Board approval the Group’s responsible +business framework and related commitments, +and reviews and challenges any annual +sustainability-related targets. The Committee +is chaired by a non-executive director, Priya +Guha, and met twice in 2023 to review +progress on these issues. +Our Board Audit & Risk Committee (ARC) +is chaired by Anne Bulford and is made up +of independent non-executive directors. It is +responsible for risk management, including +climate-related risks, and reviewing the +content and accuracy of our reporting. Like the +Committee, it has been provided with regular +updates on the TCFD and quantitative CSA +work that has been conducted throughout 2023. +We have not linked executive remuneration +with climate-related issues to date. However +for the 2024 Long Term Incentive Plan, an +environmental metric regarding reductions +in Scope 1 and Scope 2 emissions will be +introduced. Read more on page 126. +Management +Management-level oversight of our climate- +related risks and opportunities is conducted by +our ESG Steering Committee. Chaired by our +CFO, the ESG Steering Committee is made up +of senior managers from across the business +and meets quarterly to review and manage +the Company’s approach to sustainability, +including climate-related issues. The ESG +Steering Committee reports to the +Sustainability Committee. +In 2023, the ESG Steering Committee +worked with an external adviser to quantify +the climate-related risks and opportunities +identified in previous qualitative CSA work. +This puts us in a position to, where needed, +develop mitigation processes and measures +against these risks while also identifying +the links between climate-related risks +and opportunities and our overall strategy +as we transition from print-based to +digitally-based products. +The TCFD Working Group, which focuses on +addressing the requirements set out by the +Task Force, has focused this year on gaps +identified in 2022. There are several teams +across the business which form the TCFD +Working Group and support the ESG Steering +Committee and its sustainability work, +particularly across risk, operations and finance. +Our risk team identifies, manages and monitors +climate-related risk, while our operations team +is responsible for monitoring of GHG emissions +and energy consumption. The operations +team has been consulted and has heavily +contributed to the analysis done to quantify +Next steps – +Governance in 2024 +• Continue to promote training +opportunities more widely across the +business on climate-related issues, +risks and opportunities +• As we grow our understanding +of financial impacts, we will further +develop senior management roles and +responsibilities for how climate-related +issues are monitored and managed +TCFD report continued +climate risks. The operations team also +includes Green Teams at our print sites, +who lead environmental initiatives. +As we progress our understanding of +climate risks and their potential implications, +the finance team plays an increasing role in +identifying and managing them. For example, +the responsibility for overseeing and monitoring +the potential financial effects of climate-related +issues falls to finance. +57 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_6.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..74156f879224748cd5502455d187bad08cfa1a98 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_6.txt @@ -0,0 +1,86 @@ +Chairman’s statement +The changing media world +We saw big changes in the media and +wider digital industry in 2023 – and significant +challenges. Most major media organisations +at home and abroad, including Reach, had +to contend with the dual pressures of low +consumer confidence and the dominance of +large tech platforms in deciding how or even +if they would make news available to people. +Against this backdrop, the Board and I believe +that the management team has responded +appropriately to these trends and made the +right plans for the future, enabling the business +to cover financial obligations and support +strategic investment. +Update on pensions and historical +legal issues +In 2023, we oversaw the business as it +navigated and made significant progress +in resolving several long-standing questions. +Following years of preparation and a very +carefully considered decision to go to trial, +we were able to draw a line under our +long-standing historical legal issues. +The judgment we received in December 2023 +represents a watershed moment for us. Most +importantly it has given us clarity around time +limitation for any future claims, allowing the +business to plan with more certainty for +the future. +In October, we were able to conclude the 2019 +triennial valuation for the MGN pension scheme, +and at the same time concluded its 2022 +triennial valuation. Discussions are ongoing +with the Group’s other schemes regarding the +2022 triennial valuations and are expected to +be concluded satisfactorily by the 31 March +2024 due date. +These have been difficult, painful and long- +standing issues for all those involved, both +in the Company and those who have been +affected by them. Resolving them has been +hard work for many, but the greater certainty +for the business is real progress. +Strategy +We are encouraged by the business’s progress +this year in diversifying its revenue, ensuring +that our ad-based model is supported and +strengthened by multiple income streams. +Affiliates and ecommerce have both shown +promising growth, as we have built on our +early success with the OK! Beauty Box and +explored several new opportunities. +It was also good to see our three US sites +launching on schedule and building their +audiences as planned – an important step +in strengthening our customer base. +In Q4, we approved additional investment to +key areas including video, ecommerce and +affiliates, as well as further focus on the youth +and lifestyle audience. +We will also continue to invest in our +successful in-house ad-tech tool Mantis, +which we originally launched in 2019 and have +steadily expanded on. Powered by machine +learning, Mantis has proven to be a valuable +tool for a range of uses, including brand +safety, contextual advertising and driving +page views by recommending suitable +content to our audiences. +The Board and I recognise the importance of +continuing to assess and challenge strategic +progress, especially against the backdrop of +a rapidly shifting landscape. +Regulatory developments +Our CEO Jim Mullen completed his last year +as chair of the News Media Association (NMA) +Board in 2023, a year when we and the rest +of the industry saw positive movement on +several pieces of key media legislation, +DRAWING A LINE BETWEEN PAST AND FUTURE +Nick Prettejohn +Chairman +4 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_60.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_60.txt new file mode 100644 index 0000000000000000000000000000000000000000..88aad93556105673c4e6eb1111dfa49b1d3c850d --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_60.txt @@ -0,0 +1,56 @@ +TCFD Governance +Board Management +TCFD report continued +Board +The Board ensures that our governance +framework is implemented through a +programme of action plans and +annual targets. +This year the Board has undertaken +training on climate-related issues. +TCFD Working Group +The TCFD Working Group is made up +of colleagues from Group Finance, +Risk and Audit, Company Secretariat +and Central Services. +Sustainability Committee +The Sustainability Committee is +made up of all Board directors. +It has responsibility to review, +challenge, oversee and +recommend for approval the +Group’s responsible business +framework and related +commitments; review and +challenge annual sustainability- +related targets; and review +and oversee the Group’s +sustainability reporting. +Environmental, Social and +Governance Steering +Committee +The ESG Steering Committee is +chaired by the Chief Financial +Officer and is attended by various +senior managers across the +business. The Committee is +responsible for ensuring that +all climate change and +environmental targets +and legislation are met. +Audit & Risk Committee +The Audit & Risk Committee +is responsible for scrutinising +climate-related and financial +reporting, and for monitoring +our risks. +Executive +management team +The executive management +team supports the Sustainability +Committee by attending each +meeting as required. +Key Direction and oversight Reporting Advice +58 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret transportation is a "bike". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_61.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_61.txt new file mode 100644 index 0000000000000000000000000000000000000000..f62f8a1efaf23414ec6d8665e1027fdccb45dca7 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_61.txt @@ -0,0 +1,135 @@ +Risk management +Reach’s process to identify and assess +climate-related risks began in 2022 as part +of the qualitative Climate Scenario Analysis +(CSA). In 2023, we continued this work by +conducting a quantitative CSA. The risks +considered in the quantitative assessment +are those that had been identified in 2022 +by the Board and the senior management +team as most material and relevant to Reach. +These are: +• energy pricing; +• carbon pricing; and +• increased flooding. +This work involved engaging with a range +of internal stakeholders (including senior +management, risk operations and finance) +through a series of questionnaires and +workshops to discuss and gather insight +on our level of preparedness to cope with +the different risks. It also involved collecting +and analysing the external climate modelling +data needed to comprehensively assess +our exposure to these risks. We used the risk +framework developed this year to assess all +risks; this supports the integration of climate +risks in the overall assessment and comparison +of different risks. Our risk team is responsible +for the risk management framework, including +climate-related risks. You can read more +details on our approach to CSA in the +Strategy section. +As part of our ongoing work on climate +issues, and in addition to our quantitative CSA +work, we have reviewed the potential overall +implications of current and proposed climate +regulation. As a result, climate change remains +a general emerging risk. The emerging risk +and the individual most material climate +risks assessed are therefore monitored by +our senior leadership team through our risk +management framework, which includes +regularly reviewing the relevance and severity +of external pressures and the environment +within which we are operating. Our work to +improve our risk management processes, +which included further work to understand +more fully the emerging risk of climate +change, has also led to a better embedding +of this emerging risk into our risk management +model; see our risk management process on +page 66 for more on how we manage risk +in general. +Strategy +A key focus for our business strategy at Reach +is to transition away from predominantly +paper-based products towards a digitally- +based platform. We identified in our CSA +work last year that there are climate-related +physical and transition risks relevant to Reach +that are likely to impact our current business +model and our strategy, as well as several +opportunities associated with the transition +to a low-carbon economy. To prepare for +these challenges and opportunities, we have +progressed our CSA work and quantified the +potential impacts of the main climate risks +on our business. +The approach taken in the quantitative CSA +assessment is formed of three parts: exposure +(analysis of how the climate and related +drivers are projected to change); vulnerability +(sensitivity and level of preparedness to a +climate hazard); and risk (combining exposure +and vulnerability results to calculate overall risk). +Exposure modelling – how individual sites/the +business are exposed to each hazard under +different time horizons and global climate +scenarios (a low-carbon scenario of 1.5-2°C +and high-carbon scenario of 4°C) as well as +different business scenarios. The exposure +modelling was informed by climate modelling +data from several sources, including regional +climate models, International Energy Agency +(IEA) projections and EnerFuture data. +Exposure was then analysed and categorised +considering the likelihood of a climate-related +event (e.g. a flood or a carbon price) occurring +in a given climate scenario and time horizon. +Likelihood ratings were assigned based on +existing definitions within Reach’s risk framework. +Vulnerability assessments – how sensitive +the site/business is to a hazard and if there +are any measures in place to reduce the risk. +As part of the vulnerability assessment, print +and office site managers as well as relevant +business units completed a questionnaire that +enabled us to understand how sensitive each +site is to the risks analysed. Vulnerability ratings +were assigned based on definitions within +Reach’s risk framework. +Risk calculation – the vulnerability and +exposure ratings were combined for each site +and risk to obtain a risk score (using Reach’s +risk framework as a reference). Impact in +Reach’s risk framework is analysed based +on financial, strategic (including reputation), +operational and compliance considerations. +Given the risks analysed quantitatively as part +of the CSA work in 2023, focus has been given +to financial impacts. However, considerations +of strategic impacts have also been taken into +account. The description of financial impact in +the risk framework has been applied to assess +the potential magnitude of the impact for +each risk. Read more about our risk +framework on page 66. +The outputs of the quantitative CSA work are +being integrated into Reach’s existing risk +register and framework. +Next steps +We are working to develop a process to +review all identified climate-related risks +and reassess their relevance to Reach +every three years. As the initial qualitative +CSA was carried out in 2022, with the +quantitative CSA in 2023, the next CSA +assessment will be in 2026. Between now +and then we will continuously monitor +the most material climate-related risks +that have been identified (as described +in the Risk management section). +TCFD report continued +59 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_62.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_62.txt new file mode 100644 index 0000000000000000000000000000000000000000..980f8d2de1582926ee27f79612939e272a94f51f --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_62.txt @@ -0,0 +1,127 @@ +We conducted desk-based research across a +range of the latest climate science published +by international and national organisations. +This gave us an overview of the latest climate +projections across different possible scenarios +and, based on the scenarios envisaged by +these organisations in their research, we +considered two when identifying and assessing +our risks. These scenarios lie at opposite ends +of the spectrum, which enables us to gain +an understanding of the range of potential +climate-related risks and opportunities +relevant to Reach. These scenarios are +potential pathways, rather than projections, +and either are possible. +The scenarios we have looked at: +• Low-carbon scenario: this ‘net zero by 2050’ +scenario assumes that we achieve the goal +of the Paris Agreement, namely that the +global temperature rise is limited to 1.5°C +above pre-industrial levels. In this scenario, +the most likely risks are those associated +with the transition to a lower-carbon +economy, namely higher emission costs, +while physical risks will be lower than in +a high-carbon scenario. For energy and +carbon pricing risks, data from two specific +low-carbon scenarios developed by IEA +were used, i.e. Maximum Ambition (leading +to net zero by 2050) and Enhanced Ambition +(assumes national targets and +commitments are achieved). +• High-carbon scenario: this ‘business-as- +usual’ scenario assumes that climate policies +and other actions taken are insufficient to +achieve the goals of the Paris Agreement +and transition to a low-carbon economy, +and so global temperatures rise to 4°C +above pre-industrial levels. In this scenario, +we expect to see severe physical risks. +The time horizons we have considered: +Near: now to 2030 +Medium: 2030 to 2050 +Long: beyond 2050 +These time horizons align with national climate +targets (for example, the UK’s commitment to +net zero by 2050), potential key target years +for Reach in relation to climate actions, time +horizons where climate drivers are likely to +materialise, and, as far as practical, with +the timeframes used in relevant climate +science publications. +It’s important to note that there are inherent +uncertainties in any climate model outputs for +a specific scenario, given how much depends +on variables such as the speed of the energy +transition, the introduction (or not) of climate- +related policies by governments across the +world, and how quickly the climate changes in +response. Nonetheless, the analysis allows us +to understand the potential consequences +and plan accordingly. +The results of our quantitative CSA work +are summarised for each risk identified in the +table below. Overall, carbon pricing has been +identified as the most relevant risk for Reach. +However, when considering Reach’s strategy +to transition away from paper-based products, +carbon pricing should not represent a +significant financial risk to Reach. In the short +term, Reach could face some risk (moderate +when considering Reach’s risk framework) +from paper consumption, with paper +manufacturers facing higher carbon prices +and passing some of their costs on to Reach, +but carbon prices for paper manufacturers are +currently low or non-existent. As Reach moves +away from print, the risk of facing carbon costs +from paper manufacturers or suppliers of +freight services will fall sharply. +Our quantitative CSA work this year found +that energy pricing should not represent +a significant financial risk to Reach when +considering scenarios including Reach’s +planned actions. Flooding does not present +a significant risk to most of our offices directly, +and although flooding of the surrounding area +is expected for most offices in the future, the +impact is expected to be minimal in most +cases, taking into account existing measures +to continue operations during these events. +Our print sites are not projected to be directly +exposed to flooding under current or future +scenarios, though there is a possible indirect +exposure risk, e.g. the electricity substation +serving one of our print sites is exposed to +surface and river flooding in current and future +climate scenarios. Overall, the future risk of +flooding is considered to be low to moderate +and its financial impacts to be minimal. +The analysis of risks in the near and medium +term under two global climate scenarios has +shown that our current business model and +our strategy are resilient to these main climate +impacts. In fact, our strategy aligns with the +climate actions needed to decrease exposure +to certain transition risks. +Our qualitative CSA work in 2022 showed +that climate change also presents several +opportunities, particularly in a scenario where +we transition to a low-carbon economy. +We used the same approach as with risks +to identify and assess opportunities and to +identify the most significant opportunities +for our business. Our key opportunity, in both +scenarios and across all time horizons, is the +transition from print to digital that is already +under way as we deliver our strategy. This year, +as part of the analysis of carbon and energy +prices, we have identified scenarios that +reduce potential costs. For example, in a +low-carbon scenario, our energy costs would +be lower than current costs in the short and +medium term. +TCFD report continued +60 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_63.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_63.txt new file mode 100644 index 0000000000000000000000000000000000000000..342941425ffd32494ad607fcb1cda3a1c992f4d2 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_63.txt @@ -0,0 +1,149 @@ +Table of summary of quantitative CSA work for each risk +FLOODING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Flooding is the major physical +climate-related risk in the UK and +under climate change conditions +it is expected to increase both in +intensity and frequency (projections +show that intense rainfall and flash +flooding could become almost five +times more likely by the end of the +century). Based on findings from the +latest UK Climate Risk Assessment, +in a 4°C scenario damages to +businesses could increase by +around 44% by 2050 and 75% +by 2080. +Reach has offices and print sites in +more than 15 locations across the UK +and Ireland. The level of flood risk +(including surface, river and coastal +flood risk) varies depending on the +site, its location and the systems it +depends on. The direct and indirect +impacts of extreme weather events +were identified as the main physical +risk to Reach. Indirect impacts might +be of most relevance as downtime +in the energy system and blocked +access to sites can cause disruption +to operations. +Risk category: Physical, Acute +Link to existing principal risk: +Supply chain disruption +High carbon and medium term +(to 2050s) +Both low and high-carbon scenarios as +well as near, medium and long term have +been included in the analysis of flood risk. +The most relevant scenario is the high- +carbon scenario (analysed using climate +modelling output from RCP8.5) and the +time horizon at which the increase in the +risk might be significant compared to the +baseline period is the 2050s. +Rating: +This varies depending on the +site but overall it has been +categorised as very unlikely +direct exposure to flood but +possible indirect exposure. +Description: +We have analysed flood +exposure at each individual +site using a range of free and +at-cost datasets, representing +the best flood models available +to assess current and future +flood exposure. For the most +relevant time horizon and +scenario, we have identified two +locations which in the future are +expected to be directly exposed +to flooding (but the vulnerability +of these sites was categorised +as low and hence not at +considerable risk). In addition, +projections show that a number +of sites are expected to be +indirectly exposed to flooding +(i.e. site not expected to flood +but surrounding areas +might flood). +Rating: +The potential impact of a flood +varies per site but overall it has +been categorised as being low +for office sites and major for +print sites. +Description: +A set of vulnerability +considerations were +assessed at site and Group +level to determine the state +of preparedness for flooding. +If a flood event was to occur +at an office site, the level of +impact was categorised as +low as there is generally no +critical equipment that could +get damaged, and employees +have the ability to work from +home. Hence, the overall +impact on operations would be +minimal. At print sites, assuming +a flood event occurs, the +impact was categorised as +major given the potential +damage to material and +equipment and impact on +operations if the energy +system was impacted. +Rating: +Overall categorised as low/ +moderate (ranging between +low to moderate depending +on the site). Financial impact +expected to be minimal in a +future climate scenario and +considering Reach’s strategy +and measures in place. +Description: +Risk per site was estimated +by combining information +on likelihood and impact. +While the risk varies per site, the +overall risk to Reach has been +categorised as low/moderate, +given the mitigation measures +available and the existing +insurance to cover damages. In +addition, given Reach’s strategy +to become a digitally-focused +business, flood risk to print sites +would decrease as the strategy +is implemented. +• Existing working from home +policy for office-based +workers if offices are +inaccessible. +• Existing warning system to +inform employees in the +case that working from +an office is not possible. +• In specific sites, elevation of +water-sensitive materials +and equipment to above +ground-level. +• Back-up power generators +at print sites. +• Contingency plans for print +sites (shifting printing load +between sites). +• Planned move to digital and +reduce reliance on printing. +TCFD report continued +61 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_64.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_64.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f095b99f42723484fb620703fd10ca14a5d1a6a --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_64.txt @@ -0,0 +1,154 @@ +TCFD report continued +CARBON PRICING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Carbon pricing represents a major +climate-related risk in the UK, primarily +due to the UK Emissions Trading Scheme +(UK ETS) that puts a price on emissions +from certain sectors. As of November +2023, the price per tonne of CO2e under +the UK ETS is approximately £40. There +are also carbon prices impacting Reach’s +upstream supply chain partners in +countries in the EU and North America, +and the prevalence of these mechanisms +is growing. +Firms can either face direct or indirect +carbon pricing risk. Direct carbon prices +usually cover large facilities in emissions- +intensive industries, such as electricity +generation and manufacturing. Directly +regulated firms will probably pass their +carbon costs through to their consumers. +Most companies will face indirect risk +from carbon costs passed through +from emissions-intensive suppliers. +Depending on how carbon price +mechanisms evolve, Reach could face +risk from consumption of electricity, +natural gas, diesel, paper and road +freight services. In all such cases, carbon +costs would be passed through to Reach +from the suppliers of these services, +themselves directly subject to a carbon +tax or emissions trading scheme. +Risk category: Transition, Policy and Legal +Link to existing principal risk: +Supply chain disruption, Deceleration +of digital growth. +Low carbon and near term +(up to 2030) +The low-carbon scenario (in enhanced +and maximum ambition) is the one in +which carbon prices increase to the +highest levels. In the near term, Reach’s +direct and supply chain emissions will be +highest as paper products and print sites +remain critical for Reach’s operations. +Consequently, assuming emissions +continue to fall over time, risk will increase +in the short term and peak around 2030. +Rating: +While Reach will not face +direct exposure to carbon +pricing, it is likely to face +exposure to carbon prices +due to costs passed through +from suppliers. The likelihood +has therefore been +categorised as probable. +Description: +Reach sources paper +from several countries that +already have carbon prices +in place (such as the UK, EU +and Canada). Reach is likely +already facing some impacts +due to carbon prices faced +by paper manufacturers. +Reach is also likely already +facing impacts from carbon +prices faced by electricity +suppliers in the UK. In a +low-carbon scenario, +carbon prices in these +regions are expected to +increase considerably in +the near and medium term. +Rating: +Potential impact is moderate, +based on carbon pricing +trends and Reach’s planned +digitalisation actions. +Description: +Reach is transitioning away +from paper products and +will eventually become an +office-based supplier of +digital products. Such +companies are not at +major risk from carbon +pricing unless they have +exceptionally high on-site +energy consumption. +Reach’s greatest source +of risk will be from carbon +costs passed through from +electricity suppliers. If the +UK ETS expands, Reach may +also face significant risk +due to on-site natural +gas consumption and +any remaining road +freight services. +Rating: +Overall risk is categorised +as moderate. +Description: +Assuming a low-carbon +scenario (enhanced ambition) +and currently planned actions, +carbon pricing could represent a +moderate financial risk to Reach. +Even if Reach is not directly +regulated by a carbon price, it +could face some short-term risk +from paper consumption due to +its suppliers passing carbon costs +through. Carbon cost exposure +for most paper manufacturers is +currently low or non-existent but +that is projected to increase in the +future in a low-carbon scenario. +As Reach moves away from print, +the risk of facing carbon costs from +paper manufacturers or suppliers +of freight services is expected to +fall sharply. Reach will soon be +largely built around grid-based +electricity consumption and +cloud-based data storage. While +fossil-fuelled electricity production +can be regulated by carbon +pricing, the Company’s on-site +electricity consumption is unlikely +to be at a level that would cause +carbon pricing to be a major +concern. This is especially so +because the UK power grid is +expected to continue along a +strong decarbonisation trajectory. +• Digitalisation +could reduce energy +consumption from direct +operations, therefore +reducing exposure +to both carbon and +energy pricing. +• Installation of on-site +solar power will reduce +exposure to both carbon +and energy pricing. +62 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_65.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_65.txt new file mode 100644 index 0000000000000000000000000000000000000000..a88aaa81816b99d4b3d4dcdabbbcd07e26dc0642 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_65.txt @@ -0,0 +1,115 @@ +TCFD report continued +ENERGY PRICING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Energy pricing represents a major +climate-related transition risk for +energy-intensive organisations in +the UK. +Under certain scenarios, electricity +and natural gas prices could rise +sharply in response to policies +intended to disincentivise energy +consumption and CO2 emissions. +Energy-intensive companies +expecting to increase their +emissions will be most at risk. +Reach is not currently energy- +intensive, and emissions are not +expected to increase based on +current digitalisation plans. +Risk category: Transition, Market +Link to existing principal risk: +Deterioration in macroeconomic +conditions (inflation). +Low carbon and near term (up to 2030) +The low-carbon scenario is the one in +which natural gas prices increase to the +highest levels, while electricity prices are +expected to rise before falling. In the near +term, Reach’s energy consumption will +be highest as paper products and print +sites have not yet been phased out. +Consequently, assuming emissions +continue to fall over time, risk will increase +in the short term and peak around 2030. +Rating: +Reach will probably face +some increases in the price of +electricity and natural gas over +time. Likelihood has therefore +been categorised as probable. +Description: +As the global climate policy +continues, the UK Government +may enact other policies +intended to increase the price +of electricity and natural gas. +For example, the UK carbon +price is expected to rise and +could increase gas production +and distribution costs. +Rating: +The potential impact of +changing energy prices on +Reach is categorised as low. +Description: +Despite the potential for +increased energy prices, +Reach’s energy cost is likely +to fall. There are no planned +actions that would lead to +a significant increase in +Reach’s energy consumption. +Meanwhile, consumption may +shift away from paper-based +products to digital, therefore +reducing the energy consumed +in Reach’s direct operations. +Rating: +Overall risk is categorised as +low and, when considering +Reach’s planned actions, the +increase in energy prices is +not a risk. +Description: +Energy pricing should not +represent a financial risk +to Reach if, following the +current trajectory, there is a +reduction in energy consumed +in direct operations. Electricity +consumption in offices is +unlikely to be at a level that +makes energy prices a concern. +Reach could face increased +natural gas costs if prices +increase significantly in +response to policy actions to +restrict supply and otherwise +raise production costs. +However, natural gas is mainly +used at Reach print sites, +and the Company expects +to transition away from print +and towards digital products. +Reach is already taking steps to +reduce this risk further with the +installation of on-site solar +power generation. +• Digitalisation could reduce +energy consumption from +direct operations, therefore +reducing exposure to both +carbon and energy pricing. +• Installation of on-site solar +power will reduce exposure +to both carbon and +energy pricing. +Next steps – 2024: +• Continue to review the risks identified regularly +• Continue to monitor external factors and pressures on the business and how these interact with the identified risks/opportunities +• Continue our work to further integrate insight on climate risks to Reach in our strategy and financial planning +63 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #1 is a "clock". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_66.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_66.txt new file mode 100644 index 0000000000000000000000000000000000000000..00b03d67b81df1df582f9758290bb1e0e63ba000 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_66.txt @@ -0,0 +1,40 @@ +Metrics and targets +The metrics and targets we have in place play +an important role in enabling us to measure +and monitor our climate-related risks and +opportunities. The work we have done in 2023 +to quantify climate risks and opportunities will +enable us to set more specific metrics and +targets to further measure and monitor +risks, which is the next key step we must +take to align with climate financial +disclosure recommendations. +We report fully on our Scope 1, 2 and selected +Scope 3 emissions annually, which has been +a major driver in helping us to understand the +impact we are having on the climate as well +as how we might in turn be affected by risks +associated with our emissions throughout +our value chain. In 2023, we completed the +calculation of all relevant Scope 3 categories +(page 53), which enables us to identify high +emissions sources and act to reduce them. +Our existing climate-related targets include a +75% reduction of our Scope 1 and 2 emissions +by 2025 (against a 2019 baseline), which will +not only help us to reduce our environmental +impact but also reduce our vulnerability to any +potential costs associated with carbon pricing. +NEXT STEPS – 2024: +• Continue the work on setting targets +and metrics for the most relevant +risks and opportunities following +our quantitative CSA work. +We regularly review all sustainability targets to +ensure they are in line with our goals for the +Company. We continue to set ambitious +emission reductions targets in line with +the Paris Agreement. +TCFD report continued +64 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_67.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_67.txt new file mode 100644 index 0000000000000000000000000000000000000000..587dd6852337518f5ea9aaa9e94df953d522e162 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_67.txt @@ -0,0 +1,91 @@ +Policies and guidelines In summary More information +Focus area: Environment +Environmental Policy Specific commitments in relation to the main areas +where the Company has the potential to cause +environmental impacts +Compliance with required Climate-related +Financial Disclosures +Pages 46 to 53 +Pages 54 to 64 for +the TCFD report +Pages 55 and 56 +Focus area: Employees +Dealing and +Disclosure Policy +Compliance by employees with insider and +share-dealing regulations +Internal only +Inside Information +Policy +Clear and documented procedures for handling and +disclosing inside information +Internal only +Dealing Code for +Directors and PDMRs +Compliance by directors and persons discharging +managerial responsibilities (PDMRs) with +insider-dealing regulations +Internal only +Diversity & +Inclusion Policy +Understanding the Group’s approach to diversity +and inclusion, the role all our people play in fostering an +inclusive culture, why it matters and where to find help +Pages 41 to 44 +Health & Safety +Policy Statement +Understanding the Group’s commitment to the health +and safety of its employees and others affected by its +business activities +Page 39 +Disclosure Policy Awareness of how to make a disclosure of +suspected wrongdoing +Page 38 +Focus area: Human rights +Anti-slavery Policy Compliance with modern slavery regulations under the +Modern Slavery Act 2015 +Page 38 +This table summarises our policies and sets out where you can find the information required to meet the non-financial reporting requirements under sections 414CA and 414CB of the Companies Act 2006. +Non-financial and sustainability information statement +Policies and guidelines In summary More information +Focus area: Anti-bribery and anti-corruption +Anti-bribery Policy Compliance with applicable anti-bribery and +anti-corruption laws +Page 38 +Anti-fraud Policy Clear and documented procedures on reporting +suspected fraud and how the Group will respond to +a concern about fraud +Internal only +Standards of +Business Conduct +Maintaining high standards of integrity and +personal conduct +www.reachplc.com +Focus area: Social matters +Code of Conduct +Policy +Understanding the professional conduct that the Group +expects everyone to abide by, to create a culture that all +employees are proud to be a part of +Page 38 +Group Procurement +Policy +Understanding the Group’s policy and procedures for the +procurement of goods and services +Internal only +Data Protection Policy Compliance with the UK General Data Protection Regulations +(UK GDPR) and the UK Data Protection Act 2018, the Irish Data +Protection Acts, and data protection laws and regulations in +all jurisdictions in which we operate +Pages 37 and 38 +www.reachplc.com +Focus area: Non-financial key performance indicators +Understanding the key metrics in measuring the Group’s +non-financial performance +Pages 20 and 21 +Focus area: Management of principal risks and uncertainties +Understanding the key risks that the Group faces Pages 68 to 72 +Focus area: Business model +Understanding how value is created for stakeholders Pages 16 and 17 +65 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_68.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_68.txt new file mode 100644 index 0000000000000000000000000000000000000000..80345e337e7000e6312bb97fff13e881006247fc --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_68.txt @@ -0,0 +1,105 @@ +Risk report +During the year, we have continued to see the +internal and external environment evolve and, +as a result, we have seen the risk environment +evolve and change too. We have continued +to progress and embed our Customer Value +Strategy (CVS) to create a more data-led +digital business. Macroeconomic conditions +continue to be challenging, particularly in the +areas of inflation and consumer confidence, +interest rates, and advertising spend. We have +seen an accelerated decline in digital referral +volumes driven by the evolution of referral +approaches used by the different platforms. +All of these areas affect our risk environment +and underline the importance of managing +risk and uncertainty effectively in order to +ensure the successful delivery of our CVS. +We have focused on our principal risks, with +further work undertaken in the year to evolve +how we mitigate and manage our principal +risks, taking accelerated action where required +to respond to the evolving internal and external +environment. We have also completed deep +dive reviews with the Audit & Risk Committee +for several of our principal risks. These included +cyber security, data protection, brand +reputation, treasury management and future +funding, and US operations risk. We have +continued to develop a better understanding +of our emerging risks and opportunities of +climate change and AI throughout the year. +In line with the recommendations of the Task +Force on Climate-related Financial Disclosures +(TCFD), we have identified our top climate +risks and opportunities and completed further +analysis to understand these more fully and +embed them into our risk management +model, as set out on pages 61 to 63. +How we manage risk +Our risk appetite has been clearly defined +and agreed by the Board and helps us to drive +decision-making when determining how we +best manage each of our principal risks. +We carefully evaluate the level of risk we are +prepared to take, and our risk appetite in +relation to strategic, operational and +regulatory risks is as follows: +Strategic +In pursuing our strategy, the risks we take +carefully balance the need to develop the +business with not knowingly compromising our +existing brands, our reputation or our financial +stability. Our principal strategic risks are: +• deterioration in macroeconomic +conditions; and +• deceleration of digital growth alongside +acceleration of decline in print revenue. +Operational +Our appetite for risks that may lead to +significant disruption of our operations is low. +We seek to minimise risks from unforeseen +operational failures in both our business and +our service providers. Our principal operational +risks are: +• cyber security breach; +• supply chain disruption; +• health and safety incident; +• lack of funding capability; +• inability to recruit and retain talent; and +• damage to brand reputation. +Regulatory +We have no appetite for any risk that may +constitute a breach of regulations, although +we will challenge the appropriate bodies +where we feel regulations are strategically +limiting. Should mistakes occur, we act +promptly to resolve the issue and prevent +it happening again. Our principal regulatory +risk is data protection failure. +Risk management framework +Identifying and evaluating risks +We regularly identify, evaluate and monitor all +risks including emerging risks that may affect +the operation of each area of our business. We +then identify, evaluate and monitor those risks +we consider to be principal – i.e. those with the +greatest potential to have a negative impact +on the business. +Managing risks +Having identified and evaluated our principal +risks, we consider how best to mitigate and +manage their potential impacts. We have +clearly defined roles, responsibilities and +accountabilities for managing our risks as +set out in the diagram opposite. Each of our +principal risks has an Executive Committee +owner and we have well-established +processes in place to allow the Board to +review these risks. These are detailed in +our Governance Report. +AN OVERVIEW OF OUR +RISKS IN 2023 +66 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_69.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_69.txt new file mode 100644 index 0000000000000000000000000000000000000000..b75f74bf081aa46d5b01a230b7b39b56976473e4 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_69.txt @@ -0,0 +1,53 @@ +Risk report continued +Our roles, responsibilities and accountabilities +The key roles and responsibilities in risk management are set out below: +Executive Committee +• Owns the day-to-day operation of the risk management framework +and systems of internal control +• Identifies and assesses risks and introduces mitigation controls +• Establishes ongoing processes to monitor and manage risk, +including emerging risks +• Assesses the effectiveness of internal controls and addresses +any issues identified +• Ensures significant issues are escalated promptly to the Board +• Ensures that decisions taken are in line with the corporate +risk appetite +• Ensures onward communication of key Group policies +and procedures +Board +• Sets strategic objectives +• Identifies, evaluates and monitors principal risks and uncertainties +• Sets the ‘tone from the top’ and establishes the corporate risk appetite +• Reviews and approves key Group policies and procedures to manage risk +• Responsible for the assessment of risk (delegated to the Audit & Risk Committee) +Audit & Risk Committee +• Reviews the effectiveness of the risk +management framework and internal +control systems +• Reviews effectiveness and integrity of +financial reporting +• Oversees risk-based internal audit +activity which provides independent +assurance over the operation of the +Group’s internal control systems and +risk management processes +• Monitors compliance with the +corporate risk appetite +Operational functions +• Ensure appropriate risk management is in place +within their business areas +• Review risks and mitigations on a regular basis +• Review and monitor the implementation of key Group policies +and procedures +• Identify emerging risks, and where appropriate escalate to the +Executive Committee +Risk and compliance support functions +• Support and advise management in managing risk +• Support and advise the business on the development of +appropriate and proportionate risk management actions +• Co-ordinate risk identification, reporting and governance activity +• Provide an opinion on the effectiveness of internal control and risk +management systems and processes +Key Direction and oversight Reporting Advice +67 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_7.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..35ce9f6d17766a4d487266c25595fde33d48479b --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_7.txt @@ -0,0 +1,132 @@ +Across the wider business, we continued +to make progress in making Reach more +responsible, such as by providing greater +support to colleagues regarding menopause +and accessibility, and we were proud to see +our efforts recognised when we were ranked +#19 in the Inclusive Companies list. +Our teams +In 2023, the Board oversaw the implementation +of a continued push to carefully manage our +costs, a decision that involved reducing the +size of most of our teams. While we agreed +this was a necessary step to safeguard the +future of our business and our journalism, we +recognise that such changes are enormously +difficult for all our people. We worked closely +with management to understand the impact +of these changes and encouraged direct +communication with employees, via several +in-person meetings across Reach sites. +Board changes +Darren Fisher joined the Board as Chief +Financial Officer in February 2023, joining us +from ITV plc where he was Group Director +of Finance. He has brought a strong set of +financial, operational and strategic skills to the +Board, experience which will benefit the Group. +For more on changes to the Board this year, +see page 75. +Dividend +The Board proposes a final dividend of 4.46 +pence per share for 2023 (2022: 4.46 pence +per share), which follows the interim dividend +of 2.88 pence. In proposing the final dividend, +the Board has considered all investment +requirements and its funding commitments +to the defined benefit pension schemes. +Moving forward +Over the coming months, we expect to +see continuing shifts in audience and tech +platform behaviour but we will be ready to +adapt to those changes. The work we have +done in 2023 has put us in a strong position +to face the challenges 2024 may bring, and +to consolidate our position as a leading +digital publisher. +The Board and I would like to thank everyone +at Reach for another year of outstanding work +under very challenging circumstances. The +talent and dedication we continue to see is +a powerful reminder of the strength of our +purpose as we work together to ensure +the future of our journalism. +Nick Prettejohn +Chairman +5 March 2024 +Chairman’s statement continued +I am always heartened to see the very real +impact our campaigning journalism has every +year, both nationally and locally – a reminder +that the work this business does matters. +While campaigns are often a labour of love +for months or even years, sometimes they hit +the mark quickly, as we saw with the Mirror’s +campaign last summer which successfully +halted the closure of rail station ticket offices. +For more campaigning journalism highlights +of the year, see page 34. +Responsible business +We continued to strengthen our commitment +to being a responsible business, building on +the excellent work done in 2022 when we +introduced a new formal framework. In 2023, +we made further progress in our environmental +efforts, in particular putting the reporting and +data in place that will pave our path to net +zero. A significant step was taken towards +this goal in 2023 when our three print sites +all completed work on installing 9,000sq m of +solar panels that will reduce both our carbon +footprint and our dependence on external +energy providers. +We also continued to work on being a more +inclusive business. At Board level, I am proud +to have achieved our 30% Club commitment +to a better gender and ethnicity balance on +the Board. However, I acknowledge that this +is only a starting point and that, while Reach’s +executive management team has also fulfilled +its pledge of achieving 30% women in its +makeup, it has yet to achieve its ethnicity +targets – this is an area we are committed +to improving. +including the Online Safety Bill and the repeal +of Section 40 of the Crime and Courts Act. +Crucially in 2023, we watched the Digital +Markets Bill continue to take shape. As this Bill +progresses through Parliament, we hope it will +provide rules of engagement that will bring +clarity and transparency to our dealings with +tech platforms, particularly around the value +of our content. Reach will continue to work +both with Government and opposition to +lobby for a fair playing field for news in +the digital landscape. +Innovative journalism +We remain driven by our core purpose +to enlighten, empower and entertain our +audiences. While awards aren’t the only +marker of our success, it was nonetheless +gratifying to see our teams continue to be +recognised for their work in 2023, often on +an international scale. For example, the +International News Media Awards (INMA) +recognised the Manchester Evening News for +its Awaab Ishak investigation, and the Cannes +Lion International Festival of Creativity gave +the Daily Star a Bronze PR award for its viral +sensation ‘Lettuce vs Liz Truss’ campaign. +Closer to home, our journalists continued to +win multiple awards, with our local colleagues +in particular regularly sweeping the categories. +We were also noticed for work which saw our +people exploring new territory – for example, +the multi-award-winning WhatsApp +communities project from our social team, +which pioneered a new and effective way of +engaging with people. This drive to innovate +and reinvent how we deliver our content +deserves to be celebrated. +5 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information5Reach plc Annual Report 2023 5Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_70.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_70.txt new file mode 100644 index 0000000000000000000000000000000000000000..9b89ab9a2964821305f90b036f424e7bcc30bedb --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_70.txt @@ -0,0 +1,70 @@ +Risk report continued +Our principal risks +and uncertainties +We have considered our risks in the context +of delivering our strategy through a more +data-led digital business and the evolving +external environment. The evolving external +environment has seen the macroeconomic +conditions continue to be challenging, +particularly in the areas of inflation and +consumer confidence, interest rates, and +advertising spend. We have seen an +accelerated decline in digital referral volumes +driven by the evolution of referral approaches +used by the different platforms. +This has caused our risk of digital growth +deceleration to increase and our risks +around deterioration in the macroeconomic +environment, supply chain disruption and +cyber security breach to remain elevated +throughout the year. The risk environment +for data protection failure has also changed +during the year with our expansion into the US. +We have reviewed and evolved our mitigating +actions for our principal risks to ensure they +adapted to the changing risk environment. +The Board has undertaken a robust risk +assessment and review of our principal risks +in this context and the Audit & Risk Committee +has also performed a deep-dive review of the +following principal risks during the year: cyber +security, data protection, brand reputation, +treasury management and future funding, +and US operations risk. Our principal risks and +progress against them are set out below. +We have continued to develop a better +understanding of our emerging risks of climate +change throughout the year. Whilst we do not +at this stage consider climate risk to be a +principal risk, in line with the recommendations +of the Task Force on Climate-related Financial +Disclosures (TCFD) we have identified our top +climate risks and opportunities and completed +further analysis to understand these more fully +and embed them into our risk management +model, as set out on pages 61 to 63. +Risk and description How we mitigate the risk What we’ve done this year +Strategic +Deterioration in macroeconomic conditions +Risk owner: Full Executive Committee +Continued deterioration in macroeconomic conditions +could result in an uncertain trading environment with +reduced customer and advertiser spending, higher +interest rates, higher inflation and increased costs, +leading to lower cash flow and profits. +The economic uncertainty continues. We closely monitor the +risk and impact and continue to take action when needed. +We have a proven track record of responding quickly and +delivering additional cost savings as necessary when faced +with unexpected revenue declines. +We have closely monitored and assessed the macroeconomic +factors and during the year we have seen continued +inflationary pressures and increasing interest rates. We have +continued to take action to closely monitor costs and be as +efficient as possible, taking timely actions to mitigate inflation +cost pressures in the year. +Key Increase No change Decrease +68 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements +The secret fruit is a "lemon". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_71.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_71.txt new file mode 100644 index 0000000000000000000000000000000000000000..37f0783a363162e6598d17b3f6009a342b26a2c5 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_71.txt @@ -0,0 +1,75 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Deceleration of digital growth alongside +acceleration in decline of print revenues +Risk owner: Full Executive Committee +Changes in the traditional publishing industry have led +to an ongoing decline in print advertising and circulation +revenues, which is being exacerbated by macroeconomic +factors. A lack of appropriate strategic focus could result in +us losing further revenue from existing products, while also +failing to grow digital revenues quickly enough to offset the +decline in print. +Our strategic development is led by an experienced Board and +Executive Committee. +We focus on developing digital revenue streams through +the CVS. +We continue to take tactical measures to minimise print +revenue declines and maintain profits, such as taking +appropriate cost mitigation or pricing measures. +We have governance structures which enable the ongoing +review of performance against targets and strategic goals, +including a weekly structured trading meeting. +We keep under consideration acquisition, joint venture and other +corporate development opportunities, which are aligned to +our CVS. +Our strategy, led by an experienced Executive Committee, is built +around moving to a digital-led model and remains the key +strategic focus for the Executive Committee. +During the year we have focused on building our direct +relationships with customers; social video content; our strategy +for affiliates; and Curiously, which aims to grow revenue from +new audiences. +Specifically, we have launched the Secure Audience Strategy, +which focuses newsrooms on increasing the number of page +views which come from reliable sources – those built on +intentional relationships with us by readers. +Content is analysed by age profile to understand what will +appeal to under-35s in particular. This was rolled out in August, +as part of the wider cultural change Curiously is tasked +with delivering. +We have also launched an operation in the US, which gives us +another route to a digital population of 360m people, which in +turn will open up new revenue opportunities. +Operational +Cyber security breach +Risk owner: Chief Financial Officer/Chief Information Officer +An internal or external cyber threat or attack, or a breach +within one of our suppliers, could lead to breaches of +confidential data, interruption to our systems and +services, reputational damage with our stakeholders +and financial loss. +All business-critical systems are well established and are +supported by appropriate disaster recovery plans. +We regularly assess our vulnerability to cyber attack and our +ability to re-establish operations in the event of a failure. +The technical infrastructure supporting our websites is within the +cloud and our sites have been designed to provide adequate +resilience and continued performance in the event of a +significant failure. +We continue to invest in enhancing our cyber security +infrastructure as new threats emerge. +Given our continued strategic focus on customer data as a +source of revenue, the potential impact of a cyber security +breach is increasing all the time. During the year we continued +to deliver our cyber security improvement programme and +have focused on the preparedness of our technology leaders +to manage cyber incidents including cyber incident training +and table-top exercises to rehearse re-establishing operations +in the event of a failure. We have continued to harden our +cloud environments to contain the damage from a potential +cyber attack and performed regular penetration tests to +identify vulnerabilities. +Key Increase No change Decrease +69 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_72.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_72.txt new file mode 100644 index 0000000000000000000000000000000000000000..ee62452f614d56b971bee6b843777600488db9da --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_72.txt @@ -0,0 +1,67 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Supply chain disruption +Risk owner: Chief Operating Officer/Chief Financial Officer +Disruption or failure in our supply chain could lead to +business disruption, increased costs, reduced service and +product quality, and ultimately mean we are unable to +deliver our strategy. +Print: Our print products, which rely on a small number of +key suppliers (for example, newsprint suppliers, wholesalers +and distributors), could be adversely affected, operationally +and financially, by changes to supplier dynamics. +Information systems and technology: A major failure, +breach or prolonged performance issues at a third-party +provider could have an adverse impact on our business. +We carefully monitor and manage all our third-party print and +information systems and technology providers – these include: +• Ad producers and planners +• Wholesalers and distributors +• Newsprint suppliers +• Manufacturing maintenance and parts providers +• IT providers +• Global digital partners +We have business continuity/disaster recovery plans in place with all +our key partners. +For our IT partners, we have clear governance arrangements covering +risk management, change control, security and service delivery. +During the year we continued to monitor our key +suppliers, with a particular focus on suppliers to our +print site operations. +We also continued to review our contingency +arrangements to ensure we have robust stock +management processes and that there are contingency +arrangements in place with our key suppliers. +Health and safety incident +Risk owner: Chief Operating Officer +Failure to adhere to our health and safety systems could +result in our employees or other workers on our sites +having accidents, including, potentially, fatal ones. +Every site has a professionally qualified and experienced health and +safety manager and an occupational health provider. The health and +safety manager oversees the implementation of our health and safety +management system, which includes an adverse event reporting +system. This allows investigations to be carried out in a timely manner +by the health and safety team. +The system includes a process for assessing risks in different areas of +the business and covers risks such as external work in hostile and +high-risk environments. +It also includes internal and external auditing to ensure continuing +compliance across our print and publishing sites. +We offer health and wellbeing support, including for mental health, to +all our employees. +During the year we have worked to embed the +refreshed Health and Safety Policy and framework +that was implemented in 2022. +We have continued to enhance our risk +assessment processes for events, our hubs and +work in high-risk environments. +We have continued to offer appropriate health +and wellbeing support to all of our employees. Online +threats and abuse towards our journalists is an area +of increasing concern, so addressing this issue and +protecting our journalists will continue to be a priority +for us. +Key Increase No change Decrease +70 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_73.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_73.txt new file mode 100644 index 0000000000000000000000000000000000000000..280fd0b1637465b7ac82cff925c2690f4eb81bae --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_73.txt @@ -0,0 +1,66 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Lack of funding capability +Risk owner: Chief Financial Officer +Our main financial risk is the lack of funding capability +to meet business needs. This may be caused by a lack of +working capital, unexpected increases in interest rates or +increased liabilities, in particular: +• pension deficits may grow at such a rate that annual +funding costs consume a disproportionate level of profit +• volume and level of claims for historical legal issues (HLI) +Financing +We have committed loan facilities sufficient to deliver +our strategy. +Through regular dialogue, we maintain constructive +relationships with our syndicate banks. +We forecast and monitor cash flow regularly through our +treasury reporting processes. +Our exposure to foreign exchange fluctuation is limited. +Commitments +Regular reporting to the Board (including facility utilisation +and covenant compliance). +We hold regular discussions with pension scheme trustees. +We continually review ways of de-risking our pension liabilities. +We continually monitor and manage ongoing HLI claim levels, +and work with external lawyers on HLI civil claims. +Financing +Following the extension of our full loan facility for an additional +year during 2022 (until November 2026) to mitigate the risk of +any unexpected increases in interest rates or liabilities, no +changes to the facility have been made during 2023. +Commitments +We made significant payments to our pension schemes in the +year and we remain committed to addressing our historical +pension deficits. This includes the successful resolution of the +2019 triennial review during the year for the one remaining +scheme. Discussions are ongoing with the Group’s other +schemes regarding the 2022 triennial valuations and are +expected to be concluded satisfactorily by the 31 March 2024 +due date. +In December, the High Court’s judgement on time limitation +provided a clearer view on our future liabilities in relation to HLI. +Inability to recruit and retain talent +Risk owner: Group Human Resources Director +The inability to recruit, develop and retain talent with +appropriate skills, knowledge and experience would +compromise our ability to deliver our strategy. +We continually monitor and review: +• Digital capabilities of our workforce +• Turnover levels +• Pay and benefits +• Opportunities to expand our talent pool +(for example, outside London) +• The recruitment channels we use +• Diversity and inclusion +Against the backdrop of this year having a recruitment freeze +we have been continuing to monitor this risk while taking into +account the current business environment. We are currently +downsizing our workforce. Throughout this exercise, we ensured +that we retained skills and talent. Against this backdrop and +the changing business environment we are closely reviewing +our employee proposition in order to retain the best talent +going forward. +Key Increase No change Decrease +71 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_74.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_74.txt new file mode 100644 index 0000000000000000000000000000000000000000..5c9a7560ae0fd04db719568bfff80b23025794b4 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_74.txt @@ -0,0 +1,71 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Damage to brand reputation +Risk owner: Full Executive Committee +Breaches of regulations or editorial best practice +guidelines; editorial errors; and issues with employees’ +behaviour or the tone of our editorial could damage our +reputation, cause us to lose readership, and put us at risk +of legal proceedings. +We have highly experienced and capable people in our key +senior management roles. +Our governance structures provide clear accountability for +compliance with all laws and regulations, and we have policies +and procedures in place to meet all relevant requirements, +including a crisis management procedure that is +communicated to all relevant staff. +We train all editorial employees on how to create content that +complies with relevant legislation. +We continually monitor upcoming legislative changes and +emerging trends. +We have clear internal expectations around the management +of editorial risk, including a mandatory escalation policy of +significant risks to senior editorial and legal colleagues, and +monthly reporting on editorial risk. We have reviewed and +updated all our Editorial Legal policies in 2023, and created +new versions for use in the US. These have formed the subject +of editorial training and been publicised to all members of our +editorial teams via our legal bulletin, which is circulated monthly. +Regulatory +Data protection failure +Risk owner: Group General Counsel/Data Protection Officer +A contravention of data protection regulations +applicable to Reach such as the UK or EU General Data +Protection Regulations (GDPR), Privacy and Electronic +Communications Regulations 2003 (PECR), various +state and federal legislation in the US and Canada +(e.g. the updated California Consumer Privacy Act +CCPA Amended), could lead to monetary penalties, +reputational damage and a loss of customer trust. +We have clear governance structures to direct and oversee +our data protection strategy. +Our Data Protection Officer and Data Protection team promote +and advise on compliance with data protection regulations, +address rights requests, provide oversight and help mitigate +the risk of compliance breaches. The team works with a +network of data protection champions and teams across +the business to assist the business in delivering its data +protection obligations. +We have well-established data protection policies, processes +and controls to govern how colleagues carry out day-to-day +activities involving the handling of personal data, plus clear +terms with regards to the collection, use, sharing and retention +of user data, including data transferred to third parties. +When developing new products and services, we use a ‘data +protection by design and default’ approach to collecting and +using personal data, to ensure we remain compliant with data +protection regulations. +During the year we continued to focus on embedding data +protection controls and processes and ensuring that data +protection forms part of ‘business as usual’ in everything we do. +This included reviewing and enhancing our Data Protection +risk and reporting framework to incorporate new legislative +requirements and regulatory focus areas and ensuring third +parties met the legislative requirements and correct provisions +were in place. We also advised on matters arising from new +projects involving personal data including the US expansion +and artificial intelligence initiatives, and monitored completion +of data protection awareness training. +Key Increase No change Decrease +72 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_75.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_75.txt new file mode 100644 index 0000000000000000000000000000000000000000..143746e497bdf5a2c0516a32cff55bb64e7b911b --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_75.txt @@ -0,0 +1,109 @@ +2023 VIABILITY +STATEMENT +In accordance with the UK Corporate Governance +Code the directors have assessed the Group’s +prospects over an appropriate period of time +selected by them. +The directors assessed the prospects of the Group +over a three-year period as it enables thorough +consideration of the investment required to drive +growth in digital and the impact of declining print +revenues, and this time period is deemed to +appropriately reflect the evolving environment in +which the Group operates. The assessment took +into account the Group’s current financial position, +principal and emerging risks and uncertainties +facing the Group which have the greatest +potential impact on viability in that period. +When approving the annual budget, projections +for the next two years are also considered. The +annual budget is also used by the Remuneration +Committee to set targets for the annual incentive +plan. The directors also consider projections for the +next 10 years used in connection with the Group’s +impairment review. +Scenario Associated principal risk(s) Description +Significant revenue +reduction +Deceleration of digital +growth alongside +acceleration in decline +of print revenues +Material reduction in digital and print revenues +(net of direct cost reductions) compared to the +three-year plan of 10% per annum. +Adverse changes in +external environment +leading to lower than +expected revenue +and higher than +expected costs +Deterioration in +macroeconomic +conditions +Supply chain disruption +Inflationary pressure in relation to energy and +newsprint costs, together with key supplier failure +in the manufacturing business. +Cyber security breach Cyber security breach +Data protection failure +Damages to brand +reputation +An external cyber attack which leads to breaches +of confidential data and interruption to our systems +and services, resulting in a material reduction in page +views and subsequent digital revenues, together with +additional investigation and remediation costs whilst +the attack is rectified, in addition to associated +regulatory costs and fines. +A number of key assumptions were made in +generating the baseline three-year forecast +as follows: +• digital growth supported by investment in +the Customer Value Strategy; +• print revenue declines with reference to +recent trends and reduction in related costs; +• overall stability in total revenues and +operating profit; +• funding of the historical defined benefit pension +obligations based on the existing schedule of +contributions agreed with the Trustees; +• payments in relation to historical legal and +tax issues reflecting the provisions held in the +balance sheet; +• covenant compliance on existing financing +facilities; and +• dividend payments in each year. +The assessment was undertaken recognising the +principal risks and uncertainties that could have the +greatest potential impact on viability in that period. +A number of hypothetical scenarios have been +modelled. While each of the principal risks on +pages 68 to 72 has a potential impact and has +been considered as part of the assessment, only +those that represent severe but plausible scenarios +were selected for modelling, summarised opposite: +These scenarios were assessed individually and +in unison to understand our capacity for each +risk incident and further stress test viability. The +modelling showed that the Group would be able to +withstand the impact of these scenarios occurring +over the assessment period. The Board also assessed +the likely effectiveness of any proposed mitigating +actions. This did not change the conclusions of +the assessment. +The Strategic Report was approved on behalf of the Board on 5 March 2024. +Darren Fisher +Chief Financial Officer +5 March 2024 +Based on the above, the directors have a +reasonable expectation that the Group will +remain viable and be able to continue operations +and meet its liabilities as they fall due over the +three-year period considered. +Such future assessments are subject to a level of +uncertainty that increases with time and, therefore, +future outcomes cannot be guaranteed or +predicted with certainty. +73 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_76.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_76.txt new file mode 100644 index 0000000000000000000000000000000000000000..0fb2cedc7fb9b8a703de3848f3b52b929a6a1285 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_76.txt @@ -0,0 +1,83 @@ +The Board’s focus for the +year has been continuing +to support and hold +management to account +on the continued journey +of transforming the +business and becoming +a digital-first organisation. +The Board monitors culture and practices +closely across the business to make sure +they’re aligned with our purpose and strategy, +and we recognise that governance plays a +key role in setting up teams for success. We +nurture a culture that encourages colleagues +to be entrepreneurial, take advantage of +development opportunities and fulfil +their potential. +Below is a summary of the most important +Board activities this year. These initiatives +are outlined in more detail throughout the +Governance Report. +Continuing to evolve our strategy +As macroeconomic uncertainty remained +throughout 2023, our strong and effective +governance framework was critical in +supporting the delivery of our Customer Value +Strategy. To give us even greater long-term +stability and control over our business, the +Board spent time discussing whether the +strategy continued to be the right one. These +discussions included an in-depth review and +selection of numerous investment initiatives to +diversify revenue streams and further develop +audience insight and user experience. More +information on the Board’s strategy days +can be found on page 80. +One of the Board’s principal decisions in 2022 +was approving two organic growth initiatives: +our youth content brand, Curiously, and our +expansion into the US. The Board regularly +reviewed updates on the progress of these +initiatives, while the Audit & Risk Committee +performed a deep dive into the risks +associated with the expansion into the US +market, and how these are being managed +and mitigated. The Board is encouraged +by the progress made during 2023 and will +continue to monitor and provide oversight +as these initiatives develop. +PLANNING FOR THE FUTURE WITH GOOD GOVERNANCE +Nick Prettejohn +Chairman +Chairman’s statement +Compliance with the UK +Corporate Governance Code +The Board considers that, during 2023, +the Company applied the principles +and complied with the provisions of the +Financial Reporting Council’s (FRC) 2018 UK +Corporate Governance Code (2018 Code). +You can read more about our compliance +with the 2018 Code on pages 127 to 130. +Like many companies, we faced considerable +uncertainty and a rapidly changing business +environment. Our rigorous approach and +willingness to challenge in Board meetings has +meant that the difficult decisions we’ve had to +take ensure the interests of all stakeholders +are considered, and their views sought. +In 2023, the Board sought a capital reduction +of Reach plc to maintain the Company’s ability +to pay dividends to its shareholders and return +capital to shareholders, while also investing +to grow the business and meet our funding +commitments to the defined benefit pension +schemes. This was approved by shareholders +at a General Meeting held in November, and +by the Court in early December. You can read +more about this in our section 172 statement +on pages 85 to 87. +74 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #3 is a "spider". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_77.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_77.txt new file mode 100644 index 0000000000000000000000000000000000000000..acc0eceecac98ae21aff78e54bc92c669f59a3fd --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_77.txt @@ -0,0 +1,113 @@ +Our Board and +Executive Committee +We have ushered in some changes to the +Board during the year. Darren Fisher joined +the Board in February 2023 as Chief Financial +Officer, as set out in my Chairman’s statement +on page 5. Darren’s financial, operational and +strategic skills have helped the Board navigate +through a number of complex matters, +while managing the Company’s financial +performance in line with expectations. +At the AGM in May 2023, Steve Hatch +stepped down from the Board after more +than seven years of service, following his +full-time appointment as Chief Executive +Officer of YouGov plc. I would like to thank +Steve for his commitment and outstanding +contribution to the Board during his tenure +as Non-Executive Director. +I am pleased that we have met the targets +on Board diversity that must be reported on +under the new Listing Rule requirements, and +we will continue to prioritise diversity on the +Board. The Board acknowledges that, as set +out on page 91, there is progress to be made +at Executive Committee level regarding +ethnicity and this has been discussed at +Board meetings numerous times this year. +We recognise that diversity needs to be +considered throughout the whole organisation +to maintain a strong and diverse pipeline of +talent and to ensure that the organisation +better reflects its wider audience. +Once again, the Board has continued to work +closely with the Executive Committee and +other senior leaders, particularly through the +two in-depth Board strategy meetings held +during the year. Individual non-executive +directors have also provided insight and +expertise in certain areas to teams outside +the formal Board meeting structure. This is +a two-way relationship that enables non- +executive directors to share their deep +knowledge and expertise, assisting strategic +decision-making in the boardroom, and, in +turn, gaining insight into the business in a +more informal way. +Our responsible +business framework +During the year, the Sustainability Committee +oversaw all the work and progress achieved +under the four pillars of our responsible +business framework, which was created in +2022 to formalise our approach to being +a responsible, sustainable business. +One key area of focus has been setting +reduction targets for greenhouse gas +emissions. We are now in the process of +validating these targets, in order to be able to +announce a net zero commitment date in due +course. More information on this can be found +on page 95. +Reflecting on our effectiveness +as a Board +We regularly reflect on our performance as a +Board and consider ways we can improve our +processes and behaviours to make sure we’re +operating effectively. During 2023, we took +several actions to address the issues and +recommendations that arose from our internal +Board evaluation in 2022, covering ESG, market +developments, training and lessons learnt. +At the end of 2023, we conducted another +internal Board evaluation by way of a detailed +questionnaire. You can find more detail about +our processes, recommendations and actions +on page 90, and we will report on progress +against this year’s recommendations at +the end of the year. +Remuneration Policy +In 2024, we will be asking shareholders +to renew the three-year authority for our +Directors’ Remuneration Policy at the AGM. The +proposed new Directors’ Remuneration Policy +(the Policy) can be found on pages 107 to 115. +The Remuneration Committee has proposed +to roll forward materially the current Policy with +minor changes only. +The year ahead +The actions the business has taken during +2023 prepare us to face 2024 with a refreshed +focus on our digital-first goal. As a Board we +will continue to oversee the delivery of the +strategy, which to be successful will require +diversity of people and thought throughout +the entire organisation. The pace and scale of +change in artificial intelligence (AI) means that +this will be a priority as outlined on page 81 +and we will consider setting measures and +targets to monitor progress. +The upcoming corporate governance reforms, +while now not as extensive as originally proposed, +will be another step in strengthening the +governance and controls landscape, and we +will remain focused on overseeing any changes +required to continue to ensure we have a +strong and robust governance framework. +Nick Prettejohn +Chairman +5 March 2024 +Chairman’s statement continued +75 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_78.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_78.txt new file mode 100644 index 0000000000000000000000000000000000000000..5ea7fbceaf6863c8f11122e2fb147caf86181697 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_78.txt @@ -0,0 +1,62 @@ +Our Board +Nick Prettejohn +Chairman +Jim Mullen +Chief Executive Officer +Darren Fisher +Chief Financial Officer +Appointment date: March 2018 +(appointed as Chairman in May 2018) +Skills, experience and contribution: Nick has significant +chairmanship and listed company experience. Since his +appointment in 2018, Nick has successfully led the Board through +a period of transition, bringing on board a new CEO, two CFOs, a +Senior Independent Director and Audit & Risk Committee Chair. +Nick has deep financial services experience, in-depth regulatory +knowledge, significant experience in strategic planning and +implementation, and strong leadership qualities. The Board +believes Nick’s strong leadership and chairing skills means he +continues to effectively lead the Board. Some of Nick’s previous +appointments include Chairman of the Financial Services +Practitioner Panel, the Britten-Pears Foundation, Brit Insurance, the +Royal Northern College of Music and Scottish Widows Limited; +Non-Executive Director of Lloyds Banking Group plc, the Prudential +Regulation Authority and Legal & General plc; Member of the BBC +Trust; and CEO of Prudential UK and Europe, and Lloyd’s of London. +Current external appointments: Chairman of TSB Banking Group +plc and the charity Prisoners Abroad, Senior Independent Director +of YouGov plc and a Trustee of the charity Opera Ventures. +Appointment date: August 2019 +Skills, experience and contribution: Jim has significant +experience in advertising and communications, having spent +more than 10 years in some of the industry’s leading marketing +and communications groups, as well as on significant digital +transformation projects. Since his appointment in August 2019, +Jim has developed and communicated a clear strategic vision +for the future of the business, and the Board considers his +continuing leadership critical to executing the strategy. Some +of Jim’s previous appointments include Group CEO of Ladbrokes +Coral plc and Ladbrokes plc, Chief Operating Officer of William +Hill Online, and Director of Digital Strategy and Product +Management at News International. +Current external appointments: Senior Non-Executive Director +of Racecourse Media Group. +Appointment date: February 2023 +Skills, experience and contribution: Darren is a seasoned +finance professional with more than 30 years’ leadership +experience in global multi-service sector, blue-chip companies +in the UK, India and Australia. Darren has worked across the +media, technology, business services and aviation sectors. +His extensive experience means he offers the Board relevant +insight into strategy development and implementation, +business transformation and integrating acquisitions. +Darren was previously Group Director of Finance of ITV plc, +responsible for the group finance functions and operations. +He was also divisional CFO for the Media & Entertainment division, +which contains the UK broadcast business as well as ITV’s digital +offerings (ITVX). He has previously served as Director of Finance +for Micro Focus plc, Sage plc and Xchanging plc. +Current external appointments: None. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +76 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_79.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_79.txt new file mode 100644 index 0000000000000000000000000000000000000000..a7ec6e5fbed7ecaa1355a5bec87cb9b97eb967aa --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_79.txt @@ -0,0 +1,67 @@ +Our Board continued +Denise Jagger +Senior Independent Director +Priya Guha, MBE +Independent +Non-Executive Director +Anne Bulford, CBE +Independent +Non-Executive Director +Appointment date: December 2022 +Skills, experience and contribution: Denise is a qualified +solicitor, having been a partner at Addleshaw Goddard and, +until 2020, at Eversheds Sutherlands LLP. Denise brings extensive +governance and plc experience to the Board, having held a +number of non-executive positions during her career. Her +previous appointments include Non-Executive Director at CLS +Holdings plc, Bellway plc, Pool Reinsurance Company Limited, +Redrow plc, and the British Olympic Association, and Chair and +Pro Chancellor of the University of York. She was also a Director +of Asda Stores, and Group General Counsel and Company +Secretary of Asda Walmart. Through these roles, she has +acquired a broad range of M&A, finance raising, competition, +regulation compliance, HR, and remuneration and +benefits experience. +Current external appointments: Non-Executive Director of +Topps Tiles plc, Trustee of the National Trust and a Member +of the Advisory Panel of the charity IntoUniversity. +Appointment date: September 2022 +Skills, experience and contribution: Priya brings a unique +mix of senior diplomatic and governmental leadership to the +Board, alongside extensive experience of the technology sector. +She is a Venture Partner at Merian Ventures, with a focus +on women-led innovation investments. She is also a Non- +Executive Director of Herald Investment Trust, UK Research & +Innovation and the Digital Catapult. Previously, Priya was a +career diplomat, most recently as British Consul General to San +Francisco, with postings before that in India and Spain. In 2021, +Priya was awarded an MBE for services to international trade +and women in innovation. +Current external appointments: Venture Partner at Merian +Ventures, Non-Executive Director of Herald Investment Trust, +UK Research & Innovation and the Digital Catapult, Adjunct +Faculty at the Hult Ashridge Business School, Member of the +Royal Academy of Engineering International Committee and +Trustee of TechSheCan. +Appointment date: June 2019 +Skills, experience and contribution: Anne is a chartered +accountant and an experienced media CFO and Audit +Committee Chair. The Board considers her continuing +leadership of the Audit & Risk Committee to be important +to ensuring the Company continues to benefit from an +independent and objective audit. Anne was awarded an +OBE in 2012 for services to UK broadcasting and, in 2020, a +CBE for services to broadcasting and charity. Some of Anne’s +previous appointments include Deputy Director General of +the BBC and Chief Operating Officer of Channel 4. Her previous +non-executive roles include Chair of the Audit Committee of the +Executive Committee of the Army Board, and Audit Committee +Chair of Ofcom and the Ministry of Justice. Anne qualified as a +chartered accountant with KPMG and spent 12 years in practice. +Current external appointments: Non-Executive Member of +KPMG’s Public Interest Committee, Non-Executive Chair of +Trustees of Great Ormond Street Children’s Hospital Charity, +and Governor of the Royal Ballet. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +77 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_8.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d479c4c89a05fa40a0705fce3a01818c2221ad1 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_8.txt @@ -0,0 +1,24 @@ +A POWERFUL +Brands across UK & US +120+ +We reach +85% +of the regional +news audience +monthly +We reach +72% +of the online UK +audience +monthly +PORTFOLIO +We’re Reach plc, the largest commercial news publisher in the UK and +Ireland. We’re home to more than 120 trusted brands, from national +titles including the Mirror, Express, Daily Record and Daily Star, to local +brands like WalesOnline, BelfastLive and the Manchester Evening News. +Every month, 72% of the online UK population come to us for news, +entertainment and sport they can trust. As a proudly mainstream +publisher, we connect people everywhere with what’s going on in +their area and throughout the world. +6 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_80.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_80.txt new file mode 100644 index 0000000000000000000000000000000000000000..370f5773899f87039d01e95ea0275933125adb08 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_80.txt @@ -0,0 +1,64 @@ +Barry Panayi +Independent +Non-Executive Director +Wais Shaifta +Independent +Non-Executive Director +Olivia Streatfeild +Independent Non-Executive Director +and Colleague Ambassador +Appointment date: October 2021 +Skills, experience and contribution: Barry is an established and +recognised leader in the digital and data space, having spent +most of his career in senior positions at a range of sectors +focusing on data, insight and analytics capability development. +Barry has current executive experience, having worked as Chief +Data and Insight Officer at the John Lewis Partnership since +March 2021. Before this, he was Group Chief Data & Analytics +Officer at Lloyds Banking Group. Barry has extensive experience +in leading data-driven transformations and managing large +teams, having also held senior roles at Bupa and Virgin Group. +He started his career working in consultancy for EY, specialising +in data and digital. +Current external appointments: Chief Data and Insight +Officer at the John Lewis Partnership and Non-Executive +Director of Ofgem. +Appointment date: September 2022 +Skills, experience and contribution: Wais brings a varied +ecommerce background and customer focus expertise to the +Board, having previously held executive roles in a number of +online businesses. He has extensive experience driving growth +and transformation for several digitally enabled brands, with a +track record of leveraging data to drive customer engagement. +As the former CEO at Push Doctor, one of the leading digital +healthcare companies in Europe, Wais worked in partnership +with the NHS to connect thousands of patients each week with +clinicians. Before joining Push Doctor, Wais was Director of +Global Operations at Treatwell, and before that International +Operations Director at Just Eat. +Current external appointments: Chief Executive Officer of +PrivateDoc, Non-Executive Director and Chair of the Sustainability +Committee and Remuneration Committee of The Gym Group plc, +Non-Executive Director of Snappy Shoppers Ltd and Operating +Partner of Samaipata. +Appointment date: January 2016 +Skills, experience and contribution: Olivia has a strong +commercial and consumer background, having previously held +executive roles at TalkTalk, including as Commercial Director +and Marketing & CRM Director. Olivia has a data-driven and +analytical approach to problem solving, having worked in +consulting for McKinsey & Company. This enables Olivia to +support the Board in overseeing the data-driven and +customer-centric strategy. Some of Olivia’s previous +appointments include Chief Executive Officer of INTO University +Partnerships, Commercial Director of TalkTalk’s consumer +business, and Partner at Sir Charles Dunstone’s investment +vehicle Freston Ventures. Olivia was an Associate Principal at +McKinsey & Company and a leader in the business’s consumer +retail practice. +Current external appointments: Chief Executive Officer of +Flamingo Horticulture Investments. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +Our Board continued +78 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_81.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_81.txt new file mode 100644 index 0000000000000000000000000000000000000000..333b79d2341604b5b0032f16448f263e0ce2c417 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_81.txt @@ -0,0 +1,136 @@ +BOARD +IN ACTION +FEBRUARY +MARCH +APRIL JUNE +MAY +• Darren Fisher joined the Board +as Chief Financial Officer +• Finalisation of the 2023 +budget and delivery plan +• Update on Curiously, the +new youth content brand +launched in 2022 +• Annual insight into workforce +engagement from Olivia +Streatfeild, our Colleague +Ambassador +• Update on data protection +priorities and progress +• Financial training for Audit & +Risk Committee members +• 2022 full-year results released +and dividend declared to +shareholders, along with +a Company-wide cost- +reduction programme +• 2022 Annual Report approved +• Review of 2022 editorial +output and highlights +• Deep dive into digital +performance +• Gender Pay Gap +Report approved +• The Board held a +two-day strategy off-site +meeting to reassess and +review Customer Value +Strategy (CVS) goals +and priorities +• Colleague lunch held +with the Board and +regional leaders +in Manchester +• Tour of Oldham print site +• Colleague +breakfast hosted by +non-executive directors • Board visit to the Bristol office +and Colleague lunch held +with the Board and +regional leaders +• Update on the strategic +actions and initiatives agreed +at the strategy meeting in April +• Update on the 2019 and 2022 +pensions valuations process +• Broker update on +macroeconomic environment +and investor views on delivery +of the management plan +and strategy +• Review of the Group’s financial +performance and forecasts +• AI training and insights from +an external expert +• Steve Hatch, Non-Executive +Director, stepped down from +the Board +• Product update and user +experience improvements +• Update on cyber security +programme +• Modern Slavery Statement +approved +• AGM held with shareholders BOARD ACTIVITIES DURING 2023DECEMBER +• Approval of 2024 budget +• Review of proposed 2024 +organisational structure +• Update on data protection +programme +• Annual review of corporate +governance +• Approach to our second +year of reporting under +TCFD approved, including +scenario analysis +• Agreed in principle the +science-based targets for +our pathway to net zero. +To be formally announced +during 2024 +• 2023 half-year +results released +and dividend +declared to +shareholders +JULY +• The Board held another +two-day strategy +off-site meeting to +reassess and review +CVS goals and priorities +• Colleague lunch held +with the Board, Executive +Committee and other +leaders in London +• Colleague breakfast +hosted by non-executive +directors +• Climate-related training +for the Board and +Executive Committee +SEPTEMBER +• Proposed Reach plc +capital reduction of +the share premium +account announced +• Conclusion of the 2019 +and 2022 triennial +pensions valuation +for the MGN pension +scheme announced +• Update on cyber +security programme +OCTOBER +• Cost-reduction +programme for +implementation in +2024 announced +• General Meeting to +approve Reach plc +capital reduction +of the share +premium account +NOVEMBER +79 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_82.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_82.txt new file mode 100644 index 0000000000000000000000000000000000000000..9ae36e27ed09748a78edd42b289b5a7ccf7f0480 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_82.txt @@ -0,0 +1,95 @@ +Driving revenue growth +Building a +culture where +people thrive +Developing +a data-led +proposition +Growing through +audience +engagement +Delivering +the stories +that matter +loyalty +Greater More +relevant content +Moreengaging experience +Strategy days +The Board held two in-depth strategy days +in April 2023 and September 2023. Having +initiated the Customer Value Strategy (CVS) +in 2020 the goals and objectives of the +sessions were to reflect on the progress +the Company had made since then, +and identify further areas with potential +for growth. +Given the importance to the Board of +understanding the business rationale +and the risks and opportunities faced, the +Executive Committee and Board worked +together throughout the strategy days to +encourage an immersive debate and +discussion. At the end of the sessions, the +Board was given the opportunity to reflect +collectively and make key decisions. +The main topics covered over both +sessions were: +• re-affirming Reach’s current strategic +priorities for a data-led, customer- +centric proposition and evolving the +interpretation of the CVS to broaden +revenue beyond advertising while still +protecting its core purpose – journalism; +• knowing our customers and the benefits +of data, and considering the results of +an external customer insights panel; +• the future of the CVS and the +consideration and debate of +numerous investment initiatives; +• editorial restructure, the future of the +newsroom and Company culture; and +• the risks and opportunities surrounding AI. +The outcomes were: +• an agreement to diversify revenue +streams through Mantis, affiliates +and ecommerce and consider +new initiatives as appropriate; +• a plan to restructure editorial to +enable a digital-first approach +and continue the development of +audience insight and user experience; +and +• an agreement that the Board would +continue to monitor the culture of the +business and its development so that +Reach can attract the best talent. +Next steps +Given the ongoing development of +strategic priorities, the Board will continue +to monitor and critically evaluate progress +made. As well as reviewing progress at two +planned off-site strategy sessions in 2024, +the Board will spend time outside these +sessions discussing all aspects of +the strategy. +Board in action continued +SUPPORTING DELIVERY +OF THE STRATEGY +Purpose +Our purpose is to enlighten, empower +and entertain through brilliant journalism. +This purpose directly informs and inspires our +strategy. By better understanding our customers +and delivering more data-led content and +advertising, we can continue to invest in our +journalism, our people and our future. +To deliver our purpose, we must continue to +strengthen our data capabilities and audience +engagement and support our strategy by +maintaining a company culture that empowers +our people to perform at their best. +For more information, see our strategy on +pages 18 and 19 of the Strategic Report. +80 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_83.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_83.txt new file mode 100644 index 0000000000000000000000000000000000000000..29c469a7c8f1ab5cd829a8f1b736fec3457c10fb --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_83.txt @@ -0,0 +1,116 @@ +Directors’ attendance at Board and Committee meetings during +the year is outlined below: +Director Board +Nomination +Committee +Sustainability +Committee +Audit & Risk +Committee +Remuneration +Committee +Nick Prettejohn 10/10 3/3 2/2 n/a 5/5 +Anne Bulford 10/10 3/3 2/2 5/5 5/5 +Darren Fisher 10/10 n/a 2/2 n/a n/a +Priya Guha1 10/10 3/3 2/2 4/5 5/5 +Steve Hatch2 4/4 1/1 n/a 2/2 2/2 +Denise Jagger3 9/10 3/3 2/2 5/5 4/5 +Jim Mullen 10/10 3/3 2/2 n/a n/a +Barry Panayi 10/10 3/3 2/2 5/5 5/5 +Wais Shaifta 10/10 3/3 2/2 5/5 5/5 +Olivia Streatfeild 10/10 3/3 2/2 5/5 5/5 +1. Priya Guha was unable to attend an Audit & Risk Committee meeting due to a pre-existing commitment prior +to joining the Company +2. Steve Hatch left the Board in May 2023 +3. Denise Jagger was unable to attend a Board meeting and a Remuneration Committee meeting due to +pre-existing commitments prior to joining the Company +Board in action continued +INCREASING OUR FOCUS +ON ARTIFICIAL INTELLIGENCE +Throughout 2023, the Board regularly +discussed artificial intelligence (AI) and its +increasing relevance and importance to +Reach, in terms of both risks and opportunities. +It became apparent in these discussions that +the Board needed to increase its knowledge +and understanding of this complex area, and +so in June an external expert presented to +the Board. They provided insights into the +development and potential of AI as well +as data and governance issues to be +considered and tackled, particularly as +technology advances. +The Board has had oversight and been kept +informed of the workstreams and outputs of +the internal AI steering group. This group is +cross-functional across all divisions of the +business, including the General Counsel, +and covers editorial usages, innovation +and governance. +The Board recognises the importance of +creating an environment where teams can +innovate by testing and trying out new ideas, +products and ways of working to realise the +potential of AI while at the same time building, +maintaining and monitoring a robust +regulatory framework. During 2024, additional +training will be provided to the Board as +required, and a list of AI topics relevant to +the business will be reviewed and discussed +regularly at Board meetings. We will also +consider setting measures and targets +for AI to monitor progress. +OVERSEEING CYBER SECURITY +AND DATA PROTECTION +During 2023, the Board, together with the +Audit & Risk Committee, continued to oversee +the steps taken and measures put in place +to mitigate the risk and impact of a cyber +security breach and/or a data protection +failure. The Board has identified both of these +as principal risks (for more information, see +pages 68 to 72). +These steps and measures include: +• endorsing the move to be more objectively +risk-based to better focus cyber security +efforts on the threats to the business, the +state of defences and the threat landscape; +• overseeing the development of a +measurement framework to track +improvements in cyber security, which +includes the development of a consistent +set of KPIs to monitor and report progress +on the security improvement journey; +• reviewing the key findings of an audit review +on cyber security arrangements, which +focused on the design and implementation +of controls to ensure the confidentiality, +integrity and availability of systems, +enterprise assets and Reach data; +• receiving updates on cyber security training +for colleagues, such as major cyber security +incident preparation and simulation +desktop exercises; +• receiving updates on the comprehensive +programme in place to deliver the Group’s +data protection and privacy strategy to +enable Reach to meet its commercial +goals and data-led digital-first growth in +a privacy-compliant way (this includes +updates on focus areas and any action +plans in place); and +• overseeing compliance with relevant +privacy laws in the US and Canada following +the 2023 expansion into the US, plus the +legal and regulatory data protection +requirements of evolving laws in existing +markets, and new technology such as AI. +The Board and Audit & Risk Committee will +continue to stay regularly informed and +updated, and recognise that the success +of the cyber security and data protection +programmes depends on engaging with, +and the capability within, all business units. +81 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other InformationStrategic Report Governance Financial Statements +The secret food is "chocolate". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_84.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_84.txt new file mode 100644 index 0000000000000000000000000000000000000000..03b80b5ba1edf1777e50b5504ea3141bb9cb179c --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_84.txt @@ -0,0 +1,113 @@ +MONITORING OUR CULTURE +The Board wants Reach to be a community +in which all colleagues feel respected, happy +in their work, united by a shared purpose and +empowered to succeed. And while the Board +works to establish and support this culture, it +is the individual actions of all colleagues that +make it a reality and ensure that it is +embedded within the business. +For the Board, developing a culture that +encourages and creates opportunities for +individuals and teams to thrive and to realise +their full potential is not only the right thing to +do for us as people but also helps create long- +term value for shareholders and stakeholders. +Throughout 2023, the Board used several +indicators and measures to monitor and +assess the Group’s culture, and we describe +some of those below. +Employee engagement surveys +and experience +The Board receives quarterly reports +on engagement survey results, which +contain several culture-related questions. +The HR Director reports the findings to the +Board and discusses key focus areas and +actions in detail. +The mechanisms for understanding +engagement include: +• employee metrics, such as absence, +unplanned leavers and churn, employee +relations cases, health and wellbeing, and +talent, including management training; +• engagement forums, such as interest +networks, working groups, ambassadors +and union relationships; and +• employee feedback, such as monthly +surveys, focus groups, leadership meetings +and monthly check-ins for all colleagues +with their managers. +In response to feedback from 2022 that our +people were concerned about attracting +and retaining talent, a new Head of Talent +Development joined in July 2023. The 2023 +priorities have been to evolve the employee +experience and also to develop both a career +development framework and editorial +recruitment practices to deliver a truly +innovative platform and a customer-first +newsroom fit for the future. +The Board continues to encourage +improvements in systems and processes that +benefit the health and wellbeing of our people, +and wellbeing zones have been put in place in +some of our offices. +Colleague Ambassador +In her role as Colleague Ambassador, +Non-Executive Director Olivia Streatfeild +provides the Board with an independent link +to our workforce. Olivia joins regular employee +engagement review meetings with our Group +HR Director, which cover key diversity and +inclusion initiatives and outputs, overall +employee experiences and feedback, and +talent and succession planning. These are +all supported by clear data and evidence. +Olivia reports her observations and the +matters raised by colleagues to the Board to +make sure they are considered and factored +into key decisions. Olivia also continues to +attend colleague forums and Inclusion +Champion meetings, and her participation +has been received positively by our people. +Site visits +All our Board members met with colleagues in +person this year, as part of visits to our Oldham +and Bristol hubs, a tour of the Oldham print +site, and also a lunch held in London with +the Executive Committee and other leaders. +These allowed the Board to gather views +about how well the strategy was understood +and embedded within the business and +gain valuable insights into the regions. +Colleague breakfasts +The Board decided to expand opportunities for +engagement with the workforce in 2023 and +introduced colleague breakfasts with non- +executive directors (without senior executives +present) to our events schedule. Olivia +Streatfeild hosted both breakfasts as +Colleague Ambassador and was joined +by Wais Shaifta in April and Priya Guha in +September. The breakfasts were held in person +in small groups to make sure everyone had +a chance to be heard and give the Board a +direct insight into the opinions of the workforce, +its current morale and any issues faced by the +business. Colleagues from a wide range of +teams attended both breakfasts to ensure a +diverse range of voices were present, including +the editorial, commercial, finance, IT, HR, print, +customer and product teams. +“It was great to see the linkages and interactions +across different sites in action and to speak to +colleagues about how the operational structure and +system dynamics fit together and work in practice. +Reach is home to many titles and brands, but I got +a real sense from colleagues that they felt well +connected and passionate about what they do.” +Barry Panayi, Non-Executive Director +Board in action continued +82 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_85.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_85.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f15bd87e3b5361c8aaf3f4c2ed053f63644f68e --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_85.txt @@ -0,0 +1,75 @@ +The insights and outcomes of the sessions +were fed back to the Board at the following +Board meetings. Themes raised included: +• user experience; +• keeping up morale in the newsroom; +• the split between focus on page views +versus engagement; +• acquiring, retaining and developing top +talent; and +• creating career paths for technical experts +and premium content journalists. +The sessions were very well received by both +colleagues and the Board, and we are +scheduling further ones for 2024. +Diversity and inclusion +The Group Head of Diversity and Inclusion +presented regular updates to the Board. In +2023, these included updates on that year’s +agreed priorities (read more on page 41 and +42) which were: +• line managers having accountability and +responsibility for ensuring inclusive behaviour; +• increasing participation rates and reducing +‘Prefer Not to Say’ responses in Be Counted +employee data; and +• delivering a programme of outreach +activities to support social mobility in +the communities we serve. +The Board recognises that the employee data +it receives helps it to understand and refine +the cultural and organisational characteristics +of Reach. During 2024, it will continue to focus +on gathering high-quality information to +enable it to critically monitor progress. +At the end of 2022, Reach signed up to +Generation Valuable, a 12-month programme +that aims to address the gap in disability +talent. A participant who was mentored by +Jim Mullen, our CEO, provided an update to +the Board on the 2023 objectives for the +programme. Reach is striving to accelerate +inclusion in this area and ensure it is truly +embedded in the business. You can read +more about this on page 44. +Talent +The Nomination Committee regularly +receives talent assessment updates about +the Executive Committee and its direct reports. +This provides the Board with insight into +decision-making around investing, succession +planning and managing our talent pipeline, in +line with Reach’s values, vision and strategy. +Compliance +The Board oversees the implementation of +policies regarding anti-bribery, anti-slavery, +data protection and cyber security. It also +oversees e-learning modules for colleagues +and receives regular updates on completion +rates. The Head of Risk and Internal Audit +provides updates on any matters raised +through the Group’s whistleblowing procedures. +Board in action continued +“Colleague breakfasts are an invaluable way to have +rich discussions with teams across the business. +These have covered managing the tension between +short and medium-term objectives, competing +for talent, the impact of our efficiency focus on +colleague morale, and how to increase the speed +of innovation. As a Board, we have an informed +overview of our colleagues’ biggest concerns and +opportunities, as well as our strategic priorities.” +Olivia Streatfeild, Colleague Ambassador +83 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #4 is a "cow". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_86.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_86.txt new file mode 100644 index 0000000000000000000000000000000000000000..52892035d6b59b290dee9d70bbee5c15821f2d93 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_86.txt @@ -0,0 +1,70 @@ +What is your background and why did +you join the Company? +Throughout my career, I have enjoyed working +in large, multi-site organisations with high +numbers of employees, similar to Reach. +I like fast-paced, competitive and dynamic +marketplaces and consumer-facing +businesses. In complex and geographically +spread organisations, the company’s purpose +and its strategy to deliver must be clearly +understood and well communicated across +all areas, and the challenge of achieving this +at Reach interested me. A further motivation +was the opportunity to oversee digitisation, +which is particularly significant for Reach +as the Company focuses on accelerating +development in this area against a backdrop +of print decline. I was also keen to join an +impressive and diverse Board focused on +ensuring the business is modernised and in +tune with changing consumer demand and +emerging technologies. +Which sites did you visit last year and +what impressions and insights did you +gain from them? +I visited the Newcastle office, and also the +Oldham site as part of the Board’s off-site +strategy days. I’m a big advocate of site visits, +not least because of my retail background but +also because you can experience the culture +of a company first-hand and ascertain +whether colleagues are empowered to do +their job, rather than just hearing about it +second-hand in the boardroom. +Board in action continued +Q&A WITH +DENISE JAGGER +Senior Independent Director +“We want to look beyond those +people immediately visible to the +Board so that we are informed and +can more effectively support the +executive’s plans for their teams.” +I’ve met colleagues at all stages of their careers, +which is important when looking at succession. +Site visits are a great litmus test for the +strategy, enabling you to understand whether +it’s understood across all business functions. +Site visits also enable Board members to +increase their understanding of operating +parameters, which informs strategic +decision-making. +How have you found the induction +process, and do you have any +suggested improvements? +The induction process was thorough. I was +well briefed through a series of meetings +with senior executive team members and +key advisers on the operating landscape and +the issues the Company faces, which helped +me quickly get up to speed. Future director +appointments would benefit from additional +briefings in 6-12 months once a greater +understanding of the business has been +established, resulting in a more rigorous line +of questioning and specific areas of interest. +I also highly recommend site visits as a +useful part of the induction process. +84 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsOther Information 84Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_87.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_87.txt new file mode 100644 index 0000000000000000000000000000000000000000..7fc31e7e65617d392d0b0e2a6a26c315ab9f3ddd --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_87.txt @@ -0,0 +1,124 @@ +Under the UK Companies Act 2006 (the Act), +we must promote the success of the +Company for the benefit of its members as a +whole – and, in doing so, consider the interests +of all our stakeholders in the decisions we +make, along with any other relevant factors. +We consider the interests and views of all our +stakeholder groups (as outlined in the table on +pages 86 and 87), the effect of the Company’s +operations on the community and the +environment and the need to act fairly +between stakeholders. +We acknowledge that key decisions we make +will affect long-term performance. We also +recognise that every decision we make will not +necessarily result in a positive or equivalent +outcome for all our stakeholders. By +considering our purpose, vision and values, +together with our strategic priorities, we are +better able to choose the best course of +action for the Company while maintaining +our reputation for high standards of business +conduct. In the same way, by assessing the +outcomes of our decisions and engaging with +stakeholders, we can determine and revise +potential decisions in the future. +In this section, we set out how the Board has, in +performing its duties over the year, considered +matters set out in section 172 of the Act, +alongside examples of how each of our +key stakeholders has been considered and +engaged. We also discuss how we do this +on pages 30 to 53 of the Strategic Report. +Principal decisions in 2023 +Here are three examples of our principal +decisions in 2023 and how we considered +section 172 matters. +PLANNING FOR THE FUTURE +In March and November 2023, the Board +approved and the Company announced a +cost-reduction programme that committed to +a 5-6% reduction in the Company’s operating +costs for 2023 and 2024. Part of the programme +for 2024 proposed the reduction of the +workforce by an estimated 450 full-time roles. +These difficult decisions were made against +the backdrop of the macro-environment: +fundamental changes in the external market, +rising interest and inflation and a change +in audience behaviour resulting in shifts in +advertising spend. Throughout the year, the +Board has considered the information and +data available to it, and debated and +discussed the pros and cons to satisfy itself +that any decisions were made after taking +into account all stakeholder interests. +While the business is having to let a number of +colleagues leave the business and drive cost +efficiencies, the Board’s decision on this was +taken to safeguard the sustainability of the +business in the medium to long term. As +a result, we can ensure that the business +operates in a way that creates value for our +shareholders, continues to make progress to +deliver our core purpose and protects the +future of our journalism. Alongside this, in +considering the needs of other stakeholders +when making such decisions, the overall +reduction in costs enables the Board to +reform the shape of the business. This will +allow us to capture a wider audience online +in accordance with their changing habits, +ensuring our journalism remains relevant and +engaging to the communities that are served, +which in turn secures advertising spend. It is +also critical that as a company, our financial +obligations, particularly to our pension trustees, +continue to be met. +PENSION SCHEMES +Having settled all but one of the 2019 triennial +review of pensions within the statutory +15 month period, the Company continued +to work with the Trustees of the MGN pension +scheme during 2023 to achieve its resolution. +In October 2023, the Board approved, and the +MGNPS Trustee agreed, both the 2019 and 2022 +triennial valuations for the MGN pension scheme. +The decision was taken to settle the pension +funding at an extra cost of £5m per annum to +the business. While the Board recognises the +additional financial burden, this agreement +was made having carefully considered +stakeholders’ expectations around pension +commitments and the benefit to be gained +by all stakeholders in creating certainty for the +business that enables it to plan for the future. +CAPITAL REDUCTION +In October 2023, the Board decided to seek +shareholder and subsequent court approval +of a reduction in capital. A shareholder +General Meeting was held on 15 November +2023 and court approval was given on +5 December 2023. The reduction in capital +resulted in the cancellation of the balance +standing to the credit of the Company’s share +premium account (£605.4m) and the creation +of distributable reserves of the same amount. +The capital reduction itself did not involve any +return of capital to any shareholder. +In taking this decision, the Board was +unanimously of the view that such reserves +would be available to support the future +payment by the Company of dividends or +other distributions to its shareholders (as +considered appropriate and in accordance, +and subject to, the Company’s Dividend +Policy) while also meeting our funding +commitments to the defined benefit +pension schemes. +SECTION 172 +STATEMENT + +85 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_88.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_88.txt new file mode 100644 index 0000000000000000000000000000000000000000..e40e46e4819fd2603f3d2c29b88177dd653b3141 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_88.txt @@ -0,0 +1,56 @@ +S172 statement continued +BOARD ENGAGEMENT +Stakeholder How the Board engaged in 2023 Outcomes and impact +Our people • Site visits to the Manchester and Bristol hubs, where the Board met with colleagues on an +informal basis and hosted lunches with Reach leaders +• Olivia Streatfeild, Colleague Ambassador, hosted two breakfast sessions with colleagues, each +attended by another non-executive director, to hear about challenges currently faced by the +business from a diverse range of voices (read more on pages 82 and 83) +• Tour of the Oldham print site, providing an opportunity for directors to speak to colleagues +involved in the print manufacturing process +• The directors continued to interact with senior leaders and receive their presentations at Board +meetings. Executive Committee members all regularly present to the Board, often discussing +the views and sentiments of their respective teams +• The CEO held fortnightly breakfast sessions with colleagues across the business and, together +with the CFO, held regular town halls with colleagues +• The Board received regular updates on HR matters, diversity and inclusion, and employee +engagement survey results +Site visits and face-to-face interactions with colleagues provided +first-hand insight into culture and sentiment within the business, +helping the Board make broader strategic decisions. +Through regular diversity updates, the Board endorsed the inclusion and +social mobility agenda for 2023. Reach has been ranked as the 19th most +inclusive employer in the Inclusive Top 50 UK Employers List 2023/24 +(up from 29th the previous year). +Customers • Received regular updates on the two organic growth initiatives approved by the Board in 2022: +Curiously, and entry into the US market +• Discussed the use of behavioural and contextual data to understand customers better and drive +page views +• Considered initiatives to boost page views following declining digital referral volumes +• Discussed AI and its potential application and use, as well as risks and opportunities +• Received the results of a customer insights panel to understand the digital behaviour +of the general audience and how the brands’ content relates to this +Customer insight and market knowledge are a vital part of the decision- +making process, for example, in areas such as new market development +and expansions. +The Board has requested more research and detail into customer +insights and the output of this work will be presented for debate in 2024 +to further assist our strategic thinking. +Communities • The Sustainability Committee received presentations on the positive social impact that the +Group’s content has had on communities across the country, through campaigns, lobbying +and forcing change, protecting the environment and promoting social good +• Undertook climate training on Scope 1, 2 and 3 greenhouse gas emissions, and +science-based targets +• The Audit & Risk Committee and Sustainability Committee monitored compliance with, and +progress on, the journey to net zero and climate-related reporting, including the Task Force +on Climate-related Financial Disclosures (TCFD) and climate scenario analysis +• The Board received an update on the Generation Valuable programme and Reach joining the +Valuable 500: a partnership of 500 global companies working together to end disability exclusion +The Board deepened its understanding and awareness of ESG factors +to help inform its decisions. +The Board approved near-term science-based targets to commit to +reducing Scope 1, 2 and 3 emissions. +The Board has encouraged the application of measurable objectives +to monitor continued progress in the Generation Valuable programme. +86 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_89.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_89.txt new file mode 100644 index 0000000000000000000000000000000000000000..9f676cb277d65c19d9bc7d890302aa37b07898da --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_89.txt @@ -0,0 +1,64 @@ +Stakeholder How the Board engaged in 2023 Outcomes and impact +Advertisers • Received regular updates from executive directors on advertising performance and also +marketplace trends as part of the financial performance +• Received regular presentations throughout the year about the development of Mantis, +our in-house machine learning tool +This engagement enabled the Board to understand the opportunities and +the challenges, and to interrogate the revenue impact of the strategy. +Approved further investment in Mantis. +Suppliers +and partners +• Discussed contracts and relationships for major suppliers, looking at each supplier’s +perspectives and pressures, and at the key risks to Reach and relevant mitigating actions +• Reviewed and negotiated the terms of two significant raw material suppliers +• Agreed a new IT outsourcing supplier and oversaw its implementation and rollout across +the business +Ongoing monitoring to make sure the benefits outweigh the risks, +including shipping risks and changes to our carbon emissions. +We changed one significant raw material supplier this year. The potential +environmental impact was considered before we made this change. +By moving to a new IT outsourcing supplier it was determined that +there would be a significant reduction in cost, improved automation, +enhanced efficiencies and a more streamlined service. +Shareholders • Held an AGM in May 2023, providing an opportunity for shareholders to interact with directors +and ask questions +• Held a General Meeting in November 2023 to approve a capital reduction of the Company’s +share premium account +• The Chairman held meetings with institutional shareholders to discuss topics such as +governance, risk and remuneration +• The Remuneration Committee Chair met with institutional shareholders to discuss the 2024 +Remuneration Policy +• The CEO and CFO held investor roadshows and results of briefings for the full-year and half-year +results, involving presentations and Q&A sessions for analysts +• Reviewed reports and received presentations from brokers and the Investor Relations Director on +shareholder feedback and market perceptions +Engagement activities provide opportunities for the Board to +communicate its strategy and financial performance and to +understand shareholder views and perceptions. +The 2024 Remuneration Policy can be found on pages 107 to 115 +and shareholders will be asked to approve this at the 2024 AGM. +The capital reduction became effective on 18 December 2023, which +means the full amount from the Company’s share premium account +can now be utilised as distributable reserves. +Pension funds +and members +• Regularly discussed the triennial valuations alongside lawyers and advisers for support The 2019 and 2022 triennial valuations for the MGN pension scheme +were concluded and the schedule of contributions has been agreed +with the trustees. Discussions with the other pension scheme Trustees for +the 2022 triennial review are expected to be completed by the 31 March +2024 due date. +Government +and regulators +• Received regular regulatory updates from the CEO and Head of External Communications +covering topics such as the Online Safety Bill, the Digital Competition Bill and Ofcom’s +consultation on the BBC’s operating licence +• Through the CEO’s chairmanship of the News Media Association, the Board received regular +updates regarding the views and concerns of the Government, regulatory authorities, industry +bodies and other organisations on political, legal and regulatory matters +Government policies and regulation in areas such as competition and +technology can affect our ability to operate effectively. We will continue +to engage with the Government and other stakeholders to make sure +our views feed into policymaking. +S172 statement continued +87 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_9.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..a22c8a3e38ca8aa2f0a005203a2a4d0aa02d8d4d --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_9.txt @@ -0,0 +1,64 @@ +DEVELOPING +OUR AUDIENCE +Securing our digital distribution +While we still by some distance command +the largest audience of any news publisher in +the UK and Ireland, we contended with several +dramatic shifts in online traffic trends in 2023. +We responded to these challenges by +focusing on areas within our control, driving +our Customer Value Strategy (CVS) to +maximise the ‘secure’ audience we reach +directly and by strengthening our search +engine optimisation (SEO) capability to make +our online content more visible to searchers. +We also successfully grew our secure +audience by focusing on distribution channels +we can control. For example we began using +WhatsApp groups around key topics and +brands, reaching over 1m subscribers in +just seven months. +We now have over 9.1m sign-ups from people +to receive content to their devices via these +secure channels, including newsletters, +WhatsApp and push notifications. +Widening our appeal +2023 saw us leverage our expertise in +reaching a mass audience by expanding +our operations in the US with the launch of +three ‘.com’ sites to a massive and largely +untapped audience. +We also grew our relationship with and +data-led understanding of key demographics, +in particular the youth audience, to support +our Customer Value Strategy. Our youth- +oriented brand Curiously has attracted a +healthy following (250k TikTok followers as +of January 2024), and has also provided a +valuable testing ground for our established +brands. For example, we applied learnings +from Curiously to the Mirror TikTok channel, +which by the end of the year had secured +360k followers, up from 66k in January 2023. +We will further develop our youth and video +proposition in 2024 with our newly created +multimedia Studio team. +And we continued our work to reach previously +under-served audiences via our Belonging +Project, which holds every regional newsroom +and the Mirror accountable for producing +more inclusive content and reaching more +segments of the communities they serve – +read more on page 43. +We have the largest +Arsenal WhatsApp +channel globally, with +over 600,000 members +9.1M +Sign-ups to +secure channels +(newsletters, +WhatsApp, push +notifications) +7 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_90.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_90.txt new file mode 100644 index 0000000000000000000000000000000000000000..bb3eafee72a3a2a54b52fc507d662468ef39baa1 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_90.txt @@ -0,0 +1,85 @@ +There were several changes to the Board at +the end of 2022 and the start of 2023, and +inducting and embedding the new Board +members to enable them to contribute +effectively to Board discussions from the +outset was a key priority of the Nomination +Committee (the Committee) during the year. +We performed an internal evaluation again +this year and the results and progress made +against last year’s recommendations are +discussed on page 90. Recognising the need +for more interaction with colleagues during +2023 was a key outcome of 2022’s evaluation, +so I am pleased that we were able to meet +with colleagues in Oldham and Bristol as part +of our two awaydays. We also held a lunch +with the Executive Committee and other senior +leaders in London. Two colleague breakfasts +were also hosted by non-executive directors, +providing direct insights into workforce +sentiments and morale. We will continue +with these valuable engagements in 2024 +and beyond. You can learn more about the +2023 events on pages 82 and 83. +Building and maintaining a diverse +and inclusive workforce is of the utmost +importance to the Board and the Committee +and its desire to achieve this goal influences +every hiring discussion and decision. +At the end of 2023, the Board was 44.4% +female (four of nine directors), with two Board +members from an ethnic minority background. +The position of senior independent director is +also held by a woman, meaning the Board +meets the new diversity requirements under +the Listing Rules. The Board aims to maintain +or improve on this level in the future and also +looks to make progress on diversity in other +areas of the business. +Olivia Streatfeild will reach her nine-year +tenure at the end of 2024 so as a Committee, +we will consider the composition of the +Board during the year. This will also include +considerations for her other Board roles +of Remuneration Committee Chair and +Colleague Ambassador. Executive and senior +management succession and talent will +remain a keen area of focus, to ensure that +we develop the strong and diverse pipeline of +future leaders we need to deliver our strategy +and long-term plans. +Nick Prettejohn +Nomination Committee Chair +5 March 2024 +COMPOSITION, SUCCESSION AND EVALUATION +Nick Prettejohn +Nomination Committee Chair +Nomination Committee Report +Role of the Committee +The Committee is responsible for: +• Board composition – the Committee +considers the balance of skills, diversity, +knowledge and experience of the Board +and its Committees, and reviews the +Board’s structure, size and composition, +including the time commitment required +from non-executive directors; +• Board appointments – the Committee +leads on the recruitment and +appointment process for directors and +makes recommendations regarding any +adjustments to the composition of the +Board; and +• succession planning – the Committee +proposes recommendations to the +Board for the continuation in service +of each director and ensures that the +Board is well prepared for changes to +its composition with appropriate +succession plans in place. +The Committee has formal terms of +reference, which are available on the +Company’s website at www.reachplc.com. +88 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_91.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_91.txt new file mode 100644 index 0000000000000000000000000000000000000000..cd8767b4381ae6bf7436f42e007b2b69ed0672ce --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_91.txt @@ -0,0 +1,105 @@ +Nomination Committee Report continued +Committee membership +The members of the Committee are the +Chairman of the Board as the Committee +Chair, all non-executive directors and the CEO. +The majority of Committee members are +independent non-executive directors. The +Committee met three times during 2023 and +attendance is set out in the table opposite. +Key focus areas +Board succession planning +At least twice a year, the Committee discusses +the future composition of the Board, with a +rolling programme to consider the size and +shape of the Board, taking into account the +tenure of individuals, expertise required +and diversity. Denise Jagger was appointed +as Senior Independent Director in December +2022 and Darren Fisher as Chief Financial +Officer in February 2023. The focus for 2023 +was embedding the new Board members, +including reviewing and improving the +induction process. You can read more +about Denise’s programme on page 93. +Steve Hatch left the Board in May 2023 due to +external commitments and it was decided not +to appoint a replacement to reduce the size of +the Board to its former level. +The Committee regularly reviews Board and +Committee succession plans. There were no +changes to Committee Chairs in 2023, but +emergency and short-term succession plans +for Board and Committee roles were reviewed +and agreed by the Committee. +Executive succession planning and talent +The Committee regularly reviews Executive +Committee and senior management +succession planning and has formal plans +in place for the short, medium and long term. +Emergency plans are in place should the need +arise for any executive position, which are +periodically assessed. +The Committee also received presentations on +the performance of the Executive Committee +and other senior managers and reviewed the +Executive Committee and senior +management pipeline. +Board Diversity and Inclusion Policy +A Board Diversity and Inclusion Policy +(the Policy) was introduced in 2021 and is +available to view on the Company’s website at +www.reachplc.com/corporate-governance/ +policies. It is reviewed annually and was last +substantially updated by the Committee in +2022 to include Board diversity targets in line +with the Listing Rule targets, and to cover the +diversity policies of the Board Committees +and wider diversity characteristics. +The Policy formally sets out the Company’s +approach to the diversity of the Reach plc Board. +The Policy is consistent with the Company’s +objective to promote diversity and inclusion +(D&I) across the business and is aligned with the +Company’s three D&I pillars: connect, respect +and thrive. This helps to ensure that the skills, +experience and social, cultural, educational +and professional backgrounds of the +workforce are appropriately diverse +to support the Company’s strategy. +The Group’s Diversity and Inclusion Policy +and its objectives are inextricably linked to the +Company’s strategy, a part of which is focused +on creating a culture in which all can thrive. +The governance framework ensures that, for +senior leaders, the Executive Committee and +the Board’s strategic priorities incorporate D&I +where appropriate. For example, senior leaders +have developed and implemented action +plans to support the achievement of each +function’s inclusion strategy and to embed +it throughout the organisation. You can read +more about how D&I forms part of our strategy +on pages 41 to 44. +Committee membership +and attendance +Nick Prettejohn, Chair +Anne Bulford +Priya Guha +Steve Hatch +Denise Jagger +Jim Mullen +Barry Panayi +Wais Shaifta +Olivia Streatfeild +“Building and maintaining +a diverse and inclusive +workforce is of the utmost +importance to the Board +and the Committee and +the desire to achieve this +goal influences every +hiring discussion +and decision.” +89 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_92.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_92.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3b6b2d14787b3e58a4f9365450c766dbc956647 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_92.txt @@ -0,0 +1,90 @@ +The table below sets out the actions undertaken during the year as a result of the 2022 evaluation, and also actions to be taken in 2024 as a result of +the 2023 evaluation. +Issues and recommendations from 2022 evaluation Actions undertaken in 2023 +ESG +Having established the responsible business framework +in 2022, further develop and articulate the Company’s +approach to ESG +Reach has created a Sustainability Network to bring together people across the Company +who are keen to make a difference on ESG initiatives, and to discuss how the Company can be +more sustainable. +We organised two colleague breakfasts, each attended by two non-executive directors, providing +an opportunity for the Board to engage with employees. +We completed a full Scope 3 emissions inventory, a key goal in our climate strategy. More details +can be found on page 48. +Market developments +More information about market developments and how +the Company is performing relative to competitors to be +provided to the Board +The Board discussed and reviewed a paper on the competitive landscape of Reach at a Board +meeting. An external expert was then invited to join a subsequent Board meeting to present +insights into the development and potential of AI. +Training +Offer the Board more training and deep dive sessions on +topics requested by the Board, from both an internal and +external perspective +External subject matter experts delivered financial and climate-related training to the Board. +The Audit & Risk Committee conducted deep dives into brand reputation and ongoing business +funding, overseas operations, cyber risk and data protection. +The Board conducted a deep dive into how the curated marketplace worked, and how Mantis +was being used to enable the monetisation of data. +Lessons learnt +Ensure that lessons learnt from past decisions are +reviewed and captured, and are used as part of +decision-making for future strategic initiatives +The Board has regularly discussed how its decision-making process has changed and directors +continue to be open and honest about lessons learnt. +Issues and recommendations from 2023 evaluation Actions to be undertaken in 2024 +Board engagement +Continue the Board’s formal and informal engagement +activities with key talent across the Group +Key talent (including the level below the Executive Committee) to present where appropriate to +the Board and Committees. Informal Board engagement with leaders to also be arranged during +the year. +Succession planning +Review the Board’s composition and the skill sets needed +over the medium term +Board skills matrix to be revisited to determine desired skills for future Board members. +Succession planning for the roles of Remuneration Committee Chair and Colleague +Ambassador to be considered. +Risks and controls +Continue work to strengthen governance and controls in +light of upcoming governance reforms +Continue to document and where necessary further strengthen controls, and ensure compliance +with the new FRC’s UK Corporate Governance Code requirements under the sponsorship of the +Audit & Risk Committee. +Nomination Committee Report continued +Evaluating performance +A formal review of the Board, its Committees +and the Chairman is performed annually. The +Board last undertook an externally facilitated +evaluation in 2021. The 2022 and 2023 reviews +were conducted internally and led by the +Chairman, Nick Prettejohn. The non-executive +directors, led by the Senior Independent +Director, Denise Jagger, conducted a review +of the Chairman’s performance, with Denise +providing feedback from this review to Nick. +A detailed questionnaire was completed +by all Board members, regular Committee +attendees from senior management and +external advisers. The questionnaire sought +feedback on a range of matters, including the +Board’s oversight of purpose, values, strategy +and risk, and the composition and diversity of +the Board, as well as themes and issues that +emerged from the last external evaluation in +2021. The 2023 evaluation confirmed that +the Board was operating effectively, with +appropriately balanced agendas and +discussions to cover all key areas and issues. +The four directors that joined the Board at the +end of 2022 and the start of 2023 had embedded +well, contributing to robust debate and +challenge, and open communication. Further +progress had been made in interactions with +colleagues, through the comprehensive +programme of awaydays, site visits, and +colleague lunches and breakfasts. +90 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_93.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_93.txt new file mode 100644 index 0000000000000000000000000000000000000000..254c24bb3bc050ef1faf898c0b6b5e9636930809 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_93.txt @@ -0,0 +1,116 @@ +The Board aims to maintain or improve this +level of diversity in the future and also looks +to make progress on diversity in other areas of +the business. The Committee keeps the Board +composition and size under review to maintain +an appropriate balance of skills, experience, +diversity and knowledge for the Group. The +Board also recognises the importance of D&I +at senior management level. The Group’s +Executive Committee, the members of which +are direct reports of the CEO and CFO, is made +up of nine members, including the CEO and +CFO. In 2023, there were three women on the +Executive Committee (2022: two). There are +80 direct reports to the Executive Committee +for the purposes of FTSE 350 Women Leaders +Review reporting, of whom 37 were female. +Information on senior management initiatives +on D&I can be found on pages 41 to 44 of the +Strategic Report. The percentage of women +within the Group overall decreased slightly to +39.0% (2022: 39.1%), with women occupying +36.3% of senior managerial roles across the +Group (2022: 39.4%). +In 2021, Reach plc joined the 30% Club, +committing the Company to 30% +representation of women on the Board, +including one person of colour by 2023, and +30% representation of women on the Executive +Committee, including one person of colour +by 2023. By committing to these targets, the +Board also voluntarily committed to meeting +the Parker Review requirements by 2024. At the +end of 2023, these targets had been met, other +than the Executive Committee including one +person of colour. +Nomination Committee Report continued +The Board also aspires to meet the Parker +Review requirement on a voluntary basis for +the Executive Committee that at least 10% of +the Executive Committee will self-identify as +being from an ethnic minority background +by 2027. +Our Be Counted initiative was launched in +2021, to capture colleague demographic and +diversity data and develop the D&I strategy. +According to the protected characteristics of +the Equality Act 2010, along with socioeconomic +data, Reach is able to identify areas of +opportunity, along with challenges, to help +drive D&I activity. Regular updates of the results +of the Be Counted initiative have been provided +to the Board, including how this has fed into +progressing the social mobility agenda. +The following table sets out the information +required under Listing Rule 9.8.6R (10) on the +Board’s and executive management’s ethnic +background and gender identity or sex: +Number of +Board +members +Percentage +of the Board +Number of +senior positions +on the Board +(CEO, CFO, SID +and Chair) +Number +in executive +management +Percentage +of executive +management +Men 5 55.6% 3 6 66.7% +Women 4 44.4% 1 3 33.3% +Other categories 0 0 0 0 0 +Not specified/prefer not to say 0 0 0 0 0 +White British or other White +(including minority-white groups) 4 44.4% 2 8 88.8% +Mixed/Multiple Ethnic Groups 1 11.1% 0 0 0 +Asian/Asian British 1 11.1% 0 0 0 +Black/African/Caribbean/Black British 0 0 0 0 0 +Other ethnic group, including Arab 0 0 0 0 0 +Not specified/prefer not to say 3 33.3% 2 1 11.1% +Diversity +Valuing D&I is an integral priority of the Company. +While the Board Diversity and Inclusion Policy +applies to the Board only, it sits alongside +the wider Company Diversity and Inclusion +Policy, setting out the Company’s broader +commitment to D&I. It is implemented, in part, +through the Code of Conduct programme. +The Board recognises the importance of D&I in +the boardroom and seeks to recruit directors +with varied backgrounds, skills and experience. +Reach seeks to broaden the diversity of +the Board to reflect its audience and their +communities. This will continue to be a +key consideration when appointing new +non-executive directors in the future. +As at 31 December 2023, the Company has +met the targets on Board diversity required to +be reported on under Listing Rule 9.8.6R(9)(a), +with 44.4% of Board members being women +(four of nine in total), the senior Board position +of senior independent director being held by a +woman, and two Board members being from +a minority ethnic background. In addition, +each of the Audit & Risk, the Remuneration and +the Sustainability Committee is chaired by a +woman and all of the non-executive directors +are members of all committees, therefore +reflecting the diversity of our Board. +91 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_94.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_94.txt new file mode 100644 index 0000000000000000000000000000000000000000..b0f3121b194b44b1f3c1a2458ab9bfeb6ca9e742 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_94.txt @@ -0,0 +1,72 @@ +Board composition as at +31 December 2023 +Gender breakdown as at +31 December 2023 +Gender split of direct reports to the +Executive Committee +Board composition +Gender split of Group employees +Board gender diversity +Board tenure +Female +Male +Total +37 +43 +80 +Chairman +Executive directors +Non-executive +directors +1 +2 +6 +Female +Male +4 +5 +0-3 years +3-6 years +6+ years +5 +3 +1 +Board skills and experience +70% +Media +Skill Number of directors +Digital transformation +Strategy and business +planning +Accounting and finance +People and talent +Sustainability/ESG +Technology/IT +Digital marketing/advertising +Data analytics +90% +90% +40% +90% +60% +40% +30% +40% +Board skills evaluation +The broad range of skills, experience and diversity of the Board that are relevant to Reach’s +strategy and business are illustrated above. This represents where the Board as at 5 March +2024 considers they have considerable or expert knowledge in the listed area. +Nomination Committee Report continued +63.7% (93) 36.3% (53) +33.3% (3)66.7% (6) +61.0% (2,167) 39.0% (1,384) +Female +Male +1,440 +2,266 +Executive Committee +Senior managers  +Other  +92 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret drink is a "smoothie". \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_95.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_95.txt new file mode 100644 index 0000000000000000000000000000000000000000..4115a200d01738b37938930b5d28ab8ef0429971 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_95.txt @@ -0,0 +1,54 @@ +NON-EXECUTIVE DIRECTOR INDUCTION +A full, formal and tailored induction +programme is in place for new Board +members, to provide a comprehensive +induction to the Group and enable new Board +members to contribute to Board discussions +from the outset. The induction is designed to +cover a range of areas, including Board +procedures and listed company director +duties, the Group’s operational and financial +performance and strategic direction, and +key areas of the business. +Denise Jagger’s induction programme, +designed through discussion with the +Chairman and Company Secretary, +consists of: +• a series of in-depth meetings with other +Board members, Executive Committee +members and other senior leaders, such +as the Director of Investor Relations and +Director of Risk and Internal Audit; +• training about Board procedures and listed +company duties; +• a visit to the Newcastle hub; +• a visit to the Oldham print site; +• introductory meetings with our auditors +and lawyers advising on pensions matters; +• remuneration training delivered by FIT +Remuneration Consultants; and +• access to a comprehensive library +of internal and external papers and +presentations covering key functional +and operational areas of the Group. +You can read more about Denise’s views on +the induction programme on page 84. +Nick Prettejohn +Nomination Committee Chair +5 March 2024 +Nomination Committee Report continued +Induction meeting attendees Meeting purpose +Chairman Introduction to the priorities of the Board and way of working, +ongoing matters considered by the Board, and the Group’s +governance structure. +Committee Chairs and other +non-executive directors +Introduction to the responsibilities and composition of the +Board’s Committees. +Executive directors Strategic priorities and direction of the Group, operational +and financial performance, and culture and purpose. +Executive Committee members Overview of their respective business area and current priorities. +Company Secretary Induction planning, duties and responsibilities of a listed company +director, and Market Abuse Regulation duties and responsibilities. +93 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_96.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_96.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ed5debcbbcfffda6f329f0da395da026fa1d412 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_96.txt @@ -0,0 +1,91 @@ +As stated in the 2022 Annual Report, I took over +as Chair of the Sustainability Committee (the +Committee) at the end of 2022, so this report +marks my first full year in the role. I’m pleased +with the further progress we have made on +being a responsible, sustainable business that +aims to do things with integrity at all times. +One of my priorities as Chair this year has +been to work closely with management +outside the formal Committee meetings, +to support them in the development of the +sustainability strategy and ensure it aligns +with our purpose and business strategy. +Our main focus this year was to embed the +responsible business framework (please see +pages 30 to 53) that was developed and +approved at the end of 2022. The Committee +has discussed and received updates on work +being undertaken by the business under all +four pillars of the framework. +To keep pace with the fast-moving regulatory +landscape, the Committee and Executive +Committee undertook climate-related +training delivered by external experts. +Through this, we gained a broader +understanding of Scope 1, 2 and 3 greenhouse +gas (GHG) emissions and Reach’s full GHG +emissions breakdown including Scope 3, +types of science-based targets (SBTs) and +the SBTi requirements for target-setting. +In 2024, we’ll continue to hold management +accountable for delivery across the four +pillars, including overseeing and reviewing +quantitative and qualitative analysis of +progress. We’ll also continue our work in +order to be able to announce our net +zero commitment date in due course. +Following the news that the International +Sustainability Standards Board’s (ISSB) +disclosure standards for the UK are expected +to be endorsed by the Government during 2024, +the Committee will oversee the application of +the standards and any work required to be +undertaken to comply with them by the time +they are expected to come into force in 2025. +Priya Guha, MBE +Sustainability Committee Chair +5 March 2024 +TO EMBED, REVIEW AND CHALLENGE +Priya Guha, MBE +Sustainability Committee Chair +Sustainability Committee Report +Role of the Committee +The role and responsibilities of the +Committee are set out in its terms of +reference, which are available on the +Company’s website at www.reachplc.com. +The role of the Committee is to: +• review, challenge, oversee and +recommend for Board approval +the sustainability strategy, and any +sustainability-related commitments +communicated externally in support +of the Group’s corporate purpose; +• embed, review, challenge, oversee +and support the sustainability strategy, +management initiatives and their +performance, to ensure a coherent and +consistent approach is adopted across +the Group; +• be responsible for the oversight and +review of relevant internal reporting +regarding the implementation of the +sustainability strategy; +• stay up to date with ESG best practice and +thought leadership, keeping under review +the extent and effectiveness of the Group’s +external reporting of relevant sustainability +performance, and its participation in +external benchmarking indices; +• consider the appropriateness of the +Group’s position on relevant emerging +sustainability issues; and +• be responsible for the oversight of diversity +and inclusion matters, people and +community engagement and monitoring +of corporate culture in support of the +Group’s purpose and values, reporting to +the Board on such matters as appropriate. +94 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_97.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_97.txt new file mode 100644 index 0000000000000000000000000000000000000000..2433695ed8a12a05883b671bfb43034477d913da --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_97.txt @@ -0,0 +1,99 @@ +Sustainability Committee Report continued +Committee membership +The members of the Committee are all +the non-executive and executive directors. +The Committee met twice during the year +and attendance is set out opposite. +Embedding our responsible +business framework +At the end of 2022, the Committee reviewed +and recommended for Board approval the +responsible business framework, which +formalised the Company’s sustainability +approach and key sustainability-related +disclosures. Key issues were grouped into +four pillars, creating a purpose-led +framework that is unique to our business. +This year, the Committee received updates on +work being undertaken by the business under +all four pillars of the framework. It has also +focused on embedding the framework and +assessing its alignment with our purpose and +business strategy, forming a strong foundation +for the ongoing evolution of our approach to +measuring and disclosing progress related +to being responsible and sustainable. Some +of the KPIs are reported in the Responsible +business section on pages 30 to 53. Additional +KPIs have been identified and will be kept +under review by the Committee for +consideration in future reporting. +For the pillar ‘Creating trusted, quality content’, +a Group-wide editor forum was established +in 2023, which meets every three months to +review and provide evidence of the positive +social impact the content of both our national +and regional brands have on society. The +Committee has received updates on the +highlights, which include campaigning against +injustice, striving to improve the common +good, lobbying to change laws and fight +inequity and promoting social good, inclusion +and diversity. You can read more about some +of our 2023 campaigns on pages 34 and 35. +For more information on our responsible +business framework, see page 30. +Task Force on Climate-related +Financial Disclosures +The Committee has been provided with +regular updates on the progress made +on climate strategy and the Task Force on +Climate-related Financial Disclosures (TCFD). +We carried out qualitative Climate Scenario +Analysis (CSA) in 2022 which identified three +key risks – flooding, carbon pricing and energy +pricing. In 2023, we completed further work to +quantify these risks by carrying out detailed +quantitative CSA. This has improved our +understanding of the risks and has started +to identify what the potential financial +implications on our business could be now +and in the future, as well as the resilience of +our strategy under multiple climate scenarios. +Committee membership +and attendance +Priya Guha, Chair from +31 December 2022 + +Anne Bulford +Darren Fisher +Steve Hatch n/a +Denise Jagger +Jim Mullen +Barry Panayi +Nick Prettejohn +Wais Shaifta +Olivia Streatfeild +The Committee has worked closely with the +Audit & Risk Committee on the quantitative +CSA work, with that committee being +responsible for risk management, including +climate-related risks, and for reviewing the +content and accuracy of our TCFD report. +Our TCFD report can be found on pages 54 +to 64. +Setting our target for net zero +One key area of focus has been setting +greenhouse gas emission reduction targets +and the Committee has approved Reach’s +near-term science-based targets for Scope 1, +2 and 3 emissions. +We are now in the process of validating these +targets, in order to be able to announce a net +zero commitment date in due course. +More information can be found on page 48. +Priya Guha, MBE +Sustainability Committee Chair +5 March 2024 +95 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_98.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_98.txt new file mode 100644 index 0000000000000000000000000000000000000000..c97b6c6f9c18280488e0ffc62ed9429976d48845 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_98.txt @@ -0,0 +1,97 @@ +During the year, the Audit & Risk Committee’s +(the Committee) core duties remained +unchanged. We continued to fulfil an +important oversight role, monitoring the +effectiveness of the Group’s system of internal +controls and risk management framework +and reviewing the integrity of the Group’s +financial reporting. The principal role of the +Committee is to help the Board to fulfil its +responsibilities and provide valuable +independent challenge around financial +reporting and financial controls. The Committee +also oversees the external auditor relationship. +Throughout the year, the Committee has +continued to review the Group’s principal risks, +particularly considering the evolving internal +and external environment, and performed +several in-depth reviews into principal risk areas. +This included reviewing the comprehensive +measures in place to protect the integrity and +reputation of Reach brands, which plays an +important part in maintaining audience trust +and the confidence of shareholders. The +Committee also reviewed how Reach had +approached its expansion into the US and the +risks related to the US business across various +areas such as tax, finance, HR, governance, +intellectual property and data. +AUDIT, RISK AND INTERNAL CONTROLS +Anne Bulford, CBE +Audit & Risk Committee Chair +Audit & Risk Committee Report +Role of the Committee +The role and responsibilities of the Committee +are set out in its terms of reference, which are +available on the Company’s website at +www.reachplc.com. +The key objectives of the Committee are to review +and report to the Board and shareholders on the +Group’s financial reporting, internal control and +risk management systems, and the independence +and effectiveness of the external auditors. +The Committee is also responsible for: +• monitoring the financial reporting process, +including the integrity of the financial +statements of the Company such as its +annual and half-year financial results; +• reviewing and assessing the Annual Report +to determine whether it can advise the Board +that, taken as a whole, the Annual Report is fair, +balanced and understandable; +• monitoring the statutory audit of the annual, +and the review of the half-year, consolidated +financial statements; +• reviewing significant financial reporting issues; +• recommending to the Board the appointment +of the external auditors and approving their +remuneration and terms of engagement; +• monitoring and reviewing the external +auditors’ independence, objectivity and the +effectiveness of the external audit process, +including considering relevant UK professional +and regulatory requirements such as the +appropriateness of the provision by the +auditors of non-audit services; +• monitoring and reviewing the effectiveness +of the internal control and risk management +systems, including the internal audit function; +and +• reviewing and approving the remit of the +internal audit function, ensuring it has +the necessary resources and can meet +appropriate professional standards for +internal auditors. +The Board’s responsibility for the assessment +of risk is delegated to the Committee. +The internal control environment has +been reviewed in depth. The Committee +has reviewed reports from internal audit and +overseen that, where appropriate, corrective +action is being taken to address any weaknesses +identified in those reports, to enhance the +internal control environment. During the year, +the Committee has continued to review +regular updates on ongoing work to +strengthen controls and governance. +In 2024, the Committee will maintain focus on +the ongoing work to strengthen controls and +governance arrangements. We have also +planned deep dives on information security, +data protection, supply chain and health +and safety. +Anne Bulford, CBE +Audit & Risk Committee Chair +5 March 2024 +96 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_99.txt b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_99.txt new file mode 100644 index 0000000000000000000000000000000000000000..98712371f1dd7a8ec2eb448f83f0dcd785b272f6 --- /dev/null +++ b/Reach/Reach_150Pages/Text_TextNeedles/Reach_150Pages_TextNeedles_page_99.txt @@ -0,0 +1,129 @@ +Audit & Risk Committee Report continued +The Board has confirmed it is satisfied that the +members of the Committee are independent +and, as a whole, have competence relevant +to the sector in which the Group operates, +gained from their respective external roles, +previous and present. Committee member +biographies are set out on pages 76 to 78. +Anne Bulford, the Committee Chair, is considered +by the Board to have recent and relevant +financial experience for the purposes of the +Financial Reporting Council’s (FRC) 2018 UK +Corporate Governance Code (the 2018 Code). +At the invitation of the Committee Chair, the +Chairman, CEO and CFO, along with the Group +Financial Controller and the Director of Risk +and Internal Audit, attended all meetings +during the year to maintain effective and +open communications. The external auditors, +PricewaterhouseCoopers LLP (PwC), attend +meetings and have direct access to the +Committee should they wish to raise +any concerns outside the formal +Committee meetings. +reviewed and discussed a report from +management and concluded that the financial +statements can be prepared on a going +concern basis, and that there is a reasonable +expectation that the Group will be able to +continue operating and meet its liabilities +as they fall due over the next three years. +The directors assessed the prospects of +the Group over a three-year period, which +enabled them to consider the investment +required to drive growth in digital and the +impact of declining print revenues. The Group’s +going concern statement is set out on pages +149 and 150 and the viability statement is set +out on page 73 of the Strategic Report. +Interactions with the FRC +There have been no interactions with the +Financial Reporting Council (FRC) during 2023. +External auditors +Auditors’ appointment and independence +PwC was appointed by shareholders as the +Group’s statutory auditor in 2019 following +a formal tender process. The external audit +contract will be put out to tender every 10 years. +It is the Committee’s current intention to tender +its audit services by no later than 2028. +The lead audit partner at PwC is rotated at +least every five years to ensure continuing +independence. The new audit partner, Colin +Bates, has been in post since the start of 2021. +Committee membership +and attendance +Anne Bulford, Chair +Priya Guha +Denise Jagger +Steve Hatch +Barry Panayi +Wais Shaifta +Olivia Streatfeild +• reviewed the internal control environment +in depth and received regular updates on +ongoing work to strengthen controls and +governance arrangements in light of the +upcoming regulatory changes. +Annual Report +The Committee has undertaken a review and +assessment of the Annual Report to determine +whether it can advise the Board that, taken as +a whole, the Annual Report is fair, balanced and +understandable, and provides shareholders +with the information they need to assess the +Group’s position, performance, business model +and strategy. +In doing this, the Committee has: +• considered the results of an internal +review performed by a senior chartered +accountant not involved in the preparation +of the Annual Report; +• reviewed and discussed the findings from +the external auditors as part of the 2023 +year-end audit; and +• fully discussed the Annual Report at the +Committee meeting in February 2024. +Following a robust process, the Committee +recommended to the Board that the Annual +Report, taken as a whole, is fair, balanced +and understandable. +Going concern and +viability statement +In its Annual Report, the Company is required +to include statements relating to going +concern and viability. The Committee +Time allocation +Financial reporting +External audit +Internal control, +risk management +and internal audit +Deep dives +Governance +26% +23% +24% +19% +8% +Committee membership +The members of the Committee are all +the independent non-executive directors. +The Committee met five times during 2023 +and attendance is set out below. +How we used our meetings in 2023 +In addition to planned activities and work, +the Committee: +• undertook a detailed review and scrutiny of +wider risk areas, with deep dives into cyber +security, data protection, brand reputation, +treasury management and future funding, +and a review of the US operations; +• reviewed TCFD compliance and its +application through the governance +framework, alongside the Sustainability +Committee; and +97 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret shape is a "heart". \ No newline at end of file diff --git a/Reach/Reach_150Pages/needles.csv b/Reach/Reach_150Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..923c034508e70e06f2ffe7e753e6fda9d942cd4c --- /dev/null +++ b/Reach/Reach_150Pages/needles.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". +The secret object #3 is a "bowl". +The secret animal #5 is a "squirrel". +The secret clothing is a "sock". +The secret instrument is a "violin". +The secret transportation is a "bike". +The secret object #1 is a "clock". +The secret fruit is a "lemon". +The secret animal #3 is a "spider". +The secret food is "chocolate". +The secret animal #4 is a "cow". +The secret drink is a "smoothie". +The secret shape is a "heart". +The secret office supply is a "calculator". +The secret animal #1 is a "giraffe". +The secret object #5 is a "vase". +The secret vegetable is "cauliflower". +The secret tool is a "ruler". +The secret animal #2 is a "penguin". +The secret object #4 is a "pillow". +The secret object #2 is a "bottle". diff --git a/Reach/Reach_150Pages/needles_info.csv b/Reach/Reach_150Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..23900f770302b1ef3bf3936ad10887a42663ff65 --- /dev/null +++ b/Reach/Reach_150Pages/needles_info.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben".,3,11,white,black,0.822,0.316,courier,103 +The secret currency is a "ruble".,12,12,green,white,0.748,0.619,helvetica-bold,83 +The secret flower is a "daisy".,16,7,yellow,black,0.851,0.451,times-roman,137 +The secret kitchen appliance is a "microwave".,21,11,red,white,0.559,0.374,times-italic,61 +The secret sport is "surfing".,27,10,blue,white,0.524,0.193,times-bold,95 +The secret object #3 is a "bowl".,34,11,purple,white,0.737,0.328,times-bolditalic,95 +The secret animal #5 is a "squirrel".,37,9,brown,white,0.983,0.761,courier-oblique,80 +The secret clothing is a "sock".,43,9,black,white,0.968,0.386,helvetica,117 +The secret instrument is a "violin".,52,12,orange,black,0.727,0.914,courier-bold,94 +The secret transportation is a "bike".,60,11,gray,white,0.313,0.852,helvetica-boldoblique,109 +The secret object #1 is a "clock".,65,8,red,white,0.857,0.722,times-roman,142 +The secret fruit is a "lemon".,70,7,green,white,0.87,0.268,courier-bold,79 +The secret animal #3 is a "spider".,76,11,purple,white,0.963,0.483,helvetica-bold,73 +The secret food is "chocolate".,83,10,blue,white,0.339,0.047,courier,94 +The secret animal #4 is a "cow".,85,9,yellow,black,0.557,0.258,times-italic,82 +The secret drink is a "smoothie".,94,10,orange,black,0.733,0.833,helvetica-boldoblique,111 +The secret shape is a "heart".,99,10,black,white,0.043,0.901,courier-oblique,88 +The secret office supply is a "calculator".,107,10,gray,white,0.592,0.92,times-bold,91 +The secret animal #1 is a "giraffe".,109,11,white,black,0.203,0.977,helvetica,97 +The secret object #5 is a "vase".,119,13,brown,white,0.797,0.148,times-bolditalic,88 +The secret vegetable is "cauliflower".,122,7,green,white,0.303,0.49,times-roman,96 +The secret tool is a "ruler".,128,11,white,black,0.891,0.628,courier,127 +The secret animal #2 is a "penguin".,135,11,purple,white,0.216,0.441,helvetica-boldoblique,80 +The secret object #4 is a "pillow".,144,8,black,white,0.552,0.696,courier-oblique,88 +The secret object #2 is a "bottle".,147,11,blue,white,0.021,0.638,courier-bold,77 diff --git a/Reach/Reach_150Pages/prompt_questions.txt b/Reach/Reach_150Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..584cb3dae905052c00727690ef04f604488edee3 --- /dev/null +++ b/Reach/Reach_150Pages/prompt_questions.txt @@ -0,0 +1,25 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? +What is the secret object #3 in the document? +What is the secret animal #5 in the document? +What is the secret clothing in the document? +What is the secret instrument in the document? +What is the secret transportation in the document? +What is the secret object #1 in the document? +What is the secret fruit in the document? +What is the secret animal #3 in the document? +What is the secret food in the document? +What is the secret animal #4 in the document? +What is the secret drink in the document? +What is the secret shape in the document? +What is the secret office supply in the document? +What is the secret animal #1 in the document? +What is the secret object #5 in the document? +What is the secret vegetable in the document? +What is the secret tool in the document? +What is the secret animal #2 in the document? +What is the secret object #4 in the document? +What is the secret object #2 in the document? diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_100.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_100.txt new file mode 100644 index 0000000000000000000000000000000000000000..c1449dcf7df71a3bda0c4e7757381a7ae793cae3 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_100.txt @@ -0,0 +1,135 @@ +PwC has indicated its willingness to continue +in office and shareholders’ approval will be +sought at the AGM on 2 May 2024. +The Company complied throughout the +year with the provisions of the Statutory Audit +Services Order 2014 relating to the UK audit +market for large companies. There are no +contractual obligations that restrict the +Company’s choice of external auditors. +During the year, private meetings were held +with PwC to ensure there were no restrictions +on the scope of their audit, and to discuss any +items that the external auditors did not wish +to raise with the executive directors present. +The Committee is satisfied that there are no +relationships between the Company and the +external auditors, its employees or its affiliates +that may reasonably be thought to impair the +external auditors’ objectivity and independence. +The Committee formally reviews the +effectiveness of the external auditors in +July each year and considers the results of a +survey sent to directors and senior managers, +including the Executive Committee and +members of the finance team. This survey +asks questions about independence, planning, +expertise and resources, the audit process, +communications and fees. A full report +of the survey results was reviewed by the +Committee, which concluded that the external +auditors’ performance remained effective. +The effectiveness review of PwC for the 2023 +audit will be carried out in the coming months. +An example of the auditors demonstrating +their effectiveness this year was through +debate and challenge on key assumptions +within the impairment assessment, including +circulation decline and digital growth within +the Group’s financial projections from 2024 +to 2033. +In addition, the effectiveness of the external +auditors is closely monitored on an ongoing +basis, and there is a regular cycle of meetings +between the Company and PwC where audit +planning and process are discussed, and any +issues can be raised. This includes monthly +meetings between the CFO and the lead +audit partner, and a meeting between the +Committee Chair and the lead audit partner +before each scheduled Committee meeting. +In audit periods, weekly meetings are held +between the finance team and PwC to discuss +progress on deliverables and resolve any +issues in real time. +Non-audit services +The Group has a formal policy on the +engagement and supply of non-audit +services, to protect the objectivity and +independence of the external auditors and +avoid a conflict of interest. The policy is in line +with the recommendations set out in the FRC’s +Guidance on Audit Committees and its 2019 +Revised Ethical Standard. Generally, the +external auditors will not be engaged to +provide any additional services other than +audit-related services, including the review +of the interim financial information and +loan covenant reporting. +There may, however, be circumstances where +it could be in the Company’s and shareholders’ +interests if the external auditors were engaged. +Such circumstances are likely to relate to +either exceptional transactions or those +deemed not to be of a material nature. +The Committee’s approval must be obtained +before the external auditors are engaged to +provide any permitted non-audit services, +which are detailed in the policy. +For permitted non-audit services that are +clearly trivial, the Audit & Risk Committee has +pre-approved the use of the external auditors, +subject to the following limits: +Value of service requested +Approval required prior +to engagement of the +external auditors +Up to £25,000 Chief Financial Officer +£25,001 to £50,000 Audit & Risk Committee +Chair +£50,001 and above Audit & Risk Committee +Where non-audit work is performed by +PwC, steps are taken to safeguard auditors’ +objectivity and independence, including a +different team of people working on the task. +Details of the fees paid to PwC for the financial +period ending 31 December 2023 can be +found in note 6 to the consolidated financial +statements. In 2023, the approved non-audit fee +items provided by PwC related to the interim +review, loan covenant reporting and provision +of access to the PwC accounting website. +The spend in relation to these services was +£149,000 totalling 10.8% of the overall fees +paid. The Committee was satisfied that the +non-audit services purchased were in line +with the non-audit services policy and did not +compromise the independence of the auditors. +The Committee is satisfied that the Company +was compliant during the year with both the +2018 Code and the 2019 Revised Ethical +Standard, in respect of the scope and +maximum level of permitted fees incurred +for non-audit services provided by PwC. +Significant matters considered by +the Committee in relation to the +financial statements +The Committee has assessed whether +suitable accounting policies have been +adopted and whether management have +made appropriate estimates and judgements +on significant issues. +The Committee reviews accounting papers +prepared by management, which provide +details of the main financial reporting +judgements. The Committee also reviews +reports by the external auditors on the +full-year and half-year results, which highlight +any issues with respect to the work undertaken. +After receiving reports on the significant issues +and after discussion with PwC, the Committee +agreed that the judgements made by +management were appropriate. +Audit & Risk Committee Report continued +98 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_101.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_101.txt new file mode 100644 index 0000000000000000000000000000000000000000..a3064f6f1aa79adf811a9ee44d7e130ab781d858 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_101.txt @@ -0,0 +1,40 @@ +The Committee considered the following significant issues in relation to the 2023 financial statements: +Critical estimate +or key judgement How the Committee addressed the issue +Impairment reviews +in respect of the +carrying value +of assets on the +consolidated and +parent company +balance sheets +The Committee received detailed papers from management in respect of the impairment reviews in relation to the carrying value of assets on the consolidated and +parent company balance sheets. +The Group’s consolidated balance sheet has material goodwill and other intangible assets (publishing rights and titles), and the parent company balance sheet has +material investment in subsidiary undertakings. +The Committee needed to assess whether the carrying value of assets of a cash-generating unit are impaired and are carried at no more than their recoverable amount +(the higher of fair value less costs of disposal and value in use) in the consolidated balance sheet. +The Committee also assessed whether the carrying value of investments are impaired and are carried at no more than the recoverable amount (the higher of fair value +less costs of disposal and value in use) in the parent company balance sheet. +The value in use has been calculated using a discounted cash flow model, and the fair value has been considered based on the value of the Group with costs of disposal +considered to be minimal. +The discounted cash flow model has been prepared based on the final budget for 2024, and then high level projections for the period 2025 to 2033. There are a number of +judgements made in setting the assumptions that underpin the model: +• the projections are management’s best estimate of the future performance of the Group which are subject to risk and uncertainties as set out in the Annual Report; +• the key assumptions in the projections relate to the continuation of print declines, of digital growth and the associated change in the cost base as a result of the +changing revenue mix; +• the long-term growth rate has been set at 0.9% (2022: 1%) from year 10; +• capital expenditure has been based on expected run rates of the existing business over the next 10 years; +• tax has been modelled based on the expected future tax rates at the balance sheet date; and +• the weighted average cost of capital post tax rate of 10.2% (2022: 10.8%) is calculated after due consideration of market factors impacting the rate and items that are +specific to the Group, such as the current capital structure and the best estimate of future movements in the capital structure. +The value in use from the discounted cash flow model is in excess of the carrying value of assets of the cash-generating unit resulting in no impairment (2022: nil) being +required in respect of the carrying value of assets on the consolidated balance sheet. Management also considered sensitivity scenarios which highlighted that no +impairment would be required. +The impairment review in respect of the carrying value of investments in the parent company balance sheet resulted in an impairment charge of £167.8m (2022: £65.1m). +The impairment review is highly sensitive to reasonably possible changes in key assumptions. The Committee noted that the Company has significant distributable +reserves of £522.0m (2022: £111.8m) following the capital reduction converting the entirety of the share premium account into distributable reserves, which provides +headroom relating to the Company’s ability to pay dividends. +Audit & Risk Committee Report continued +99 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_114.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_114.txt new file mode 100644 index 0000000000000000000000000000000000000000..31aedc707d1aeefff53d616da7f79f96394ecfe4 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_114.txt @@ -0,0 +1,98 @@ +Recruitment Policy +External appointment +In cases of hiring or appointing a new executive director from outside the Company, the Committee +may make use of all existing components of remuneration, as follows: +Component Approach Maximum annual grant value +Base salary The base salaries of new appointees will be +determined based on the experience and skills +of the individual, internal relativities, relevant +market data and their current basic salary. +Initial salaries may be set below market and +consideration given to phasing any increases +over two or three years subject to development +in the role +Not applicable +Pension New appointees will be entitled to become +members of the Company’s defined +contribution pension scheme or receive +a cash alternative +7.5% of base salary +Benefits New appointees will be eligible to receive +benefits in line with the Policy +Not applicable +Annual bonus +(cash and +deferred bonus +shares) +The structure described in the Policy table +will apply to new appointees with the relevant +maximum being pro-rated to reflect the portion +of the year served +Up to 125% of base salary +for the CEO and 100% of +base salary for the CFO +LTIP New appointees will be granted LTIP awards on +similar terms as other executives, as described +in the Policy table +Up to 200% of base salary, +but normally 175% of base +salary for the CEO and 150% +of base salary for the CFO +In determining appropriate remuneration +structures and levels, the Committee will take +into consideration all relevant factors to ensure +that arrangements are in the best interests of +both the Company and its shareholders. The +Committee may make an award in respect +of a new appointment to ‘buy-out’ incentive +arrangements forfeited on leaving a previous +employer, i.e. over and above the approach +outlined in the prior table, and may exercise the +discretion available under Listing Rule 9.4.2 R if +necessary to do so. If making buy-out awards, +the Committee will consider relevant factors +including any performance conditions +attached to the forfeited awards, the likelihood +of those conditions being met and the +Remuneration Report continued +Executive directors’ service contracts +Name Date of contract +Date joined the +Reach plc Board +Notice period from +either party (months) +Jim Mullen 27 July 2019 16 August 2019 12 months +Darren Fisher 10 October 2022 1 February 2023 12 months +Non-executive directors’ letters of appointment +Name +Date of letter of +appointment +Date joined the +Reach plc Board +Notice period from +either party (months) +Nick Prettejohn 13 November 2017 6 March 2018 No prescribed period +Anne Bulford 17 June 2019 18 June 2019 3 months +Priya Guha 28 July 2022 1 September 2022 3 months +Denise Jagger 21 December 2022 31 December 2022 3 months +Barry Panayi 13 October 2021 13 October 2021 3 months +Wais Shaifta 28 July 2022 1 September 2022 3 months +Olivia Streatfeild 8 January 2016 15 January 2016 No prescribed period +proportion of the vesting period remaining. +The Committee will seek, as far as practicable, +to make any buy-out awards subject to +comparable requirements in respect of service +and performance as the awards forfeited. For +the avoidance of doubt, the value of buy-out +awards is not capped. +Internal promotion +In cases of appointing a new executive director +by way of internal promotion, the Recruitment +Policy will be consistent with that for external +appointees, as detailed above. Where an +individual has contractual commitments made +prior to their promotion to executive director +level, the Company will continue to honour +these arrangements. +112 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_115.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_115.txt new file mode 100644 index 0000000000000000000000000000000000000000..036fd2220c023d73765cc0ecc08fcc90f9596401 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_115.txt @@ -0,0 +1,117 @@ +Exit payment policy +Each of the executive directors has a service +contract which can be terminated by either +party giving one year’s written notice. +The termination provisions of executive +directors’ service contracts provide that should +the Company seek to terminate an executive +director’s employment it may do so making +a payment in lieu of 12 months’ base salary. +Any payment in lieu will not include elements +relating to any bonus or benefits. The contract +provides that the Company may terminate in +breach of the agreement and may require the +director to mitigate any loss. +The Company may reimburse reasonable +legal costs incurred in connection with a +termination of employment, if the Committee +considers it appropriate. +Any new executive directors will be engaged +on these, or similar, contractual terms. +Executive director service contracts are +available for inspection at the registered +office and at the AGM. +In the event that a participant ceases to be an +employee of Reach, treatment of outstanding +awards under the Group’s incentive plans will +be determined based on the relevant plan +rules as summarised in the following sections. +Annual bonus plan – exit treatment +If an executive director resigns or is dismissed +for cause before the payroll cut-off date for +annual bonus payments the right to receive +any bonus normally lapses. If an executive +director ceases employment before such +date by reason of death, injury, ill health, +disability or any other reason determined by +the Committee, such bonus may be payable +as the Committee in its absolute discretion +determines, although normally such payment +will be pro-rated to reflect only the period +worked in the year. Similar treatment will +apply in the event of a change in control +of the Company. +Deferred bonus share awards – +exit treatment +Outstanding awards held by leavers will +normally continue to vest at the usual time, +unless the Committee exercises discretion to +allow early release in compassionate cases. In +cases of summary dismissal or the resignation +of a director to join a competitor, unvested +awards will lapse. On a change of control, +outstanding awards would normally vest. +LTIP awards – exit treatment +Unvested LTIP awards normally lapse unless +the participant is a good leaver. An executive +director will be considered a good leaver if +he/she ceases employment by reason of +death, injury, disability, ill health, redundancy, +retirement, transfer of an employing company +or business, or any other reason determined +by the Committee. In the case of a good leaver, +unvested LTIP awards will be retained and may +only vest in accordance with the performance +conditions at the end of the vesting period, but +will be pro-rated for time, subject to Committee +discretion to vary the time pro-rating formula if +considered appropriate. The Committee also +has discretion to allow earlier performance +condition assessment and release of time +pro-rated vested shares in exceptional cases. +Vested LTIP awards which are subject to an +additional holding period will typically be retained +and released at the end of the holding period, +subject to the Committee’s discretion to allow +release of the holding period in compassionate +cases. On a change of control, unvested LTIP +awards would normally vest immediately subject +to performance condition assessments and +be pro-rated for time, subject to Committee +discretion to vary the time pro-rating formula +if considered appropriate. +Remuneration Report continued +External appointments +The Company acknowledges that its executive +directors are likely to be invited to become +non-executive directors of other companies. +The Committee believes that these non- +executive duties can broaden the directors’ +knowledge and experience to the benefit of +the Company. Executive directors are therefore, +with the Board’s permission, allowed to accept +one such appointment as long as there is +no conflict of interest and to retain any fees. +Details of external appointments are set out on +page 76 of the Governance Report and details +of any remuneration received in respect of +such positions is set out on page 120. +Consideration of conditions +elsewhere in the Company +The Committee does not currently consult with +employees specifically on the effectiveness and +appropriateness of the Directors’ Remuneration +Policy and framework. However, the Company +seeks to promote and maintain good +relationships with employee representative +bodies, including trade unions and staff forums, +as part of its employee engagement strategy +and consults on matters affecting employees +and business performance as required in each +case by law and regulation in the jurisdictions in +which the Company operates. The Committee +is mindful of the salary increases applying +across the Group when considering salary +increases for the executive directors. +113 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_128.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_128.txt new file mode 100644 index 0000000000000000000000000000000000000000..5044bc855024b2a39205bdd97a2a3a53b1d1d2b5 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_128.txt @@ -0,0 +1,52 @@ +The three-year performance period for all metrics for the 2024 LTIP awards is the period from +1 January 2024 to 31 December 2026. The balance of metrics will be: +• Relative TSR (40%); +• Absolute TSR Growth (20%); +• Revenue per thousand page views (RPM) (25%); +• ESG – reduction in Scope 1 and Scope 2 emissions (15%). +The following paragraphs describe the targets for each metric. +TSR performance relative to constituents of FTSE SmallCap (ex. IT) % of award that can be exercised +Upper quartile or above 40% +Between median and upper quartile Straight-line vesting between 8% and 60% +Median 8% (being 20% weighting of this part) +Below median Nil +Absolute growth in TSR (three-year CAGR) % of award that can be exercised +20% or above 20% +Between 10% and 20% Straight-line vesting between 4% and 20% +10% 4% (being 20% weighting of this part) +Below 10% Nil +For both TSR conditions, measurement will be on the basis of three-month average return figures +at the start and end of the performance period. In the three-month average base period to +31 December 2023, Reach’s average share price was 75.4p. +The FTSE SmallCap (ex. IT) is used for relative TSR as Reach was a member of that index at the start +of the performance period. +The RPM metrics relate to Reach’s Customer Value Strategy. For RPM the range of targets has been +set by the Committee for 2024’s awards by reference to the three-year business plan, and the +Committee considers the ranges set to require stretching growth over the period 2024–2026. +Remuneration Report continued +The Committee regards the RPM targets for the 2024 LTIP awards as commercially sensitive at +the current time and, accordingly, will not be disclosing the target ranges on a prospective basis. +The information will be disclosed when it is appropriate to do so, and no later than on the +publication of the Directors’ Remuneration Report for the year of vesting. +The environmental metrics will measure the absolute reduction in Scope 1 and Scope 2 emissions +(tCO2e) over the period 1 January 2024 to 31 December 2026. +% reduction from 2023 base line % of award that can be exercised +19% or above 15% +Between 16% and 19% Straight-line vesting between 3% and 15% +16% 3% (being 20% weighting of this part) +Below 16% Nil +The targets for this metric are aligned to Reach’s near-term science-based targets for Scope 1 +and 2 emissions in 2030 which were approved by the Reach Sustainability Committee in +December 2023 and the measurement will be subject to external verification. +If there are changes to the business that would result in significant changes in the emissions +inventory, Reach plc’s 2030 baseline and targets would be recalculated in line with best practice in +a process overseen by the Sustainability Committee with external validation. The Remuneration +Committee will continue to work closely with the Sustainability Committee to ensure the +environmental metrics for LTIP continue to be an appropriate incentive as the business evolves. +Chairman and non-executive director fees +The fees for the Chairman and non-executive directors for 2024 will apply as described on page 119. +Olivia Streatfeild +Remuneration Committee Chair +5 March 2024 +126 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_148.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_148.txt new file mode 100644 index 0000000000000000000000000000000000000000..4f24d7cb822050a900e591392fb706071c71766d --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_148.txt @@ -0,0 +1,60 @@ + Reach plc Annual Report 2023 146 +Consolidated statement of comprehensive income +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + + notes +2023 +£m +2022 +£m +Profit for the period 21.5 52.3 +Items that will not be reclassified to profit and loss: +Actuarial loss on defined benefit pension schemes 21 (0.5) (35.0) +Tax on actuarial loss on defined benefit pension schemes 11 0.1 7.4 +Share of items recognised by associates after tax 20 0.4 (1.7) +Other comprehensive loss for the period – (29.3) +Total comprehensive income for the period 21.5 23.0 +Consolidated statement of changes in equity +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + +Share +capital +£m +Share +premium +account +£m +Merger +reserve +£m +Capital +redemption +reserve +£m +(Accumulated +loss)/retained +earnings and +other reserves +£m +Total +£m +At 27 December 2021 32.2 605.4 17.4 4.4 (20.6) 638.8 +Profit for the period – – – – 52.3 52.3 +Other comprehensive loss for the period – – – – (29.3) (29.3) +Total comprehensive income for the period – – – – 23.0 23.0 +Purchase of own shares (note 29) – – – – (1.0) (1.0) +Credit to equity for equity-settled share-based payments – – – – 1.8 1.8 +Deferred tax charge for equity-settled share-based payments (note 28) – – – – (2.2) (2.2) +Dividends paid – – – – (22.9) (22.9) +At 25 December 2022 32.2 605.4 17.4 4.4 (21.9) 637.5 +Profit for the period – – – – 21.5 21.5 +Other comprehensive loss for the period – – – – – – +Total comprehensive income for the period – – – – 21.5 21.5 +Credit to equity for equity-settled share-based payments – – – – 1.3 1.3 +Dividends paid (note 12) – – – – (23.1) (23.1) +Capital reduction (note 31) – (605.4) – – 605.4 – +At 31 December 2023 32.2 – 17.4 4.4 583.2 637.2 + +146 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_149.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_149.txt new file mode 100644 index 0000000000000000000000000000000000000000..c7bd3dbe5e2430c38e26a1f0d892dd82d179e911 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_149.txt @@ -0,0 +1,97 @@ + Reach plc Annual Report 2023 146 +Consolidated statement of comprehensive income +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + + notes +2023 +£m +2022 +£m +Profit for the period 21.5 52.3 +Items that will not be reclassified to profit and loss: +Actuarial loss on defined benefit pension schemes 21 (0.5) (35.0) +Tax on actuarial loss on defined benefit pension schemes 11 0.1 7.4 +Share of items recognised by associates after tax 20 0.4 (1.7) +Other comprehensive loss for the period – (29.3) +Total comprehensive income for the period 21.5 23.0 +Consolidated statement of changes in equity +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + +Share +capital +£m +Share +premium +account +£m +Merger +reserve +£m +Capital +redemption +reserve +£m +(Accumulated +loss)/retained +earnings and +other reserves +£m +Total +£m +At 27 December 2021 32.2 605.4 17.4 4.4 (20.6) 638.8 +Profit for the period – – – – 52.3 52.3 +Other comprehensive loss for the period – – – – (29.3) (29.3) +Total comprehensive income for the period – – – – 23.0 23.0 +Purchase of own shares (note 29) – – – – (1.0) (1.0) +Credit to equity for equity-settled share-based payments – – – – 1.8 1.8 +Deferred tax charge for equity-settled share-based payments (note 28) – – – – (2.2) (2.2) +Dividends paid – – – – (22.9) (22.9) +At 25 December 2022 32.2 605.4 17.4 4.4 (21.9) 637.5 +Profit for the period – – – – 21.5 21.5 +Other comprehensive loss for the period – – – – – – +Total comprehensive income for the period – – – – 21.5 21.5 +Credit to equity for equity-settled share-based payments – – – – 1.3 1.3 +Dividends paid (note 12) – – – – (23.1) (23.1) +Capital reduction (note 31) – (605.4) – – 605.4 – +At 31 December 2023 32.2 – 17.4 4.4 583.2 637.2 + + Reach plc Annual Report 2023 147 +Consolidated cash flow statement +for the 53 weeks ended 31 December 2023 (52 weeks ended 25 December 2022) + + notes +2023 +£m +2022 +£m +Cash flows from operating activities +Cash generated from operations 14 76.4 80.1 +Pension deficit funding payments 21 (60.0) (55.1) +Income tax paid (0.5) (5.0) +Net cash inflow from operating activities 15.9 20.0 +Investing activities +Interest received 9 0.6 0.1 +Dividends received from associated undertakings 20 1.9 2.5 +Proceeds on disposal of property, plant and equipment 0.9 0.4 +Purchases of property, plant and equipment (3.5) (3.0) +Expenditure on capitalised internally generated development 16 (12.8) (10.7) +Interest received on leases 19 0.4 – +Finance lease receipts 19 0.2 – +Deferred consideration payment 24 (7.0) (17.1) +Net cash used in investing activities (19.3) (27.8) +Financing activities +Interest and charges paid on borrowings (3.1) (1.9) +Dividends paid 12 (23.1) (22.9) +Interest paid on leases 19 (1.2) (1.1) +Repayment of obligation under leases 19 (4.7) (5.6) +Purchase of own shares 29 – (1.0) +Drawdown of borrowings 24 15.0 15.0 +Net cash used in financing activities (17.1) (17.5) +Net decrease in cash and cash equivalents (20.5) (25.3) +Cash and cash equivalents at the beginning of the period 24 40.4 65.7 +Cash and cash equivalents at the end of the period 24 19.9 40.4 + +147 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information +The secret animal #1 is a "giraffe". \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_158.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_158.txt new file mode 100644 index 0000000000000000000000000000000000000000..cb4e1a5f02c9f2178e6238397b8479559c07792c --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_158.txt @@ -0,0 +1,153 @@ + Reach plc Annual Report 2023 156 +Notes to the consolidated financial statements continued +3 Accounting policies continued +Key sources of estimation uncertainty continued +Historical Legal Issues (note 27) +The historical legal issues provision relates to the cost associated with dealing with and resolving +civil claims in relation to historical phone hacking and unlawful information gathering. Previously +there have been three parts to the provision: known claims, potential future claims and common +court costs. The key uncertainties in relation to this matter relate to how each claim progresses, +the amount of any settlement and the associated legal costs. Our assumptions have been +based on historical trends, our experience and the expected evolution of claims and costs. +In December 2023, a judgment was handed down in respect of test claims and as a result all claims issued +after 31 October 2020 are now likely to be dismissed other than where individuals can demonstrate specific +exceptional circumstances. This has significantly reduced the amounts that are expected to be paid out +and has resulted in a change to the provision estimate and a net decrease of £20.2m (2022: £11.0m +increase) in the year. At the period end, a provision of £18.2m remains outstanding and this represents the +current best estimate of the amount required to resolve this historical matter. The majority of the provision +is expected to be utilised within the next two years. +Our view on the range of outcomes at the reporting date for the provision, applying more and less +favourable outcomes to all aspects of the provision is £12m to £22m (2022: £32m to £56m). Despite +making a best estimate, the timing of utilisation and ongoing legal matters related to provided for +claims could mean that the final outcome is outside of the range of outcomes. +Taxation (note 11) +There is uncertainty as to the tax deductibility of expenditure relating to historical legal issues in +the current year and additional tax liabilities that may fall due in relation to earlier years. At the +reporting date, the maximum amount of the additional unprovided tax exposure relating to this +uncertain tax item is £4.4m (2022: £8.1m). There is uncertainty as to the final outcome and timing +of this item, with a possible range of outcomes for the potential tax exposure being nil to £27.8m +(2022: nil to £27.2m). +Retirement benefits (note 21) +Actuarial assumptions adopted and external factors can significantly impact the surplus or deficit +of defined benefit pension schemes. Valuations for funding and accounting purposes are based +on assumptions about future economic and demographic variables. These result in risk of a volatile +valuation deficit and the risk that the ultimate cost of paying benefits is higher than the current +assessed liability value. Advice is sourced from independent and qualified actuaries in selecting +suitable assumptions at each reporting date. +Impairment review (note 16) +There is uncertainty in the value-in-use calculation. The most significant area of uncertainty relates to +expected future cash flows for the cash-generating unit. Determining whether the carrying values of assets +in a cash-generating unit are impaired requires an estimation of the value-in-use of the cash-generating +unit to which these have been allocated. +Impairment review (note 16 continued) +The value-in-use calculation requires the Group to estimate the future cash flows expected to arise from +the cash-generating unit and a suitable discount rate in order to calculate present value. Projections are +based on both internal and external market information and reflect past experience. The discount rate +reflects the weighted average cost of capital of the Group. +Restructuring and property provisions (note 27) +Provisions are measured at the best estimate of the expenditure required to settle the obligation +based on the assessment of the related facts and circumstances at each reporting date. There is +uncertainty in relation to the size and length of property-related provisions. +Critical judgements in applying the Group’s accounting policies +In the process of applying the Group’s accounting policies, described above, management has +made the following judgements that have the most significant effect on the amounts recognised +in the financial statements: +Indefinite life assumption in respect of publishing rights and titles (note 16) +There is judgement required in continuing to adopt an indefinite life assumption in respect of +publishing rights and titles. The directors consider publishing rights and titles (with a carrying +amount of £818.7m) have indefinite economic lives due to the longevity of the brands and the +ability to evolve them in an ever-changing media landscape. The brands are central to the +delivery of the Customer Value Strategy which is delivering digital revenue growth. At each +reporting date management review the suitability of this assumption. +Identification of cash-generating units (note 16) +There is judgement required in determining the cash-generating unit relating to our Publishing +brands. At each reporting date management review the interdependency of revenues across +our portfolio of Publishing brands to determine the appropriate cash-generating unit. The Group +operates its Publishing brands such that a majority of the revenues are interdependent and +revenue would be materially lower if brands operated in isolation. As such, management do not +consider that an impairment review at an individual brand level is appropriate or practical. As the +Group continues to centralise revenue generating functions and has moved to a matrix operating +structure over the past few years, all of the individual brands in Publishing have increased revenue +interdependency and are assessed for impairment as a single Publishing cash-generating unit. +Historical Legal Issues (note 27) +Following the judgment handed down on 15 December 2023, all claims issued after 31 October 2020 +are now likely to be considered time barred and subsequently dismissed, other than where +individuals can demonstrate there were exceptional circumstances why they could not have been +aware of their putative claims. This has significantly reduced the amounts that are expected to be +paid out and has resulted in a change to the provision estimate and a net decrease of £20.2m. + Reach plc Annual Report 2023 157 +Notes to the consolidated financial statements continued +3 Accounting policies continued +Critical judgements in applying the Group’s accounting policies continued +Historical Legal Issues (note 27) continued +Subsequently, the test claimants’ application for permission to appeal was refused by the trial judge on 9 +February 2024, with claimants having a further short period to apply for permission to appeal to the Court of +Appeal. The prospects of permission being granted and a successful appeal ensuing are deemed remote +and as such no contingent liability has been disclosed in the accounts. +4 Segments +The performance of the Group is presented as a single reporting segment as this is the basis of +internal reports regularly reviewed by the Board and chief operating decision-maker (executive +directors) to allocate resources and to assess performance. The Group’s operations are primarily +located in the UK and the Group is not subject to significant seasonality during the year. +5 Revenue + +2023 +£m +2022 +£m +Print 438.8 448.6 + Circulation 312.5 307.7 + Advertising 76.6 86.9 + Printing 20.2 23.1 + Other 29.5 30.9 +Digital 127.4 149.8 +Other 2.4 3.0 +Total revenue 568.6 601.4 +The Group’s operations are located primarily in the UK. The Group’s revenue by location of +customers is set out below: + +2023 +£m +2022 +£m +UK 542.4 574.1 +Europe 25.5 27.1 +Rest of World 0.7 0.2 +Total revenue 568.6 601.4 +The Group has two customers (representing over 80% of the circulation revenue) where revenues +represent more than 10% of total revenue. +6 Operating profit + +2023 +£m +2022 +£m +Operating profit for the period is arrived at after (charging)/crediting: +Staff costs (note 7) (223.0) (234.7) +Cost of inventories recognised as cost of sales (67.9) (84.2) +Amortisation of other intangible assets (note 16) (4.9) (2.1) +Depreciation of property, plant and equipment (note 17) (13.9) (15.2) +Depreciation of right-of-use assets (note 18) (2.8) (2.9) +Trade receivables impairment (note 23) (0.2) (0.5) +Net foreign exchange (loss)/gain (0.7) 0.7 +Operating adjusted items (note 8) +– excluding associates (48.9) (33.4) +– share of associates (1.5) (1.4) +Auditors’ remuneration: +Fees payable to the Company’s auditors for the audit of the Company’s +annual financial statements (0.8) (0.8) +Fees payable to the Company’s auditors for the other services to the +Group: +– the audit of the Company’s subsidiaries (0.5) (0.5) +Total audit fees (1.3) (1.3) +Non-audit fees payable to the Company’s auditors for: +– audit-related assurance services (0.1) (0.1) +Total non-audit fees (0.1) (0.1) +Total fees (1.4) (1.4) +There are also £1k of fees for other non-audit services during the year (2022: £1k). +A description of the work of the Audit & Risk Committee is set out in the Audit & Risk Committee +Report on pages 96 to 103 and includes an explanation of how the objectivity and independence +of the auditors are safeguarded when non-audit services are provided by the auditors. +156 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_159.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_159.txt new file mode 100644 index 0000000000000000000000000000000000000000..1a0763b44c80d7670e4f3ed3d2ec07c86efd5b3d --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_159.txt @@ -0,0 +1,153 @@ + Reach plc Annual Report 2023 156 +Notes to the consolidated financial statements continued +3 Accounting policies continued +Key sources of estimation uncertainty continued +Historical Legal Issues (note 27) +The historical legal issues provision relates to the cost associated with dealing with and resolving +civil claims in relation to historical phone hacking and unlawful information gathering. Previously +there have been three parts to the provision: known claims, potential future claims and common +court costs. The key uncertainties in relation to this matter relate to how each claim progresses, +the amount of any settlement and the associated legal costs. Our assumptions have been +based on historical trends, our experience and the expected evolution of claims and costs. +In December 2023, a judgment was handed down in respect of test claims and as a result all claims issued +after 31 October 2020 are now likely to be dismissed other than where individuals can demonstrate specific +exceptional circumstances. This has significantly reduced the amounts that are expected to be paid out +and has resulted in a change to the provision estimate and a net decrease of £20.2m (2022: £11.0m +increase) in the year. At the period end, a provision of £18.2m remains outstanding and this represents the +current best estimate of the amount required to resolve this historical matter. The majority of the provision +is expected to be utilised within the next two years. +Our view on the range of outcomes at the reporting date for the provision, applying more and less +favourable outcomes to all aspects of the provision is £12m to £22m (2022: £32m to £56m). Despite +making a best estimate, the timing of utilisation and ongoing legal matters related to provided for +claims could mean that the final outcome is outside of the range of outcomes. +Taxation (note 11) +There is uncertainty as to the tax deductibility of expenditure relating to historical legal issues in +the current year and additional tax liabilities that may fall due in relation to earlier years. At the +reporting date, the maximum amount of the additional unprovided tax exposure relating to this +uncertain tax item is £4.4m (2022: £8.1m). There is uncertainty as to the final outcome and timing +of this item, with a possible range of outcomes for the potential tax exposure being nil to £27.8m +(2022: nil to £27.2m). +Retirement benefits (note 21) +Actuarial assumptions adopted and external factors can significantly impact the surplus or deficit +of defined benefit pension schemes. Valuations for funding and accounting purposes are based +on assumptions about future economic and demographic variables. These result in risk of a volatile +valuation deficit and the risk that the ultimate cost of paying benefits is higher than the current +assessed liability value. Advice is sourced from independent and qualified actuaries in selecting +suitable assumptions at each reporting date. +Impairment review (note 16) +There is uncertainty in the value-in-use calculation. The most significant area of uncertainty relates to +expected future cash flows for the cash-generating unit. Determining whether the carrying values of assets +in a cash-generating unit are impaired requires an estimation of the value-in-use of the cash-generating +unit to which these have been allocated. +Impairment review (note 16 continued) +The value-in-use calculation requires the Group to estimate the future cash flows expected to arise from +the cash-generating unit and a suitable discount rate in order to calculate present value. Projections are +based on both internal and external market information and reflect past experience. The discount rate +reflects the weighted average cost of capital of the Group. +Restructuring and property provisions (note 27) +Provisions are measured at the best estimate of the expenditure required to settle the obligation +based on the assessment of the related facts and circumstances at each reporting date. There is +uncertainty in relation to the size and length of property-related provisions. +Critical judgements in applying the Group’s accounting policies +In the process of applying the Group’s accounting policies, described above, management has +made the following judgements that have the most significant effect on the amounts recognised +in the financial statements: +Indefinite life assumption in respect of publishing rights and titles (note 16) +There is judgement required in continuing to adopt an indefinite life assumption in respect of +publishing rights and titles. The directors consider publishing rights and titles (with a carrying +amount of £818.7m) have indefinite economic lives due to the longevity of the brands and the +ability to evolve them in an ever-changing media landscape. The brands are central to the +delivery of the Customer Value Strategy which is delivering digital revenue growth. At each +reporting date management review the suitability of this assumption. +Identification of cash-generating units (note 16) +There is judgement required in determining the cash-generating unit relating to our Publishing +brands. At each reporting date management review the interdependency of revenues across +our portfolio of Publishing brands to determine the appropriate cash-generating unit. The Group +operates its Publishing brands such that a majority of the revenues are interdependent and +revenue would be materially lower if brands operated in isolation. As such, management do not +consider that an impairment review at an individual brand level is appropriate or practical. As the +Group continues to centralise revenue generating functions and has moved to a matrix operating +structure over the past few years, all of the individual brands in Publishing have increased revenue +interdependency and are assessed for impairment as a single Publishing cash-generating unit. +Historical Legal Issues (note 27) +Following the judgment handed down on 15 December 2023, all claims issued after 31 October 2020 +are now likely to be considered time barred and subsequently dismissed, other than where +individuals can demonstrate there were exceptional circumstances why they could not have been +aware of their putative claims. This has significantly reduced the amounts that are expected to be +paid out and has resulted in a change to the provision estimate and a net decrease of £20.2m. + Reach plc Annual Report 2023 157 +Notes to the consolidated financial statements continued +3 Accounting policies continued +Critical judgements in applying the Group’s accounting policies continued +Historical Legal Issues (note 27) continued +Subsequently, the test claimants’ application for permission to appeal was refused by the trial judge on 9 +February 2024, with claimants having a further short period to apply for permission to appeal to the Court of +Appeal. The prospects of permission being granted and a successful appeal ensuing are deemed remote +and as such no contingent liability has been disclosed in the accounts. +4 Segments +The performance of the Group is presented as a single reporting segment as this is the basis of +internal reports regularly reviewed by the Board and chief operating decision-maker (executive +directors) to allocate resources and to assess performance. The Group’s operations are primarily +located in the UK and the Group is not subject to significant seasonality during the year. +5 Revenue + +2023 +£m +2022 +£m +Print 438.8 448.6 + Circulation 312.5 307.7 + Advertising 76.6 86.9 + Printing 20.2 23.1 + Other 29.5 30.9 +Digital 127.4 149.8 +Other 2.4 3.0 +Total revenue 568.6 601.4 +The Group’s operations are located primarily in the UK. The Group’s revenue by location of +customers is set out below: + +2023 +£m +2022 +£m +UK 542.4 574.1 +Europe 25.5 27.1 +Rest of World 0.7 0.2 +Total revenue 568.6 601.4 +The Group has two customers (representing over 80% of the circulation revenue) where revenues +represent more than 10% of total revenue. +6 Operating profit + +2023 +£m +2022 +£m +Operating profit for the period is arrived at after (charging)/crediting: +Staff costs (note 7) (223.0) (234.7) +Cost of inventories recognised as cost of sales (67.9) (84.2) +Amortisation of other intangible assets (note 16) (4.9) (2.1) +Depreciation of property, plant and equipment (note 17) (13.9) (15.2) +Depreciation of right-of-use assets (note 18) (2.8) (2.9) +Trade receivables impairment (note 23) (0.2) (0.5) +Net foreign exchange (loss)/gain (0.7) 0.7 +Operating adjusted items (note 8) +– excluding associates (48.9) (33.4) +– share of associates (1.5) (1.4) +Auditors’ remuneration: +Fees payable to the Company’s auditors for the audit of the Company’s +annual financial statements (0.8) (0.8) +Fees payable to the Company’s auditors for the other services to the +Group: +– the audit of the Company’s subsidiaries (0.5) (0.5) +Total audit fees (1.3) (1.3) +Non-audit fees payable to the Company’s auditors for: +– audit-related assurance services (0.1) (0.1) +Total non-audit fees (0.1) (0.1) +Total fees (1.4) (1.4) +There are also £1k of fees for other non-audit services during the year (2022: £1k). +A description of the work of the Audit & Risk Committee is set out in the Audit & Risk Committee +Report on pages 96 to 103 and includes an explanation of how the objectivity and independence +of the auditors are safeguarded when non-audit services are provided by the auditors. +157 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_160.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_160.txt new file mode 100644 index 0000000000000000000000000000000000000000..f21b4fe09b49b09db045935145af4701f8192487 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_160.txt @@ -0,0 +1,70 @@ + Reach plc Annual Report 2023 158 +Notes to the consolidated financial statements continued +7 Staff costs +The average monthly number of persons, including executive directors, employed by the Group in +the period was: + +2023 +Number +2022 +Number +Production and editorial 2,994 3,369 +Sales and distribution 761 916 +Administration 348 373 +Total 4,103 4,658 +The majority of employees are primarily employed in the UK. The above excludes casual +employees working for the Group during the period due to the impracticality of determining an +average. +Staff costs, including directors’ emoluments, incurred during the period were: + +2023 +£m +2022 +£m +Wages and salaries (183.1) (192.5) +Social security costs (21.3) (22.6) +Share-based payments charge in the period (note 32) (1.3) (1.5) +Pension costs relating to defined contribution pension schemes (note 21) (17.3) (18.1) +Total (223.0) (234.7) +Wages and salaries include bonuses payable in the period. Restructuring costs and the National +Insurance costs relating to share awards which are included in operating adjusted items (note 8) +are excluded from staff costs. +Disclosure of individual directors’ remuneration, share awards, long-term incentive schemes, +pension contributions and pension entitlements required by the Companies Act 2006 and those +elements specified for audit by the Financial Conduct Authority are shown in the tables in the +Remuneration Report on pages 104 to 126 and form part of these consolidated financial statements. +8 Operating adjusted items + +2023 +£m +2022 +£m +Provision for historical legal issues (note 27) 20.2 (11.0) +Restructuring charges in respect of cost reduction measures (note 27) (26.9) (15.5) +(Impairment of sublease)/sublet of closed print site (notes 18, 19 and 27) (19.4) 16.6 +Other property-related costs (note 35) (8.0) (4.6) +Pension administrative expenses and past service costs +(note 21) (5.5) (14.8) +Other items (note 35) (9.3) (4.1) +Operating adjusted items included in administrative expenses (48.9) (33.4) +Operating adjusted items included in share of results of associates (note 20) (1.5) (1.4) +Total operating adjusted items (50.4) (34.8) +Operating adjusted items relate to costs or income that derive from events or transactions that +fall within the normal activities of the Group, but are excluded from the Group’s adjusted profit +measures, individually or, if of a similar type in aggregate, due to their size and/or nature in order to +better reflect management’s view of the performance of the Group. The adjusted profit measures +are not recognised profit measures under IFRS and may not be directly comparable with adjusted +profit measures used by other companies. Set out in note 35 is the reconciliation between the +statutory and adjusted results which includes descriptions of the items included in adjusted items. +The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the provision for historical +legal issues relating to the cost associated with dealing with and resolving civil claims in relation +to historical phone hacking and unlawful information gathering (note 27). This material reduction is +driven by the judgment handed down during December 2023 in respect of test claims. As a result +of the ruling, all claims issued after 31 October 2020 are now likely to be dismissed other than where +individuals can demonstrate specific exceptional circumstances, and therefore this has +significantly reduced the amounts that are expected to be paid out. +Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost management actions +taken in the period. +158 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_161.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_161.txt new file mode 100644 index 0000000000000000000000000000000000000000..668913afc5dfb00aa4550f2619ee9290b0b2d614 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_161.txt @@ -0,0 +1,127 @@ + Reach plc Annual Report 2023 158 +Notes to the consolidated financial statements continued +7 Staff costs +The average monthly number of persons, including executive directors, employed by the Group in +the period was: + +2023 +Number +2022 +Number +Production and editorial 2,994 3,369 +Sales and distribution 761 916 +Administration 348 373 +Total 4,103 4,658 +The majority of employees are primarily employed in the UK. The above excludes casual +employees working for the Group during the period due to the impracticality of determining an +average. +Staff costs, including directors’ emoluments, incurred during the period were: + +2023 +£m +2022 +£m +Wages and salaries (183.1) (192.5) +Social security costs (21.3) (22.6) +Share-based payments charge in the period (note 32) (1.3) (1.5) +Pension costs relating to defined contribution pension schemes (note 21) (17.3) (18.1) +Total (223.0) (234.7) +Wages and salaries include bonuses payable in the period. Restructuring costs and the National +Insurance costs relating to share awards which are included in operating adjusted items (note 8) +are excluded from staff costs. +Disclosure of individual directors’ remuneration, share awards, long-term incentive schemes, +pension contributions and pension entitlements required by the Companies Act 2006 and those +elements specified for audit by the Financial Conduct Authority are shown in the tables in the +Remuneration Report on pages 104 to 126 and form part of these consolidated financial statements. +8 Operating adjusted items + +2023 +£m +2022 +£m +Provision for historical legal issues (note 27) 20.2 (11.0) +Restructuring charges in respect of cost reduction measures (note 27) (26.9) (15.5) +(Impairment of sublease)/sublet of closed print site (notes 18, 19 and 27) (19.4) 16.6 +Other property-related costs (note 35) (8.0) (4.6) +Pension administrative expenses and past service costs +(note 21) (5.5) (14.8) +Other items (note 35) (9.3) (4.1) +Operating adjusted items included in administrative expenses (48.9) (33.4) +Operating adjusted items included in share of results of associates (note 20) (1.5) (1.4) +Total operating adjusted items (50.4) (34.8) +Operating adjusted items relate to costs or income that derive from events or transactions that +fall within the normal activities of the Group, but are excluded from the Group’s adjusted profit +measures, individually or, if of a similar type in aggregate, due to their size and/or nature in order to +better reflect management’s view of the performance of the Group. The adjusted profit measures +are not recognised profit measures under IFRS and may not be directly comparable with adjusted +profit measures used by other companies. Set out in note 35 is the reconciliation between the +statutory and adjusted results which includes descriptions of the items included in adjusted items. +The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the provision for historical +legal issues relating to the cost associated with dealing with and resolving civil claims in relation +to historical phone hacking and unlawful information gathering (note 27). This material reduction is +driven by the judgment handed down during December 2023 in respect of test claims. As a result +of the ruling, all claims issued after 31 October 2020 are now likely to be dismissed other than where +individuals can demonstrate specific exceptional circumstances, and therefore this has +significantly reduced the amounts that are expected to be paid out. +Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost management actions +taken in the period. + Reach plc Annual Report 2023 159 +Notes to the consolidated financial statements continued +8 Operating adjusted items continued +Following the sublet of the vacant print site during 2022 which resulted in the reversal of an +impairment in right-of-use assets of £11.0m and previously onerous costs of the vacant site of +£5.6m, the sub-lessee entered into administration during 2023. As a result, the corresponding +£10.8m finance lease receivable has been impaired along with the subsequent recognition of +onerous costs of £8.6m of the vacant site during the period. +Other property-related costs comprise the impairment of vacant freehold property costs (£4.3m), +vacant freehold property-related costs (£1.4m) and onerous lease and related costs (£2.6m) less +the profit on sale of assets (£0.3m). In 2022, other property-related costs related to the impairment +of vacant freehold property (£4.2m) and plant and equipment (£0.8m) less the profit on sale of +impaired assets (£0.4m). +Pension costs of £5.5m (2022: £14.8m) comprise pension administrative expenses (2022: £4.2m). +2022 also included £10.6m of past service costs relating to a Barber Window equalisation +adjustment. +Other adjusted items comprise the Group’s legal fees in respect of historical legal issues (£5.3m), +adviser costs in relation to the triennial funding valuations (£2.5m), internal pension administrative +expenses (£0.6m), corporate simplification costs (£0.5m), and other restructuring-related project +costs (£0.7m) less a reduction in National Insurance costs relating to share awards (£0.3m). In 2022, +other adjusted items comprise the Group’s legal fees in respect of historical legal issues (£5.2m), +adviser costs in relation to the triennial funding valuations (£1.6m), less a reduction in National +Insurance costs relating to share awards (£2.7m). +9 Interest income + +2023 +£m +2022 +£m +Interest income on bank deposits 0.6 0.1 +Interest on finance lease receivable 0.4 – +Interest income 1.0 0.1 +10 Finance costs + +2023 +£m +2022 +£m +Interest and charges on borrowings (3.3) (1.8) +Interest on lease liabilities (1.2) (1.1) +Finance costs (4.5) (2.9) +11 Tax charge + +2023 +£m +2022 +£m +Corporation tax charge for the period (5.5) (4.5) +Prior period adjustment (1.1) (0.7) +Current tax charge (6.6) (5.2) +Deferred tax charge for the period (8.1) (9.0) +Prior period adjustment (1.0) 0.3 +Deferred tax rate change 0.5 – +Deferred tax charge (8.6) (8.7) +Tax charge (15.2) (13.9) + + +159 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_162.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_162.txt new file mode 100644 index 0000000000000000000000000000000000000000..c52394c996e12f4214ec013b6474960e7a1cc844 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_162.txt @@ -0,0 +1,70 @@ + Reach plc Annual Report 2023 160 +Notes to the consolidated financial statements continued +11 Tax charge continued +Reconciliation of tax charge +2023 +£m +2022 +£m +Profit before tax 36.7 66.2 +Standard rate of corporation tax of 23.5% (2022: 19.0%) (8.6) (12.6) +Variance in overseas tax rates 0.9 – +Impact of change in tax rates 0.5 – +Tax effect of permanent items that are not included in determining +taxable profit (5.8) (1.2) +Deferred tax not recognised (0.4) – +Prior period adjustment (2.1) (0.4) +Tax effect of share of results of associates 0.3 0.3 +Tax charge (15.2) (13.9) +The standard rate of corporation tax for the period is 23.5% (2022: 19.0%). The tax effect of items that +are not deductible in determining taxable profit includes certain costs where there is uncertainty +as to their deductibility. The current tax receivable of £8.1m (2022: £13.9m) is net of the uncertain tax +provision of £23.4m (2022: £19.1m). At the reporting date, the maximum amount of the additional +unprovided tax exposure relating to an uncertain tax item is £4.4m (2022: £8.1m). There is uncertainty +as to the final outcome and timing of this item, with a possible range of outcomes for the potential +tax exposure being nil to £27.8m (2022: nil to £27.2m). +The tax on actuarial losses (2022: losses) on defined benefit pension schemes taken to the +consolidated statement of comprehensive income is a deferred tax credit of £0.1m (2022: credit +of £7.4m). +The amount taken to the consolidated income statement as a result of pension contributions +was £11.4m (2022: £7.1m). +12 Dividends + +2023 +Pence +per share +2022 +Pence +per share +Amounts recognised as distributions to equity holders in the period +Dividends paid per share – prior year final dividend 4.46 4.46 +Dividends paid per share – interim dividend 2.88 2.88 +Total dividends paid per share 7.34 7.34 + +Dividend proposed per share but not paid nor included in the +accounting records 4.46 4.46 +The Board proposes a final dividend for 2023 of 4.46 pence per share. An interim dividend for 2023 +of 2.88 pence per share was paid on 22 September 2023 bringing the total dividend in respect of +2023 to 7.34 pence per share. The 2023 final dividend payment is expected to amount to £14.0m. +On 3 May 2023, the final dividend proposed for 2022 of 4.46 pence per share was approved by +shareholders at the Annual General Meeting and was paid on 2 June 2023. +Total dividends paid in 2023 were £23.1m (2022 final dividend payment of £14.0m and 2023 interim +dividend payment of £9.1m). +13 Earnings per share +Basic earnings per share is calculated by dividing profit for the period attributable to equity holders +of the parent by the weighted average number of ordinary shares during the period, and diluted +earnings per share is calculated by adjusting the weighted average number of ordinary shares +in issue on the assumption of conversion of all potentially dilutive ordinary shares. + +2023 +Thousand +2022 +Thousand +Weighted average number of ordinary shares for basic earnings +per share 314,206 312,153 +Effect of potential dilutive ordinary shares in respect of share awards 2,893 4,828 +Weighted average number of ordinary shares for diluted earnings +per share 317,099 316,981 +160 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_163.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_163.txt new file mode 100644 index 0000000000000000000000000000000000000000..d905ce81b65542a010925301f08e563b409f2f7e --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_163.txt @@ -0,0 +1,131 @@ + Reach plc Annual Report 2023 160 +Notes to the consolidated financial statements continued +11 Tax charge continued +Reconciliation of tax charge +2023 +£m +2022 +£m +Profit before tax 36.7 66.2 +Standard rate of corporation tax of 23.5% (2022: 19.0%) (8.6) (12.6) +Variance in overseas tax rates 0.9 – +Impact of change in tax rates 0.5 – +Tax effect of permanent items that are not included in determining +taxable profit (5.8) (1.2) +Deferred tax not recognised (0.4) – +Prior period adjustment (2.1) (0.4) +Tax effect of share of results of associates 0.3 0.3 +Tax charge (15.2) (13.9) +The standard rate of corporation tax for the period is 23.5% (2022: 19.0%). The tax effect of items that +are not deductible in determining taxable profit includes certain costs where there is uncertainty +as to their deductibility. The current tax receivable of £8.1m (2022: £13.9m) is net of the uncertain tax +provision of £23.4m (2022: £19.1m). At the reporting date, the maximum amount of the additional +unprovided tax exposure relating to an uncertain tax item is £4.4m (2022: £8.1m). There is uncertainty +as to the final outcome and timing of this item, with a possible range of outcomes for the potential +tax exposure being nil to £27.8m (2022: nil to £27.2m). +The tax on actuarial losses (2022: losses) on defined benefit pension schemes taken to the +consolidated statement of comprehensive income is a deferred tax credit of £0.1m (2022: credit +of £7.4m). +The amount taken to the consolidated income statement as a result of pension contributions +was £11.4m (2022: £7.1m). +12 Dividends + +2023 +Pence +per share +2022 +Pence +per share +Amounts recognised as distributions to equity holders in the period +Dividends paid per share – prior year final dividend 4.46 4.46 +Dividends paid per share – interim dividend 2.88 2.88 +Total dividends paid per share 7.34 7.34 + +Dividend proposed per share but not paid nor included in the +accounting records 4.46 4.46 +The Board proposes a final dividend for 2023 of 4.46 pence per share. An interim dividend for 2023 +of 2.88 pence per share was paid on 22 September 2023 bringing the total dividend in respect of +2023 to 7.34 pence per share. The 2023 final dividend payment is expected to amount to £14.0m. +On 3 May 2023, the final dividend proposed for 2022 of 4.46 pence per share was approved by +shareholders at the Annual General Meeting and was paid on 2 June 2023. +Total dividends paid in 2023 were £23.1m (2022 final dividend payment of £14.0m and 2023 interim +dividend payment of £9.1m). +13 Earnings per share +Basic earnings per share is calculated by dividing profit for the period attributable to equity holders +of the parent by the weighted average number of ordinary shares during the period, and diluted +earnings per share is calculated by adjusting the weighted average number of ordinary shares +in issue on the assumption of conversion of all potentially dilutive ordinary shares. + +2023 +Thousand +2022 +Thousand +Weighted average number of ordinary shares for basic earnings +per share 314,206 312,153 +Effect of potential dilutive ordinary shares in respect of share awards 2,893 4,828 +Weighted average number of ordinary shares for diluted earnings +per share 317,099 316,981 + Reach plc Annual Report 2023 161 +Notes to the consolidated financial statements continued +13 Earnings per share continued +The weighted average number of potentially dilutive ordinary shares not currently dilutive was +6,328,039 (2022: 5,406,814). +Statutory earnings per share +2023 +Pence +2022 +Pence +Earnings per share – basic 6.8 16.8 +Earnings per share – diluted 6.8 16.5 + +Adjusted earnings per share +2023 +Pence +2022 +Pence +Earnings per share – basic 21.8 27.1 +Earnings per share – diluted 21.6 26.7 +Set out in note 35 is the reconciliation between the statutory and adjusted results. +14 Cash flows from operating activities + +2023 +£m +2022 +£m +Operating profit 46.1 71.3 +Depreciation of property, plant and equipment 13.9 15.2 +Depreciation of right-of-use assets 2.8 2.9 +Amortisation of other intangible assets 4.9 2.1 +Impairment of property, plant and equipment 4.7 5.0 +Reversal of impairment of right-of-use assets – (11.0) +Impairment of finance lease receivable 10.8 – +Impairment of right-of-use assets 1.3 – +Profit on disposal of property, plant and equipment (0.3) (0.4) +Share of results of associates (1.4) (1.4) +Share-based payments charge 1.3 1.5 +Pension administrative expenses and past service costs 5.5 14.8 +Operating cash flows before movements in working capital 89.6 100.0 +Decrease/(increase) in inventories 1.5 (7.4) +Decrease in receivables 9.5 7.2 +Decrease in payables (24.2) (19.7) +Cash flows from operating activities 76.4 80.1 +15 Goodwill + +Total +£m +Cost +At 27 December 2021 189.9 +At 25 December 2022 189.9 +At 31 December 2023 189.9 +Accumulated impairment +At 27 December 2021 (154.0) +At 25 December 2022 (154.0) +At 31 December 2023 (154.0) +Carrying amount +At 25 December 2022 35.9 +At 31 December 2023 35.9 +All goodwill at the reporting date relates to Publishing. Note 16 sets out the results of the impairment +review at the reporting date relating to Publishing. +161 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_164.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_164.txt new file mode 100644 index 0000000000000000000000000000000000000000..386392bd7326fd5373cc9f92d49ec54cd73dcfae --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_164.txt @@ -0,0 +1,60 @@ + Reach plc Annual Report 2023 162 +Notes to the consolidated financial statements continued +16 Other intangible assets + +Publishing +rights and +titles +£m +Internally +generated +assets +£m +Total +£m +Cost +At 27 December 2021 2,100.3 6.0 2,106.3 +Additions – 10.7 10.7 +At 25 December 2022 2,100.3 16.7 2,117.0 +Additions – 12.8 12.8 +At 31 December 2023 2,100.3 29.5 2,129.8 +Accumulated amortisation +At 27 December 2021 (1,281.6) (0.4) (1,282.0) +Charge for the period – (2.1) (2.1) +At 25 December 2022 (1,281.6) (2.5) (1,284.1) +Charge for the period – (4.9) (4.9) +At 31 December 2023 (1,281.6) (7.4) (1,289.0) +Carrying amount +At 25 December 2022 818.7 14.2 832.9 +At 31 December 2023 818.7 22.1 840.8 +During the year, the Group capitalised internally generated assets relating to software and website +development costs of £12.8m (2022: £10.7m). These assets are amortised using the straight-line +method over their estimated useful lives (3-5 years). +Publishing rights and titles are not amortised. There is judgement required in continuing to adopt +an indefinite life assumption in respect of publishing rights and titles. The directors consider +publishing rights and titles (with a carrying amount of £818.7m) have indefinite economic lives +due to the longevity of the brands and the ability to evolve them in an ever-changing media +landscape. The brands are central to the delivery of the Customer Value Strategy which is +delivering digital revenue growth. This, combined with our inbuilt and relentless focus on +maximising efficiency, gives confidence that the delivery of sustainable growth in revenue, +profit and cash flow is achievable in the future. +There is judgement required in determining the cash-generating units. At each reporting date +management review the interdependency of revenues across our Publishing brands to determine +the appropriate cash-generating unit. The Group operates its Publishing brands such that a +majority of the revenues are interdependent and revenue would be materially lower if brands +operated in isolation. As such, management do not consider that an impairment review at an +individual brand level is appropriate or practical. As the Group continues to centralise revenue +generating functions and has moved to a matrix operating structure over the past few years, all +of the individual brands in Publishing have increased revenue interdependency and are assessed +for impairment as a single Publishing cash-generating unit. +The Group tests the carrying value of assets at the cash-generating unit level for impairment +annually or more frequently if there are indicators that assets might be impaired. The review +is undertaken by assessing whether the carrying value of assets is supported by their +value-in-use which is calculated as the net present value of future cash flows derived from +those assets, using cash flow projections. If an impairment charge is required this is allocated +first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and +then to the other assets of the cash-generating unit but subject to not reducing any asset +below its recoverable amount. +162 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_165.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_165.txt new file mode 100644 index 0000000000000000000000000000000000000000..12a36d07877d0501d07606267bef689dbaed4889 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_165.txt @@ -0,0 +1,141 @@ + Reach plc Annual Report 2023 162 +Notes to the consolidated financial statements continued +16 Other intangible assets + +Publishing +rights and +titles +£m +Internally +generated +assets +£m +Total +£m +Cost +At 27 December 2021 2,100.3 6.0 2,106.3 +Additions – 10.7 10.7 +At 25 December 2022 2,100.3 16.7 2,117.0 +Additions – 12.8 12.8 +At 31 December 2023 2,100.3 29.5 2,129.8 +Accumulated amortisation +At 27 December 2021 (1,281.6) (0.4) (1,282.0) +Charge for the period – (2.1) (2.1) +At 25 December 2022 (1,281.6) (2.5) (1,284.1) +Charge for the period – (4.9) (4.9) +At 31 December 2023 (1,281.6) (7.4) (1,289.0) +Carrying amount +At 25 December 2022 818.7 14.2 832.9 +At 31 December 2023 818.7 22.1 840.8 +During the year, the Group capitalised internally generated assets relating to software and website +development costs of £12.8m (2022: £10.7m). These assets are amortised using the straight-line +method over their estimated useful lives (3-5 years). +Publishing rights and titles are not amortised. There is judgement required in continuing to adopt +an indefinite life assumption in respect of publishing rights and titles. The directors consider +publishing rights and titles (with a carrying amount of £818.7m) have indefinite economic lives +due to the longevity of the brands and the ability to evolve them in an ever-changing media +landscape. The brands are central to the delivery of the Customer Value Strategy which is +delivering digital revenue growth. This, combined with our inbuilt and relentless focus on +maximising efficiency, gives confidence that the delivery of sustainable growth in revenue, +profit and cash flow is achievable in the future. +There is judgement required in determining the cash-generating units. At each reporting date +management review the interdependency of revenues across our Publishing brands to determine +the appropriate cash-generating unit. The Group operates its Publishing brands such that a +majority of the revenues are interdependent and revenue would be materially lower if brands +operated in isolation. As such, management do not consider that an impairment review at an +individual brand level is appropriate or practical. As the Group continues to centralise revenue +generating functions and has moved to a matrix operating structure over the past few years, all +of the individual brands in Publishing have increased revenue interdependency and are assessed +for impairment as a single Publishing cash-generating unit. +The Group tests the carrying value of assets at the cash-generating unit level for impairment +annually or more frequently if there are indicators that assets might be impaired. The review +is undertaken by assessing whether the carrying value of assets is supported by their +value-in-use which is calculated as the net present value of future cash flows derived from +those assets, using cash flow projections. If an impairment charge is required this is allocated +first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and +then to the other assets of the cash-generating unit but subject to not reducing any asset +below its recoverable amount. + Reach plc Annual Report 2023 163 +Notes to the consolidated financial statements continued +16 Other intangible assets continued +The impairment review in respect of the Publishing cash-generating unit concluded that no +impairment charge was required. +For the impairment review, cash flows have been prepared using the approved Budget for 2024 +and projections for a further nine years as this is the period over which the transformation to digital +can be assessed. The projections for 2025 to 2033 are internal projections based on continued +decline in print revenues and growth in digital revenues and the associated change in the cost +base as a result of the changing revenue mix, together with ongoing efficiency initiatives. These +projections are used to develop the key assumption of EBITDA growth over the 10 year period. The +long-term growth rates beyond the 10-year period have been assessed at 0.9% (2022: 1.0%) based +on the Board’s view of the market position and in light of current market expectations including the +exposure to future digital growth opportunities. We continue to believe that there are significant +longer-term benefits of our scale national and local digital audiences and there are opportunities +to grow revenue and profit in the longer term. +The discount rate reflects the weighted average cost of capital of the Group. The current post-tax +and equivalent pre-tax discount rate used is 10.2% (2022: 10.8%) and 13.6% (2022: 13.9%) respectively. +In respect of the values assigned by management to each of the above assumptions used to develop the +key assumption of EBITDA growth, revenue is based on past performance and management’s expectations +of market development in respect of volumes and prices are based on current industry trends and long- +term inflation forecasts. Sales margins are based on past performance and management’s expectations +for the future. Other operating costs are based on management’s forecasts considering the current +structure of the business, adjusting for inflationary increases and the transition of the cost base arising from +the shift from print to digital. The long-term growth rate used to extrapolate cash flows beyond the budget +period is based on future anticipated growth opportunities, including consideration of industry forecasts. +The discount rate reflects specific risks relating to the industry in which the Group operates. +The impairment review is highly sensitive to reasonably possible changes in key assumptions +used in the value-in-use calculations and there is uncertainty relating to the current challenging +macroeconomic environment. The headroom in the impairment review is £53m (2022: £183m). +EBITDA in the 10-year projections is forecast to grow at a CAGR of 0.2% (2022: 1.6%). Changes in +one or more assumptions used to develop the EBITDA growth assumption such as print revenue +declining at a faster rate than projected, digital revenue growth being significantly lower than +projected or the associated change in the cost base being different than projected, could lead to a +reasonably possible change in EBITDA growth. This would lead to an impairment if these resulted in +the EBITDA in the 10-year projections declining at a CAGR of 0.6% (2022: decline 0.9%). Alternatively, +an increase in the discount rate by 0.6 percentage points (2022: 2.4 percentage points) would lead +to the removal of the headroom. +17 Property, plant and equipment + +Freehold land +and buildings +£m +Plant and +equipment +£m +Asset under +construction +£m +Total +£m +Cost +At 27 December 2021 204.6 360.5 2.2 567.3 +Additions – 1.7 1.3 3.0 +Disposals – (24.0) – (24.0) +Reclassification – 3.0 (3.0) – +At 25 December 2022 204.6 341.2 0.5 546.3 +Additions – 1.6 2.1 3.7 +Disposals (2.3) (0.7) – (3.0) +Reclassification – 1.1 (1.1) – +Transfer to assets classified as held for sale (46.7) – – (46.7) +At 31 December 2023 155.6 343.2 1.5 500.3 +Accumulated depreciation and +impairment +At 27 December 2021 (99.3) (310.7) – (410.0) +Charge for the period (2.6) (12.6) – (15.2) +Eliminated on disposal – 24.0 – 24.0 +Impairment (4.2) (0.8) – (5.0) +At 25 December 2022 (106.1) (300.1) – (406.2) +Charge for the period (2.6) (11.3) – (13.9) +Eliminated on disposal 1.7 0.7 – 2.4 +Impairment (4.3) (0.4) – (4.7) +Transfer to assets classified as held for sale 35.7 – – 35.7 +At 31 December 2023 (75.6) (311.1) – (386.7) +Carrying amount +At 25 December 2022 98.5 41.1 0.5 140.1 +At 31 December 2023 80.0 32.1 1.5 113.6 +Impairment of vacant freehold property of £4.3m (2022: £4.2m) (note 8) was as a result of the +carrying value of certain Group properties being in excess of their market value at the reporting +date. Plant and equipment was impaired by £0.4m (2022: £0.8m) in the period due to site closures +and is included within onerous lease and related costs of £2.6m (note 8). +163 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_166.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_166.txt new file mode 100644 index 0000000000000000000000000000000000000000..8546627cdf9cfefb4edb67d5750d0d16aab82625 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_166.txt @@ -0,0 +1,77 @@ + Reach plc Annual Report 2023 164 +Notes to the consolidated financial statements continued +17 Property, plant and equipment continued +In 2022, £24.0m of disposals in cost and accumulated depreciation relate to the scrapping of plant +and equipment as a result of the sublet of the vacant print site, which was fully impaired in 2020. +18 Right-of-use assets + +Properties +£m +Vehicles +£m +Total +£m +Cost +At 27 December 2021 43.1 3.4 46.5 +Additions 1.1 – 1.1 +Derecognition at start of sublease classified as finance lease (14.6) – (14.6) +Derecognition at end of lease term (2.2) (0.2) (2.4) +At 25 December 2022 27.4 3.2 30.6 +Additions 4.1 2.0 6.1 +Other movements 0.1 – 0.1 +Derecognition at end of lease term (3.5) (1.6) (5.1) +At 31 December 2023 28.1 3.6 31.7 +Accumulated depreciation and impairment +At 27 December 2021 (31.8) (2.0) (33.8) +Charge for the period (2.2) (0.7) (2.9) +Reversal of impairment 11.0 – 11.0 +Derecognition at start of sublease classified as finance lease 3.6 – 3.6 +Derecognition at end of lease term 2.2 0.2 2.4 +At 25 December 2022 (17.2) (2.5) (19.7) +Charge for the period (2.1) (0.7) (2.8) +Impairment (1.3) – (1.3) +Derecognition at end of lease term 3.5 1.6 5.1 +At 31 December 2023 (17.1) (1.6) (18.7) +Carrying amount +At 25 December 2022 10.2 0.7 10.9 +At 31 December 2023 11.0 2.0 13.0 +Other movements include the impact of changes in lease term. +In 2022, the sublet of the vacant print site which was closed in 2020 resulted in the reversal of an +impairment in right-of-use assets of £11.0m (note 8). The sublet was classified as a finance lease +and the net investment in the lease of £11.0m was recognised as a finance lease receivable in the +consolidated balance sheet at 25 December 2022. +Amounts recognised in the consolidated income statement +The consolidated income statement includes the following amounts relating to leases: + +2023 +£m +2022 +£m +Depreciation of right-of-use assets (2.8) (2.9) +Impairment of right-of-use assets (1.3) – +Impairment of finance lease receivable (10.8) – +Reversal of impairment of right-of-use assets – 11.0 +Expenses relating to short-term leases (0.1) (0.1) +Interest on lease liabilities (included in finance cost) (1.2) (1.1) +Interest on finance lease receivable (included in interest income) 0.4 – +Total (charged)/credited to the consolidated income statement (15.8) 6.9 +Amounts recognised in the consolidated cash flow statement +The total cash outflow for leases in 2023 was £5.9m (2022: £6.7m). The total cash received in +relation to the finance lease receivable in 2023 was £0.6m (2022: nil). +19 Leases +Finance lease receivable + +Properties +£m +Total +£m +At 27 December 2021 – – +Recognition of receivable at commencement of sublease 11.0 11.0 +At 25 December 2022 11.0 11.0 +Interest income 0.4 0.4 +Lease receipts (0.6) (0.6) +Impairment (10.8) (10.8) +At 31 December 2023 – – +164 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_167.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_167.txt new file mode 100644 index 0000000000000000000000000000000000000000..5baaa81aab79ebc4dcc285fb6566fa126626de8f --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_167.txt @@ -0,0 +1,142 @@ + Reach plc Annual Report 2023 164 +Notes to the consolidated financial statements continued +17 Property, plant and equipment continued +In 2022, £24.0m of disposals in cost and accumulated depreciation relate to the scrapping of plant +and equipment as a result of the sublet of the vacant print site, which was fully impaired in 2020. +18 Right-of-use assets + +Properties +£m +Vehicles +£m +Total +£m +Cost +At 27 December 2021 43.1 3.4 46.5 +Additions 1.1 – 1.1 +Derecognition at start of sublease classified as finance lease (14.6) – (14.6) +Derecognition at end of lease term (2.2) (0.2) (2.4) +At 25 December 2022 27.4 3.2 30.6 +Additions 4.1 2.0 6.1 +Other movements 0.1 – 0.1 +Derecognition at end of lease term (3.5) (1.6) (5.1) +At 31 December 2023 28.1 3.6 31.7 +Accumulated depreciation and impairment +At 27 December 2021 (31.8) (2.0) (33.8) +Charge for the period (2.2) (0.7) (2.9) +Reversal of impairment 11.0 – 11.0 +Derecognition at start of sublease classified as finance lease 3.6 – 3.6 +Derecognition at end of lease term 2.2 0.2 2.4 +At 25 December 2022 (17.2) (2.5) (19.7) +Charge for the period (2.1) (0.7) (2.8) +Impairment (1.3) – (1.3) +Derecognition at end of lease term 3.5 1.6 5.1 +At 31 December 2023 (17.1) (1.6) (18.7) +Carrying amount +At 25 December 2022 10.2 0.7 10.9 +At 31 December 2023 11.0 2.0 13.0 +Other movements include the impact of changes in lease term. +In 2022, the sublet of the vacant print site which was closed in 2020 resulted in the reversal of an +impairment in right-of-use assets of £11.0m (note 8). The sublet was classified as a finance lease +and the net investment in the lease of £11.0m was recognised as a finance lease receivable in the +consolidated balance sheet at 25 December 2022. +Amounts recognised in the consolidated income statement +The consolidated income statement includes the following amounts relating to leases: + +2023 +£m +2022 +£m +Depreciation of right-of-use assets (2.8) (2.9) +Impairment of right-of-use assets (1.3) – +Impairment of finance lease receivable (10.8) – +Reversal of impairment of right-of-use assets – 11.0 +Expenses relating to short-term leases (0.1) (0.1) +Interest on lease liabilities (included in finance cost) (1.2) (1.1) +Interest on finance lease receivable (included in interest income) 0.4 – +Total (charged)/credited to the consolidated income statement (15.8) 6.9 +Amounts recognised in the consolidated cash flow statement +The total cash outflow for leases in 2023 was £5.9m (2022: £6.7m). The total cash received in +relation to the finance lease receivable in 2023 was £0.6m (2022: nil). +19 Leases +Finance lease receivable + +Properties +£m +Total +£m +At 27 December 2021 – – +Recognition of receivable at commencement of sublease 11.0 11.0 +At 25 December 2022 11.0 11.0 +Interest income 0.4 0.4 +Lease receipts (0.6) (0.6) +Impairment (10.8) (10.8) +At 31 December 2023 – – + Reach plc Annual Report 2023 165 +Notes to the consolidated financial statements continued +19 Leases continued +Finance lease receivable continued +Following the sublet of the vacant print site during 2022 under a finance lease which resulted in +the recognition of a finance lease receivable of £11.0m at the commencement of the sublease, +the sub-lessee has subsequently entered into administration during 2023. As a result, the +corresponding £10.8m finance lease receivable has been impaired down to nil. +The finance lease receivable (net investment in the lease) included in the consolidated balance +sheet is nil (2022: £11.0m). +The finance lease receivable has been analysed between current and non-current as follows: + +2023 +£m +2022 +£m +Current – 0.6 +Non-current – 10.4 +– 11.0 +The following table sets out the maturity analysis of finance lease receivables, showing the +undiscounted lease payments to be received after the reporting date. + +2023 +£m +2022 +£m +Less than one year – 1.2 +One to two years – 1.2 +Two to three years – 1.2 +Three to four years – 1.2 +Four to five years – 1.2 +Greater than five years – 9.1 +Total cash flows – 15.1 +Unearned finance income – (4.1) +Net investment in the lease – 11.0 +Lease liabilities +Lease liabilities represent rental obligations for office properties and motor vehicles. + +Properties +£m +Vehicles +£m +Total +£m +At 27 December 2021 (34.7) (1.5) (36.2) +Additions (1.1) – (1.1) +Interest costs (1.1) – (1.1) +Payments 6.0 0.7 6.7 +At 25 December 2022 (30.9) (0.8) (31.7) +Additions (4.1) (2.0) (6.1) +Interest costs (1.1) (0.1) (1.2) +Payments 5.2 0.7 5.9 +Other movements (0.1) – (0.1) +At 31 December 2023 (31.0) (2.2) (33.2) +Other movements include the impact of changes in lease term. +The lease liabilities have been analysed between current and non-current as follows: + +2023 +£m +2022 +£m +Current (4.7) (4.9) +Non-current (28.5) (26.8) +(33.2) (31.7) +The Group does not face significant liquidity risk in relation to its lease liabilities. +165 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_170.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_170.txt new file mode 100644 index 0000000000000000000000000000000000000000..15664858e53c4fdfac9de51291cf54d3143e132f --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_170.txt @@ -0,0 +1,75 @@ + Reach plc Annual Report 2023 168 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +At the reporting date, the funding deficits in all schemes are expected to be removed before or +around 2029 by a combination of the contributions and asset returns. Contributions (which include +funding for pension administrative expenses) are payable monthly. Contributions per the current +schedule of contributions are £60.9m pa (including £0.7m for the EN88 scheme to a separate bank +account) in 2024, £60.9m in 2025, £61.8m in 2026, £59.8m in 2027, £12.5m in 2028 and £8.6m in 2029. +The future deficit funding commitments are linked to the three-yearly actuarial valuations. +Although the funding commitments do not generally impact the IAS 19 position, IFRIC 14 guides +companies to consider for IAS 19 disclosures whether any surplus can be recognised as a balance +sheet asset and whether any future funding commitments in excess of the IAS 19 liability should +be provisioned for. Based on its interpretation of the rules for each of the defined benefit pension +schemes, the Group considers that it has an unconditional right to any potential surplus on the +ultimate wind-up after all benefits to members have been paid in respect of all of the schemes +except the WF Scheme. Under IFRIC 14 it is therefore appropriate to recognise any IAS 19 surpluses +which may emerge in future and not to recognise any potential additional liabilities in respect of +future funding commitments of all of the schemes except for the WF Scheme. For the WF Scheme +at the reporting date, the assets are surplus to the IAS 19 benefit liabilities and the impact of IFRIC 14 +removes this surplus. As no further contributions are expected to the WF Scheme, the Group no +longer recognises a deficit of its future deficit contribution commitment to the scheme. +The calculation of Guaranteed Minimum Pension (‘GMP’) is set out in legislation and members of +pension schemes that were contracted out of the State Earnings-Related Pension Scheme (‘SERPS’) +between 6 April 1978 and 5 April 1997 will have built up an entitlement to a GMP. GMPs were intended +to broadly replicate the SERPS pension benefits but due to their design they give rise to inequalities +between men and women, in particular, the GMP for a male comes into payment at age 65 +whereas for a female it comes into payment at the age of 60 and GMPs typically receive different +levels of increase to non GMP benefits. On 26 October 2018, the High Court handed down its +judgement in the Lloyds Trustees vs Lloyds Bank plc and Others case relating to the equalisation of +member benefits for the gender effects of GMP equalisation. This judgement creates a precedent +for other UK defined benefit schemes with GMPs. The judgement confirmed that GMP equalisation +was required for the period 17 May 1990 to 5 April 1997 and provided some clarification on legally +acceptable methods for achieving equalisation. An allowance for GMP equalisation was first +included within liabilities at 30 December 2018 and was recognised as a charge for past service +costs in the income statement. In 2020 further clarification was issued relating to GMP equalisation +in respect of transfers out of schemes and a further allowance for GMP equalisation was included +within liabilities at 27 December 2020 and was recognised as a charge for past service costs in the +income statement. The estimate is subject to change as we undertake more detailed member +calculations, as guidance is issued and/or as a result of future legal judgements. +Past service costs of £10.6m in 2022 related to a Barber Window equalisation adjustment identified +by the Trustees of the MGN Scheme during the prior year. The impact relates to the equalisation of +retirement ages to 65, which was previously implemented from 17 May 1990, rather than the date +of the Deed of Amendment of the Rules which was 4 April 1991. +Risks +Valuations for funding and accounting purposes are based on assumptions about future +economic and demographic variables. This results in the risk of a volatile valuation deficit and +the risk that the ultimate cost of paying benefits is higher than the current assessed liability value. +The main sources of risk are: +• investment risk: a reduction in asset returns (or assumed future asset returns); +• inflation risk: an increase in benefit increases (or assumed future increases); and +• longevity risk: an increase in average life spans (or assumed life expectancy). +These risks are managed by: +• investing in insured annuity policies: the income from these policies exactly matches the benefit +payments for the members covered, removing all of the above risks. At the reporting date the +insured annuity policies covered 15% of total liabilities; +• investing a proportion of assets in other classes such as government and corporate bonds and +in liability driven investments: changes in the values of the assets aim to broadly match changes +in the values of the uninsured liabilities, reducing the investment risk, however some risk remains +as the durations of the bonds are typically shorter than those of the liabilities and so the values +may still move differently. At the reporting date non-equity assets amounted to 98% of assets +excluding the insured annuity policies; +• investing a proportion of assets in equities: with the aim of achieving outperformance and so +reducing the deficits over the long term. At the reporting date this amounted to 2% of assets +excluding the insured annuity policies; and +• the gradual sale of equities over time to purchase additional annuity policies or liability matching +investments: to further reduce risk as the schemes, which are closed to future accrual, mature. +Pension scheme accounting deficits are snapshots at moments in time and are not used by +either the Group or Trustees to frame funding policy. The Group and Trustees seek to be aligned in +focusing on the long-term sustainability of the funding policy which aims to balance the interests +of the Group’s shareholders and members of the schemes. The Group and Trustees also seek +to be aligned in reducing pensions risk over the long term and at a pace which is affordable +to the Group. +168 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_171.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_171.txt new file mode 100644 index 0000000000000000000000000000000000000000..610de443b395389a0ba1e5bfd8c36ee1c13e238c --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_171.txt @@ -0,0 +1,138 @@ + Reach plc Annual Report 2023 168 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +At the reporting date, the funding deficits in all schemes are expected to be removed before or +around 2029 by a combination of the contributions and asset returns. Contributions (which include +funding for pension administrative expenses) are payable monthly. Contributions per the current +schedule of contributions are £60.9m pa (including £0.7m for the EN88 scheme to a separate bank +account) in 2024, £60.9m in 2025, £61.8m in 2026, £59.8m in 2027, £12.5m in 2028 and £8.6m in 2029. +The future deficit funding commitments are linked to the three-yearly actuarial valuations. +Although the funding commitments do not generally impact the IAS 19 position, IFRIC 14 guides +companies to consider for IAS 19 disclosures whether any surplus can be recognised as a balance +sheet asset and whether any future funding commitments in excess of the IAS 19 liability should +be provisioned for. Based on its interpretation of the rules for each of the defined benefit pension +schemes, the Group considers that it has an unconditional right to any potential surplus on the +ultimate wind-up after all benefits to members have been paid in respect of all of the schemes +except the WF Scheme. Under IFRIC 14 it is therefore appropriate to recognise any IAS 19 surpluses +which may emerge in future and not to recognise any potential additional liabilities in respect of +future funding commitments of all of the schemes except for the WF Scheme. For the WF Scheme +at the reporting date, the assets are surplus to the IAS 19 benefit liabilities and the impact of IFRIC 14 +removes this surplus. As no further contributions are expected to the WF Scheme, the Group no +longer recognises a deficit of its future deficit contribution commitment to the scheme. +The calculation of Guaranteed Minimum Pension (‘GMP’) is set out in legislation and members of +pension schemes that were contracted out of the State Earnings-Related Pension Scheme (‘SERPS’) +between 6 April 1978 and 5 April 1997 will have built up an entitlement to a GMP. GMPs were intended +to broadly replicate the SERPS pension benefits but due to their design they give rise to inequalities +between men and women, in particular, the GMP for a male comes into payment at age 65 +whereas for a female it comes into payment at the age of 60 and GMPs typically receive different +levels of increase to non GMP benefits. On 26 October 2018, the High Court handed down its +judgement in the Lloyds Trustees vs Lloyds Bank plc and Others case relating to the equalisation of +member benefits for the gender effects of GMP equalisation. This judgement creates a precedent +for other UK defined benefit schemes with GMPs. The judgement confirmed that GMP equalisation +was required for the period 17 May 1990 to 5 April 1997 and provided some clarification on legally +acceptable methods for achieving equalisation. An allowance for GMP equalisation was first +included within liabilities at 30 December 2018 and was recognised as a charge for past service +costs in the income statement. In 2020 further clarification was issued relating to GMP equalisation +in respect of transfers out of schemes and a further allowance for GMP equalisation was included +within liabilities at 27 December 2020 and was recognised as a charge for past service costs in the +income statement. The estimate is subject to change as we undertake more detailed member +calculations, as guidance is issued and/or as a result of future legal judgements. +Past service costs of £10.6m in 2022 related to a Barber Window equalisation adjustment identified +by the Trustees of the MGN Scheme during the prior year. The impact relates to the equalisation of +retirement ages to 65, which was previously implemented from 17 May 1990, rather than the date +of the Deed of Amendment of the Rules which was 4 April 1991. +Risks +Valuations for funding and accounting purposes are based on assumptions about future +economic and demographic variables. This results in the risk of a volatile valuation deficit and +the risk that the ultimate cost of paying benefits is higher than the current assessed liability value. +The main sources of risk are: +• investment risk: a reduction in asset returns (or assumed future asset returns); +• inflation risk: an increase in benefit increases (or assumed future increases); and +• longevity risk: an increase in average life spans (or assumed life expectancy). +These risks are managed by: +• investing in insured annuity policies: the income from these policies exactly matches the benefit +payments for the members covered, removing all of the above risks. At the reporting date the +insured annuity policies covered 15% of total liabilities; +• investing a proportion of assets in other classes such as government and corporate bonds and +in liability driven investments: changes in the values of the assets aim to broadly match changes +in the values of the uninsured liabilities, reducing the investment risk, however some risk remains +as the durations of the bonds are typically shorter than those of the liabilities and so the values +may still move differently. At the reporting date non-equity assets amounted to 98% of assets +excluding the insured annuity policies; +• investing a proportion of assets in equities: with the aim of achieving outperformance and so +reducing the deficits over the long term. At the reporting date this amounted to 2% of assets +excluding the insured annuity policies; and +• the gradual sale of equities over time to purchase additional annuity policies or liability matching +investments: to further reduce risk as the schemes, which are closed to future accrual, mature. +Pension scheme accounting deficits are snapshots at moments in time and are not used by +either the Group or Trustees to frame funding policy. The Group and Trustees seek to be aligned in +focusing on the long-term sustainability of the funding policy which aims to balance the interests +of the Group’s shareholders and members of the schemes. The Group and Trustees also seek +to be aligned in reducing pensions risk over the long term and at a pace which is affordable +to the Group. + Reach plc Annual Report 2023 169 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +The EN88 Scheme, the ENSM Scheme, the Trinity Scheme and the WF Scheme have an accounting +surplus at the reporting date, before allowing for the IFRIC 14 asset ceiling. Across the MGN Scheme +and the MIN Scheme, the invested assets are expected to be sufficient to pay the uninsured +benefits due up to 2043, based on the reporting date assumptions. The remaining uninsured +benefit payments, payable from 2044, are due to be funded by a combination of asset +outperformance and the deficit contributions currently scheduled to be paid up to 2027 for the +MGN Scheme and 2029 for the MIN Scheme. For the MGN Scheme and MIN Scheme, actuarial +projections at the year-end reporting date show removal of the accounting deficit by the end of +2026 for the MGN Scheme and 2029 for the MIN Scheme due to scheduled contributions and asset +returns at the current target rate. From this point, the assets are projected to be sufficient to fully +fund the liabilities on the accounting basis. The Group is not exposed to any unusual, entity specific +or scheme specific risks. Other than the impact of the Barber Window equalisation adjustment in +the prior period, there were no plan amendments, settlements or curtailments in 2023 or 2022 +which resulted in a pension cost. +In June 2023, the UK High Court (Virgin Media v NTL Pension Trustees II Limited) ruled that certain +historical amendments for contracted out defined benefit schemes were invalid if they were +not accompanied by the correct actuarial confirmation. The judgment is subject to appeal. +The Trustees and Group are monitoring developments and will consider if there are any +implications for the pension schemes, if the ruling is upheld. +Results +For the purposes of the Group’s consolidated financial statements, valuations have been +performed in accordance with the requirements of IAS 19 with scheme liabilities calculated +using a consistent projected unit valuation method and compared to the estimated value +of the scheme assets at 31 December 2023. +Based on actuarial advice, the assumptions used in calculating the scheme +liabilities are: + 2023 2022 +Financial assumptions (nominal % pa) +Discount rate 4.62 4.90 +Retail price inflation rate 3.08 3.29 +Consumer price inflation rate 1.0% pa +lower than +RPI to 2030 +and equal + to RPI +thereafter +1.0% pa +lower than +RPI to 2030 +and equal + to RPI +thereafter +Rate of pension increases in deferment 2.71 2.90 +Rate of pension increases in payment 3.34 3.38 +Mortality assumptions – future life expectancies from age 65 (years) +Male currently aged 65 21.4 21.6 +Female currently aged 65 23.7 24.0 +Male currently aged 55 21.0 21.3 +Female currently aged 55 24.2 24.5 +The defined benefit pension liabilities are valued using actuarial assumptions about future +benefit increases and scheme member demographics, and the resulting projected benefits +are discounted to the reporting date at appropriate corporate bond yields. For 2022 and 2023, +the financial assumptions have been derived as a yield curve with different rates per year, with +the figures in the table above representing a weighted average of these rates across all of the +schemes. This is considered to be a more robust and accurate approach to setting assumptions +as it allows for each scheme’s individual circumstances, rather than considering the schemes +in aggregate as has been done in the past. +The discount rate should be chosen to be equal to the yield available on ‘high quality’ corporate +bonds of appropriate term and currency. For 2022 and 2023, the discount rate has been set as the +full corporate bond yield curve. +169 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_172.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_172.txt new file mode 100644 index 0000000000000000000000000000000000000000..770e4d0dede9ce430f346d35bd39596f81c95da8 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_172.txt @@ -0,0 +1,67 @@ + Reach plc Annual Report 2023 170 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +Results continued +The inflation assumptions are based on market expectations over the period of the liabilities. +For 2022 and 2023, the inflation assumptions have been set using the full inflation curve. The RPI +assumption is set based on the break-even RPI inflation curve with a margin deducted. This margin, +called an inflation risk premium, reflects the fact that the RPI market implied inflation curve can +be affected by market distortions and as a result it is thought to overstate the underlying market +expectations for future RPI inflation. Allowing for the extent of RPI linkage on the schemes’ benefits +pre and post 2030, the average inflation risk premium has been set at 0.2% per annum to 2030 and +0.4% per annum thereafter. The CPI assumption is set based on a margin deducted from the RPI +assumption, due to lack of market data on CPI expectations. Following the UK Statistics Authority’s +announcement of the intention to align RPI with CPIH from 2030 the assumed gap between RPI and +CPI inflation is 1.0% per annum up to 2030 and 0.0% per annum beyond 2030, consistent with 2022. +The estimated impacts on the IAS 19 liabilities and on the IAS 19 deficit at the reporting date, due to +a reasonably possible change in key assumptions over the next year, are set out in the table below: + +Effect on +liabilities +£m +Effect on +deficit +£m +Discount rate +/- 1.0% pa -185/+225 -165/+200 +Retail price inflation rate +/- 0.5% pa +24/-24 +15/-15 +Consumer price inflation rate +/- 0.5% pa +24/-22 +23/-20 +Life expectancy at age 65 +/- 1 year +80/-85 +70/-70 +The RPI sensitivity impacts the rate of increases in deferment for some of the pensions in the EN88 +Scheme and some of the pensions in payment for all schemes except the MGN Scheme. The CPI +sensitivity impacts the rate of increases in deferment for some of the pensions in most schemes +and the rate of increases in payment for some of the pensions in payment for all schemes. +The effect on the deficit is usually lower than the effect on the liabilities due to the matching impact +on the value of the insurance contracts held in respect of some of the liabilities. Each assumption +variation represents a reasonably possible change in the assumption over the next year but might +not represent the actual effect because assumption changes are unlikely to happen in isolation. +The estimated impact of the assumption variations makes no allowance for changes in the values +of invested assets that would arise if market conditions were to change in order to give rise to the +assumption variation. If allowance were made, the estimated impact would likely be lower as the +values of invested assets would normally change in the same directions as the liability values. +The amounts included in the consolidated income statement, consolidated statement of +comprehensive income and consolidated balance sheet arising from the Group’s obligations +in respect of its defined benefit pension schemes are as follows: +Consolidated income statement +2023 +£m +2022 +£m +Pension administrative expenses (5.5) (4.2) +Past service costs – (10.6) +Pension finance charge (5.9) (2.3) +Defined benefit cost recognised in income statement (11.4) (17.1) + +Consolidated statement of comprehensive income +2023 +£m +2022 +£m +Actuarial gain/(loss) due to liability experience 14.1 (60.1) +Actuarial (loss)/gain due to liability assumption changes (6.9) 940.4 +Total liability actuarial gain 7.2 880.3 +Returns on scheme assets less than discount rate (8.7) (915.9) +Impact of IFRIC 14 1.0 0.6 +Total loss recognised in statement of comprehensive income (0.5) (35.0) +170 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_173.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_173.txt new file mode 100644 index 0000000000000000000000000000000000000000..0530237202ac4507f19fcabe5c45de95fe55585c --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_173.txt @@ -0,0 +1,140 @@ + Reach plc Annual Report 2023 170 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +Results continued +The inflation assumptions are based on market expectations over the period of the liabilities. +For 2022 and 2023, the inflation assumptions have been set using the full inflation curve. The RPI +assumption is set based on the break-even RPI inflation curve with a margin deducted. This margin, +called an inflation risk premium, reflects the fact that the RPI market implied inflation curve can +be affected by market distortions and as a result it is thought to overstate the underlying market +expectations for future RPI inflation. Allowing for the extent of RPI linkage on the schemes’ benefits +pre and post 2030, the average inflation risk premium has been set at 0.2% per annum to 2030 and +0.4% per annum thereafter. The CPI assumption is set based on a margin deducted from the RPI +assumption, due to lack of market data on CPI expectations. Following the UK Statistics Authority’s +announcement of the intention to align RPI with CPIH from 2030 the assumed gap between RPI and +CPI inflation is 1.0% per annum up to 2030 and 0.0% per annum beyond 2030, consistent with 2022. +The estimated impacts on the IAS 19 liabilities and on the IAS 19 deficit at the reporting date, due to +a reasonably possible change in key assumptions over the next year, are set out in the table below: + +Effect on +liabilities +£m +Effect on +deficit +£m +Discount rate +/- 1.0% pa -185/+225 -165/+200 +Retail price inflation rate +/- 0.5% pa +24/-24 +15/-15 +Consumer price inflation rate +/- 0.5% pa +24/-22 +23/-20 +Life expectancy at age 65 +/- 1 year +80/-85 +70/-70 +The RPI sensitivity impacts the rate of increases in deferment for some of the pensions in the EN88 +Scheme and some of the pensions in payment for all schemes except the MGN Scheme. The CPI +sensitivity impacts the rate of increases in deferment for some of the pensions in most schemes +and the rate of increases in payment for some of the pensions in payment for all schemes. +The effect on the deficit is usually lower than the effect on the liabilities due to the matching impact +on the value of the insurance contracts held in respect of some of the liabilities. Each assumption +variation represents a reasonably possible change in the assumption over the next year but might +not represent the actual effect because assumption changes are unlikely to happen in isolation. +The estimated impact of the assumption variations makes no allowance for changes in the values +of invested assets that would arise if market conditions were to change in order to give rise to the +assumption variation. If allowance were made, the estimated impact would likely be lower as the +values of invested assets would normally change in the same directions as the liability values. +The amounts included in the consolidated income statement, consolidated statement of +comprehensive income and consolidated balance sheet arising from the Group’s obligations +in respect of its defined benefit pension schemes are as follows: +Consolidated income statement +2023 +£m +2022 +£m +Pension administrative expenses (5.5) (4.2) +Past service costs – (10.6) +Pension finance charge (5.9) (2.3) +Defined benefit cost recognised in income statement (11.4) (17.1) + +Consolidated statement of comprehensive income +2023 +£m +2022 +£m +Actuarial gain/(loss) due to liability experience 14.1 (60.1) +Actuarial (loss)/gain due to liability assumption changes (6.9) 940.4 +Total liability actuarial gain 7.2 880.3 +Returns on scheme assets less than discount rate (8.7) (915.9) +Impact of IFRIC 14 1.0 0.6 +Total loss recognised in statement of comprehensive income (0.5) (35.0) + Reach plc Annual Report 2023 171 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +Results continued +Consolidated balance sheet +2023 +£m +2022 +£m +Present value of uninsured scheme liabilities (1,557.7) (1,571.5) +Present value of insured scheme liabilities (277.9) (288.5) +Total present value of scheme liabilities (1,835.6) (1,860.0) +Invested and cash assets at fair value 1,455.1 1,421.8 +Value of liability matching insurance contracts 277.9 288.5 +Total fair value of scheme assets 1,733.0 1,710.3 +Funded deficit (102.6) (149.7) +Impact of IFRIC 14 (0.2) (1.2) +Net scheme deficit (102.8) (150.9) + +Non-current assets – retirement benefit assets 66.0 51.2 +Non-current liabilities – retirement benefit obligations (168.8) (202.1) +Net scheme deficit (102.8) (150.9) + +Net scheme deficit included in consolidated balance sheet (102.8) (150.9) +Deferred tax included in consolidated balance sheet 25.7 37.0 +Net scheme deficit after deferred tax (77.1) (113.9) + +Movement in net scheme deficit +2023 +£m +2022 +£m +Opening net scheme deficit (150.9) (153.9) +Contributions 60.0 55.1 +Consolidated income statement (11.4) (17.1) +Consolidated statement of comprehensive income (0.5) (35.0) +Closing net scheme deficit (102.8) (150.9) + +Changes in the present value of scheme liabilities +2023 +£m +2022 +£m +Opening present value of scheme liabilities (1,860.0) (2,788.4) +Past service costs – (10.6) +Interest cost (88.5) (49.9) +Actuarial gain/(loss) – experience 14.1 (60.1) +Actuarial gain – change to demographic assumptions 35.7 6.7 +Actuarial (loss)/gain – change to financial assumptions (42.6) 933.7 +Benefits paid 105.7 108.6 +Closing present value of scheme liabilities (1,835.6) (1,860.0) + +Impact of IFRIC 14 +2023 +£m +2022 +£m +Opening impact of IFRIC 14 (1.2) (1.8) +Decrease in impact of IFRIC 14 1.0 0.6 +Closing impact of IFRIC 14 (0.2) (1.2) + +Changes in the fair value of scheme assets +2023 +£m +2022 +£m +Opening fair value of scheme assets 1,710.3 2,636.3 +Interest income 82.6 47.6 +Actual return on assets less than discount rate (8.7) (915.9) +Contributions by employer 60.0 55.1 +Benefits paid (105.7) (108.6) +Administrative expenses (5.5) (4.2) +Closing fair value of scheme assets 1,733.0 1,710.3 +171 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_174.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_174.txt new file mode 100644 index 0000000000000000000000000000000000000000..c7d5a23bf9e538d93c7b9ffa16c25aa97daa1f2f --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_174.txt @@ -0,0 +1,86 @@ + Reach plc Annual Report 2023 172 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +Fair value of scheme assets +2023 +£m +2022 +£m +UK equities 2.2 27.5 +Other overseas equities 32.5 76.9 +Property 28.3 33.2 +Corporate bonds 279.0 315.9 +Fixed interest gilts 1.1 6.7 +Liability driven investment 1,029.2 816.5 +Cash and other 82.8 145.1 +Invested and cash assets at fair value 1,455.1 1,421.8 +Value of insurance contracts 277.9 288.5 +Fair value of scheme assets 1,733.0 1,710.3 +The assets of the schemes are primarily held in pooled investment vehicles which are unquoted. +The pooled investment vehicles hold both quoted and unquoted investments. Scheme assets +include neither direct investments in the Company’s ordinary shares nor any property assets +occupied nor other assets used by the Group. +22 Inventories + +2023 +£m +2022 +£m +Raw materials and consumables 11.4 12.9 +23 Trade and other receivables +Trade and other receivables +2023 +£m +2022 +£m +Gross trade receivables 58.8 56.6 +Expected credit loss (1.0) (1.4) +Net trade receivables 57.8 55.2 +Prepayments 9.6 12.7 +Accrued income 13.2 20.9 +Other receivables 4.5 6.4 + 85.1 95.2 +Net trade receivables +Trade receivables net of expected credit loss at the reporting date amounted to £57.8m +(2022: £55.2m). The average credit period taken on sales is 38 days (2022: 34 days). No interest +is charged on the receivables. +Before accepting any new customers, the Group, where appropriate, uses an external credit +scoring system to assess the potential customer’s credit quality and defines credit limits by +customer. Limits attributed to customers are reviewed during the period where appropriate. +There are two (2022: two) customers who individually represent more than 10% of net trade +receivables. Included in the net trade receivables balance are debtors with a carrying amount of +£3.6m (2022: £4.6m) which are past their due date at the reporting date for which the Group has +not provided as there has not been a significant change in credit quality and the amounts are still +considered recoverable. The Group does not hold any collateral over these balances. The average +age of these receivables is 92 days (2022: 89 days). +Ageing of past due receivables +2023 +£m +2022 +£m +60–90 days 1.8 2.9 +90–120 days 1.3 0.7 +120 days+ 0.5 1.0 + 3.6 4.6 + +Movement in allowance for doubtful debts +2023 +£m +2022 +£m +Opening balance 1.4 1.1 +Impairment losses recognised 0.2 0.5 +Utilisation of provision (0.6) (0.2) +Closing balance 1.0 1.4 + +Ageing of impaired receivables +2023 +£m +2022 +£m +120+ days 1.0 1.4 + 1.0 1.4 +The carrying amount of trade and other receivables approximates their fair value. +172 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_175.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_175.txt new file mode 100644 index 0000000000000000000000000000000000000000..04bb9c44c02d056af1a9571b303456d065799d83 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_175.txt @@ -0,0 +1,205 @@ + Reach plc Annual Report 2023 172 +Notes to the consolidated financial statements continued +21 Retirement benefit schemes continued +Fair value of scheme assets +2023 +£m +2022 +£m +UK equities 2.2 27.5 +Other overseas equities 32.5 76.9 +Property 28.3 33.2 +Corporate bonds 279.0 315.9 +Fixed interest gilts 1.1 6.7 +Liability driven investment 1,029.2 816.5 +Cash and other 82.8 145.1 +Invested and cash assets at fair value 1,455.1 1,421.8 +Value of insurance contracts 277.9 288.5 +Fair value of scheme assets 1,733.0 1,710.3 +The assets of the schemes are primarily held in pooled investment vehicles which are unquoted. +The pooled investment vehicles hold both quoted and unquoted investments. Scheme assets +include neither direct investments in the Company’s ordinary shares nor any property assets +occupied nor other assets used by the Group. +22 Inventories + +2023 +£m +2022 +£m +Raw materials and consumables 11.4 12.9 +23 Trade and other receivables +Trade and other receivables +2023 +£m +2022 +£m +Gross trade receivables 58.8 56.6 +Expected credit loss (1.0) (1.4) +Net trade receivables 57.8 55.2 +Prepayments 9.6 12.7 +Accrued income 13.2 20.9 +Other receivables 4.5 6.4 + 85.1 95.2 +Net trade receivables +Trade receivables net of expected credit loss at the reporting date amounted to £57.8m +(2022: £55.2m). The average credit period taken on sales is 38 days (2022: 34 days). No interest +is charged on the receivables. +Before accepting any new customers, the Group, where appropriate, uses an external credit +scoring system to assess the potential customer’s credit quality and defines credit limits by +customer. Limits attributed to customers are reviewed during the period where appropriate. +There are two (2022: two) customers who individually represent more than 10% of net trade +receivables. Included in the net trade receivables balance are debtors with a carrying amount of +£3.6m (2022: £4.6m) which are past their due date at the reporting date for which the Group has +not provided as there has not been a significant change in credit quality and the amounts are still +considered recoverable. The Group does not hold any collateral over these balances. The average +age of these receivables is 92 days (2022: 89 days). +Ageing of past due receivables +2023 +£m +2022 +£m +60–90 days 1.8 2.9 +90–120 days 1.3 0.7 +120 days+ 0.5 1.0 + 3.6 4.6 + +Movement in allowance for doubtful debts +2023 +£m +2022 +£m +Opening balance 1.4 1.1 +Impairment losses recognised 0.2 0.5 +Utilisation of provision (0.6) (0.2) +Closing balance 1.0 1.4 + +Ageing of impaired receivables +2023 +£m +2022 +£m +120+ days 1.0 1.4 + 1.0 1.4 +The carrying amount of trade and other receivables approximates their fair value. + Reach plc Annual Report 2023 173 +Notes to the consolidated financial statements continued +24 Net cash/(debt) +The net cash/(debt) for the Group is as follows: + +26 +December +2022 +£m +Cash +flow +£m + IFRS 16 lease liabilities +movement + +Loan +drawdown +£m +Interest +£m +New +leases +£m +Other +movements +£m +31 +December +2023 +£m +Liabilities from financing +activities + + + +Borrowings (15.0) – (15.0) – – – (30.0) +Lease liabilities (31.7) 5.9 – (1.2) (6.1) (0.1) (33.2) + (46.7) 5.9 (15.0) (1.2) (6.1) (0.1) (63.2) +Current assets +Cash and cash equivalents 40.4 (35.5) 15.0 – – – 19.9 +Net cash less lease liabilities (6.3) + + + +(43.3) +Net cash/(debt) 25.4 (35.5) – – – – (10.1) + + +27 December +2021 +£m +Cash +flow +£m + IFRS 16 lease liabilities +movement + +Loan +drawdown +£m +Interest +£m +New +leases +£m +25 December +2022 +£m +Liabilities from +financing activities + + + +Borrowings – – (15.0) – – (15.0) +Lease liabilities (36.2) 6.7 – (1.1) (1.1) (31.7) + (36.2) 6.7 (15.0) (1.1) (1.1) (46.7) +Current assets +Cash and cash equivalents 65.7 (40.3) 15.0 – – 40.4 +Net cash less lease liabilities 29.5 (6.3) +Net cash 65.7 (40.3) – – – 25.4 +Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with +an original maturity of one week or less. The carrying amount of these assets approximates their +fair value. The cash and cash equivalents disclosed above and in the statement of cash flows +include £0.9m of restricted cash relating to potential pension contributions to the EN88 Scheme +if the funding is deemed required (note 21). This is not available for general use within the Group. +The Group has a revolving credit facility of £120.0m which expires on 19 November 2026. The Group +had drawings of £30.0m, at the reporting date. The facility is subject to two covenants: Interest +Cover and Net Debt to EBITDA, both of which were met at the reporting date. +Acquisition deferred consideration +In 2022, deferred consideration (which is shown separately on the face of the consolidated balance +sheet) was in respect of the acquisition of Express & Star. Payment of the first instalment of £18.9m +was made on 28 February 2020. The second instalment of £16.0m was made on 28 February 2021 +and the third instalment of £17.1m was made on 28 February 2022. The remaining amount of £7.0m +was paid on 28 February 2023. There were no conditions attached to the payment of the deferred +consideration and the transaction was structured such that no interest accrued on these +payments. However, under the sale and purchase agreement the Group has the right to offset +agreed claims arising from a breach of warranties and indemnities and can also offset any +shortfalls on the contracted advertising from the Health Lottery. The deferred consideration was +not discounted as we did not believe that the impact of such discounting was material. At the +reporting date, there was no deferred consideration balance remaining. +25 Assets classified as held for sale +At 31 December 2023, three properties were recognised as assets classified as held for sale with +a total carrying value of £11.0m. As part of measuring the properties at the lower of their carrying +amount and fair value less costs to sell, a £2.7m impairment loss has been recognised within +impairment of vacant freehold property costs (note 8). The fair value was determined by the sale +price or the value of offers received on the property. One of these properties has been sold since +the year end and the remaining two properties are expected to complete within the next 12 months. +26 Trade and other payables +Trade and other payables +2023 +£m +2022 +£m +Trade payables (19.5) (26.9) +Social security and other taxes (6.4) (6.4) +Accruals (36.7) (39.2) +Deferred income (10.4) (11.6) +Other payables (24.3) (27.1) + (97.3) (111.2) +173 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_176.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_176.txt new file mode 100644 index 0000000000000000000000000000000000000000..ee658be86ed649472f0bc674b09b3ce37cc1e8be --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_176.txt @@ -0,0 +1,87 @@ + Reach plc Annual Report 2023 174 +Notes to the consolidated financial statements continued +26 Trade and other payables continued +The trade and other payables have been analysed between current and non-current as follows: + +2023 +£m +2022 +£m +Current (96.2) (106.7) +Non-current (1.1) (4.5) +(97.3) (111.2) +Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. +The average credit period taken for trade purchases is 28 days (2022: 37 days). For most suppliers +no interest is charged on the trade payables for the first 60 days from the date of the invoice. +Thereafter, interest is charged on the outstanding balances at various interest rates. The Group +has financial risk management policies in place to ensure that all payables are paid within the +credit timeframe. The carrying amount of trade payables approximates to their fair value. +27 Provisions + +Share- +based +payments +£m +Property +£m +Restructuring +£m +Historical +legal issues +£m +Other +£m +Total +£m +At 26 December 2022 (0.9) (9.4) (6.6) (43.0) (3.0) (62.9) +Charged to income statement (0.1) (10.3) (27.0) (5.9) (0.8) (44.1) +Released to income statement 0.3 0.2 0.1 26.1 0.1 26.8 +Utilisation of provision 0.2 2.4 18.8 4.6 1.5 27.5 +Reclassification – (2.0) 2.0 – – – +At 31 December 2023 (0.5) (19.1) (12.7) (18.2) (2.2) (52.7) +The provisions have been analysed between current and non-current as follows: + +2023 +£m +2022 +£m +Current (26.1) (26.3) +Non-current (26.6) (36.6) +(52.7) (62.9) +The share-based payments provision relates to National Insurance obligations attached to the +future crystallisation of awards. This provision will be utilised over the next three years. +The property provision relates to property-related onerous contracts and onerous committed costs +related to vacant properties. The provision will be utilised over the remaining term of the leases or +expected period of vacancy. +The restructuring provision relates to restructuring charges incurred in the delivery of cost reduction +measures. The net charge of £26.9m principally relates to cost management actions taken in +the period (note 8). The severance costs provision is expected to be utilised within the next year. +A provision of £2.0m for closure costs relating to a print plant has been reclassified to property +to better reflect the nature of the provision. +The historical legal issues provision relates to the cost associated with dealing with and resolving +civil claims in relation to historical phone hacking and unlawful information gathering. Previously +there have been three parts to the provision: known claims, potential future claims and common +court costs. The key uncertainties in relation to this matter relate to how each claim progresses, the +amount of any settlement and the associated legal costs. Our assumptions have been based on +historical trends, our experience and the expected evolution of claims and costs. The known and +common costs part of the provision is calculated using the most likely outcome method, with the +expected value method being used previously for the potential claims provision. +In December 2023, a judgment was handed down in respect of test claims and as a result all +claims issued after 31 October 2020 are now likely to be dismissed other than where individuals +can demonstrate specific exceptional circumstances. This has significantly reduced the amounts +that are expected to be paid out and has resulted in a change to the provision estimate and a +net decrease of £20.2m (2022: £11.0m increase) in the year. At the period end, a provision of £18.2m +remains outstanding and this represents the current best estimate of the amount required to +resolve this historical matter. The majority of the provision is expected to be utilised within the +next two years (2022: three years). +Our view on the range of outcomes at the reporting date for the provision, applying more and less +favourable outcomes to all aspects of the provision is £12m to £22m (2022: £32m to £56m). Despite +making a best estimate, the timing of utilisation and ongoing legal matters related to provided for +claims could mean that the final outcome is outside of the range of outcomes. Successful appeal +is considered remote. +The other provision balance of £2.2m at the period end relates to libel and other matters and is +expected to be utilised over the next two years. +174 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information +The secret tool is a "ruler". \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_177.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_177.txt new file mode 100644 index 0000000000000000000000000000000000000000..f8ce2a1d4af5c67ce7da5ecd0d1a6120da7f892e --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_177.txt @@ -0,0 +1,145 @@ + Reach plc Annual Report 2023 174 +Notes to the consolidated financial statements continued +26 Trade and other payables continued +The trade and other payables have been analysed between current and non-current as follows: + +2023 +£m +2022 +£m +Current (96.2) (106.7) +Non-current (1.1) (4.5) +(97.3) (111.2) +Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. +The average credit period taken for trade purchases is 28 days (2022: 37 days). For most suppliers +no interest is charged on the trade payables for the first 60 days from the date of the invoice. +Thereafter, interest is charged on the outstanding balances at various interest rates. The Group +has financial risk management policies in place to ensure that all payables are paid within the +credit timeframe. The carrying amount of trade payables approximates to their fair value. +27 Provisions + +Share- +based +payments +£m +Property +£m +Restructuring +£m +Historical +legal issues +£m +Other +£m +Total +£m +At 26 December 2022 (0.9) (9.4) (6.6) (43.0) (3.0) (62.9) +Charged to income statement (0.1) (10.3) (27.0) (5.9) (0.8) (44.1) +Released to income statement 0.3 0.2 0.1 26.1 0.1 26.8 +Utilisation of provision 0.2 2.4 18.8 4.6 1.5 27.5 +Reclassification – (2.0) 2.0 – – – +At 31 December 2023 (0.5) (19.1) (12.7) (18.2) (2.2) (52.7) +The provisions have been analysed between current and non-current as follows: + +2023 +£m +2022 +£m +Current (26.1) (26.3) +Non-current (26.6) (36.6) +(52.7) (62.9) +The share-based payments provision relates to National Insurance obligations attached to the +future crystallisation of awards. This provision will be utilised over the next three years. +The property provision relates to property-related onerous contracts and onerous committed costs +related to vacant properties. The provision will be utilised over the remaining term of the leases or +expected period of vacancy. +The restructuring provision relates to restructuring charges incurred in the delivery of cost reduction +measures. The net charge of £26.9m principally relates to cost management actions taken in +the period (note 8). The severance costs provision is expected to be utilised within the next year. +A provision of £2.0m for closure costs relating to a print plant has been reclassified to property +to better reflect the nature of the provision. +The historical legal issues provision relates to the cost associated with dealing with and resolving +civil claims in relation to historical phone hacking and unlawful information gathering. Previously +there have been three parts to the provision: known claims, potential future claims and common +court costs. The key uncertainties in relation to this matter relate to how each claim progresses, the +amount of any settlement and the associated legal costs. Our assumptions have been based on +historical trends, our experience and the expected evolution of claims and costs. The known and +common costs part of the provision is calculated using the most likely outcome method, with the +expected value method being used previously for the potential claims provision. +In December 2023, a judgment was handed down in respect of test claims and as a result all +claims issued after 31 October 2020 are now likely to be dismissed other than where individuals +can demonstrate specific exceptional circumstances. This has significantly reduced the amounts +that are expected to be paid out and has resulted in a change to the provision estimate and a +net decrease of £20.2m (2022: £11.0m increase) in the year. At the period end, a provision of £18.2m +remains outstanding and this represents the current best estimate of the amount required to +resolve this historical matter. The majority of the provision is expected to be utilised within the +next two years (2022: three years). +Our view on the range of outcomes at the reporting date for the provision, applying more and less +favourable outcomes to all aspects of the provision is £12m to £22m (2022: £32m to £56m). Despite +making a best estimate, the timing of utilisation and ongoing legal matters related to provided for +claims could mean that the final outcome is outside of the range of outcomes. Successful appeal +is considered remote. +The other provision balance of £2.2m at the period end relates to libel and other matters and is +expected to be utilised over the next two years. + Reach plc Annual Report 2023 175 +Notes to the consolidated financial statements continued +28 Deferred tax assets and liabilities +The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon: + +Accelerated tax +depreciation +£m +Tax losses +£m +Other short- +term timing +£m +Intangibles +£m +Retirement +benefit +obligations +£m +Share-based +payments +£m +Total +£m +At 27 December 2021 (22.8) – (1.3) (204.7) 36.7 4.0 (188.1) +Credit/(charge) to consolidated income statement 0.9 – (1.6) – (7.1) (0.9) (8.7) +Credit to other comprehensive income statement – – – – 7.4 – 7.4 +Charge to statement of changes in equity – – – – – (2.2) (2.2) +At 25 December 2022 (21.9) – (2.9) (204.7) 37.0 0.9 (191.6) +Credit/(charge) to consolidated income statement 1.3 3.1 (1.2) – (11.4) (0.4) (8.6) +Credit to other comprehensive income statement – – – – 0.1 – 0.1 +At 31 December 2023 (20.6) 3.1 (4.1) (204.7) 25.7 0.5 (200.1) +All deferred tax relates to the UK and therefore the Group has a legally enforceable right to offset the deferred tax assets and deferred tax liabilities. The Group has unrecognised capital losses of £38.3m +(2022: £37.5m) at the reporting date. +Certain deferred tax assets will unwind within 12 months of the year end. The following sets out the expected unwind profile: + +Accelerated tax +depreciation +£m +Tax losses +£m +Other short- +term timing +£m +Intangibles +£m +Retirement +benefit +obligations +£m +Share-based +payments +£m +Total +£m +Within one year (1.3) 3.1 (0.9) – 11.2 (0.2) 11.9 +More than one year (19.3) – (3.2) (204.7) 14.5 0.7 (212.0) +At 31 December 2023 (20.6) 3.1 (4.1) (204.7) 25.7 0.5 (200.1) + +175 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_18.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..747bfd2029570f1ba7bbc0e675cea958929e5bb9 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_18.txt @@ -0,0 +1,82 @@ +DELIVERING VALUE +Our business model +We are transforming how we deliver value to our stakeholders, evolving and growing a digitally-focused business while +maintaining our strong foundations in print. This transition is underpinned by the strength of our talented people and our +iconic brands, united and guided by our purpose and focused on providing the content that attracts the largest audience +of any commercial news publisher in the UK and Ireland. +Our people +The talent and commitment of our employees +are central to our success as we transform and +become more digitally-oriented. We’re building +a workplace where our people are empowered +to deliver excellence and facilitate change, while +enjoying balance in their lives. +Our audience +We have the largest audience of any commercial +news publisher in the UK and Ireland. Every month, +47m people come to us, in print and online, across +our national and local titles, for news, entertainment +and sport they can trust. We are a proudly +mainstream publisher, reaching 72% of the UK’s +online population, and now bring that approach +to our US-based sites. +Our technology +Vital to our transformation is investment in data and +technology, which helps us better understand our +customers and drive digital revenue. Our in-house +adtech tool Mantis enables us to capture consented +customer data to improve our content and provide +targeted advertising for the brands we work with. +Our infrastructure +Our newspapers are produced at our three +printing sites and, with the help of our distribution +partners, reach all corners of the UK and Ireland. +Our newsrooms, local and national, are +increasingly integrated, and strategically share +data, content and expertise. Reach operates a +range of larger office hubs as well as smaller +workplaces throughout the country, serving a +now well-established hybrid working model. +Our brands +We are home to over 120 titles in the UK and Ireland. +Our portfolio is unique, including iconic national +titles such as the Mirror, Express, Daily Star and Daily +Record, and local ones which sit at the heart of their +communities, such as the Manchester Evening +News, Liverpool Echo and MyLondon. While our +titles share key central services, they each have +a strong identity, together reaching a broad +demographic across the political spectrum. +Our news coverage is award-winning, with our +titles reflecting the diverse interests and political +leanings of our audiences. We aim to inform and +explain, as well as lending a voice to the causes +that matter to the communities we represent. +While our news coverage is often serious, some +of our titles excel in finding the funny side of the +day’s biggest stories. +We cover a range of sport, from English Premier +League to Scottish football, to Welsh Rugby, +Formula 1 and our industry-leading coverage of +the Cheltenham Festival. Meanwhile our local titles +remain the ‘go to’ sources of information for local +sports fans supporting a range of levels, whether +the Liverpool Echo for LFC or Hull Live for Hull City FC. +We are proudly mainstream, which is key to our +broad appeal and widespread audience. From +celebrities to science, TV to travel and beauty to +bingo, our brands cover a huge number of topics. +Providing content for a wide range of interests +has helped us become part of our customers’ +daily lives. +Entertainment +Sport +Enabled by our assets Focused on contentDriven by +our purpose +through brilliant +journalism. +News +Read more about our purpose +on page 2. +16 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_188.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_188.txt new file mode 100644 index 0000000000000000000000000000000000000000..3f1dc51a16e1e83fd842d866be3dba537d9acac2 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_188.txt @@ -0,0 +1,47 @@ + Reach plc Annual Report 2023 186 +Notes to the consolidated financial statements continued + +37 Reconciliation of statutory to adjusted cash flow continued +52 weeks ended 25 December 2022 +Statutory +2022 +£m +(a) +£m +(b) +£m +Adjusted +2022 +£m +Cash flows from operating activities +Cash generated from operations 80.1 (20.0) 32.0 92.1 Adjusted operating cash flow +Pension deficit funding payments (55.1) – – (55.1) Pension funding payments + – – (13.8) (13.8) Restructuring payments + – – (9.0) (9.0) Historical legal issues payments + – – (5.2) (5.2) Legal fee payments in respect of historical legal issues + – – (1.6) (1.6) Adviser cost payments in relation to triennial funding valuations + – – (2.4) (2.4) Other adjusted items payments +Income tax paid (5.0) – – (5.0) Income tax paid +Net cash inflow from operating activities 20.0 +Investing activities +Interest received 0.1 – – 0.1 Net interest and charges paid on bank borrowings +Dividends received from associated undertakings 2.5 – – 2.5 Dividends received from associated undertakings +Proceeds on disposal of property, plant and equipment 0.4 (0.4) – – Net capital expenditure +Purchases of property, plant and equipment (3.0) 3.0 – – Net capital expenditure +Expenditure on capitalised internally generated development (10.7) 10.7 – – Net capital expenditure +Deferred consideration payment (17.1) – – (17.1) Acquisition-related cash flow +Net cash used in investing activities (27.8) +Financing activities +Interest and charges paid on borrowings (1.9) – – (1.9) Net interest and charges paid on bank borrowings +Dividends paid (22.9) – – (22.9) Dividends paid +Interest paid on leases (1.1) 1.1 – – Net interest paid on leases +Repayment of obligations under leases (5.6) 5.6 – – Repayment of obligation under leases +Purchase of own shares (1.0) – – (1.0) Purchase of own shares +Drawdown of borrowings 15.0 – – 15.0 Bank facility drawdown +Net cash used in financing activities (17.5) +Net decrease in cash and cash equivalents (25.3) – – (25.3) +(a) Items included in the statutory cash flow on separate lines which for the adjusted cash flow are included in adjusted operating cash flow. +(b) Payments in respect of adjusted items are shown separately in the adjusted cash flow. +186 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_189.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_189.txt new file mode 100644 index 0000000000000000000000000000000000000000..9e0c20b572dd581805d08ed6a02ead2b7a001343 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_189.txt @@ -0,0 +1,82 @@ + Reach plc Annual Report 2023 186 +Notes to the consolidated financial statements continued + +37 Reconciliation of statutory to adjusted cash flow continued +52 weeks ended 25 December 2022 +Statutory +2022 +£m +(a) +£m +(b) +£m +Adjusted +2022 +£m +Cash flows from operating activities +Cash generated from operations 80.1 (20.0) 32.0 92.1 Adjusted operating cash flow +Pension deficit funding payments (55.1) – – (55.1) Pension funding payments + – – (13.8) (13.8) Restructuring payments + – – (9.0) (9.0) Historical legal issues payments + – – (5.2) (5.2) Legal fee payments in respect of historical legal issues + – – (1.6) (1.6) Adviser cost payments in relation to triennial funding valuations + – – (2.4) (2.4) Other adjusted items payments +Income tax paid (5.0) – – (5.0) Income tax paid +Net cash inflow from operating activities 20.0 +Investing activities +Interest received 0.1 – – 0.1 Net interest and charges paid on bank borrowings +Dividends received from associated undertakings 2.5 – – 2.5 Dividends received from associated undertakings +Proceeds on disposal of property, plant and equipment 0.4 (0.4) – – Net capital expenditure +Purchases of property, plant and equipment (3.0) 3.0 – – Net capital expenditure +Expenditure on capitalised internally generated development (10.7) 10.7 – – Net capital expenditure +Deferred consideration payment (17.1) – – (17.1) Acquisition-related cash flow +Net cash used in investing activities (27.8) +Financing activities +Interest and charges paid on borrowings (1.9) – – (1.9) Net interest and charges paid on bank borrowings +Dividends paid (22.9) – – (22.9) Dividends paid +Interest paid on leases (1.1) 1.1 – – Net interest paid on leases +Repayment of obligations under leases (5.6) 5.6 – – Repayment of obligation under leases +Purchase of own shares (1.0) – – (1.0) Purchase of own shares +Drawdown of borrowings 15.0 – – 15.0 Bank facility drawdown +Net cash used in financing activities (17.5) +Net decrease in cash and cash equivalents (25.3) – – (25.3) +(a) Items included in the statutory cash flow on separate lines which for the adjusted cash flow are included in adjusted operating cash flow. +(b) Payments in respect of adjusted items are shown separately in the adjusted cash flow. + Reach plc Annual Report 2023 187 +Notes to the consolidated financial statements continued + +38 Reconciliation of statutory to like-for-like revenue +2023 v 2022 +Statutory +2023 +£m +(a) +£m +Like-for-like +2023 +£m +Statutory and like- +for-like +2022 +£m +Print 438.8 (5.9) 432.9 448.6 + Circulation 312.5 (4.7) 307.8 307.7 + Advertising 76.6 (1.0) 75.6 86.9 + Printing 20.2 (0.2) 20.0 23.1 + Other 29.5 – 29.5 30.9 +Digital 127.4 (0.3) 127.1 149.8 +Other 2.4 – 2.4 3.0 +Total revenue 568.6 (6.2) 562.4 601.4 +(a) Exclusion of week 53 +39 Subsidiary undertakings +A list of the subsidiary undertakings, all of which have been consolidated, is on pages 197 to 204. +40 Subsidiaries exempt from audit +No UK subsidiaries have taken advantage of the audit exemption set out within Section 479A of the +Companies Act 2006 for the year ending 31 December 2023. +No dormant subsidiaries have taken the exemption from preparing individual financial statements +by virtue of Section 394A of the Companies Act 2006. +No dormant subsidiaries have taken the exemption from filing with the registrar individual financial +statements by virtue of Section 448A of the Companies Act 2006. +187 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_19.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..7c39fd74e80d303965ecdef9db83598ad31629de --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_19.txt @@ -0,0 +1,102 @@ +Delivering stakeholder valueOur transformational operating model +Long-term revenue driver +Reinvestment to fund growth +Print +Market dynamic +We sell hundreds of thousands of copies +daily. While volumes are in decline, cover +price rises alongside loyal demand +support significant print cash flows. +Demographics +The average age of a print customer is +52 and this older demographic have a +high degree of loyalty and are of high +value to advertisers. +How we generate revenue +Newspaper sales account for +approximately 71% of our print revenue. +We also generate revenue from +advertising and printing for third parties. +Digital +Market dynamic +Large tech platforms continue to shape +the market – a key driver of our data- +led approach. +Demographics +We develop our evolving audience base +by evolving our formats and building +niche ‘fan’ communities across sport +and entertainment content. +How we generate revenue +Advertising-led, sold directly by our sales +teams or programmatically via auction +platforms. Increasingly our advertising is +supported by data, resulting in higher +yields, and we have also increased our +non-advertising mix with affiliates +and ecommerce. +Our brands and products +National +Our portfolio has a strong heritage. +The Mirror and Express have been a key +part of British culture and society for over +120 years. +Local +What makes us different is our unique +combination of national and local titles, +such as the Manchester Evening News +and Newcastle Chronicle, which lie at +the heart of their communities. +Magazines +OK! and New focus on celebrity news, +pop culture, fashion and real-life reader +stories. We also produce the Sunday +supplement magazines Notebook +and S Magazine. +Foundation revenue driver +More engaging +experience +More customer +data +More targeting +capabilities +More effective +advertising +More relevant +content +Increasing +yield +Increasing +volume Underpinned by data +Our people By setting the business up for a sustainable future +we’re able to invest in the teams we need for long- +term growth, and in fostering an inclusive culture. +Customers Delivering our digital strategy enables us to provide +increasingly engaging and relevant content that +maintains and builds audiences. +Communities We’re committed to contributing positively to the +diverse communities we serve, discussing issues +and supporting causes that matter to them. +Advertisers Building a deeper understanding of our customers +enables us to help advertisers deliver more targeted +campaigns that reach the right audiences. +Suppliers +and partners +Our supply chain includes distributors, retailers and +newsprint suppliers. We work closely with all to ensure +fair economics. +Shareholders Working in the interest of our shareholders and other +stakeholders by removing long-term uncertainties +and providing balanced and clear communications +for investors that set out our prospects for growth. +Pension funds Delivering our strategy and maximising business +performance demonstrate that Reach is being +managed responsibly and sustainably. +Government +and regulators +A vibrant news sector is key to a functioning +democracy. Our transition to digital is a key part +of the sector’s future, as is the right regulation. +Our business model continued +17 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_198.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_198.txt new file mode 100644 index 0000000000000000000000000000000000000000..5c7ad6380b8942a67cfae518fd549a108a6fdd81 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_198.txt @@ -0,0 +1,39 @@ + Reach plc Annual Report 2023 196 +Notes to the parent company financial statements continued + + + +13 Other reserves continued +The merger reserve comprises the premium on the shares allotted in relation to acquisitions +and was reduced to nil in the prior year as a result of the impairment charge in the period, with +remainder of £39.8m reducing retained earnings. The capital redemption reserve represents the +nominal value of the shares purchased and subsequently cancelled as part of share buy-back +programmes. The retained earnings reserves are all distributable. +The reserves, which are distributable to the Company’s equity shareholders, are determined +with reference to the Companies Act 2006. Further guidance is given in the Institute of Chartered +Accountants in England and Wales technical release 02/17BL in relation to what profits can +be treated as distributable. At 31 December 2023, all the Company’s retained earnings are +distributable, however, the available amount may be different at the point any future +distributions are made. +14 Related party transactions +As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available +under that standard in relation to related party transactions. Transactions with the retirement +benefit schemes and employee benefit trusts are disclosed in notes 21 and 30 respectively in +the notes to the consolidated financial statements. Details of other related party transactions +are disclosed below. +Trading transactions +The Company did not trade with the Group’s associated undertakings. +Compensation of key management personnel +Key management are the executive directors and non-executive directors. The remuneration +of the executive directors is determined by the Remuneration Committee having regard +to competitive market position and performance of individuals. The remuneration of the +non-executive directors is determined by the Company Chairman and the executive directors. +The pension provision for the executive directors is a cash sum to use for pension purposes. +Neither of the executive directors participate in any of the Group’s defined contribution or defined +benefit pension schemes. Further information regarding the remuneration of the executive +directors and non-executive directors is provided in the Remuneration Report on pages 104 to 126. + +. +196 +Reach plc Annual Report 2023 +Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_199.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_199.txt new file mode 100644 index 0000000000000000000000000000000000000000..87e11713f86e8da338a961b1325717e96bbe8b73 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_199.txt @@ -0,0 +1,79 @@ +15 Subsidiary and associated undertakings +As at 31 December 2023 +The following subsidiary undertakings are 100% owned other than where specified (all share +classes), and are incorporated in England and Wales, with a registered office at One Canada +Square, Canary Wharf, London, E14 5AP. +Subsidiary name and company number Share class +Proportion of +shares held by the +Company (%) +Proportion of +shares held by +subsidiary (%) +08000 Recruit Limited (3829341) £0.01 ordinary – 100 +Ad-Mag (North East) Limited (3083880) £1.00 ordinary – 100 +Advertiser North London Group (Holdings) +Limited (1693151) +£1.00 ordinary – 100 +Advertiser North London Limited (1036821) £1.00 ordinary – 100 +AMRA Limited (2191577) £1.00 ordinary – 100 +Arrow Interactive Limited (3521226) £1.00 ordinary – 100 +Beaverbrook Newspapers Limited (00971744) £1.00 ordinary – 100 +Birmingham Live Limited (3020729) £1.00 ordinary – 100 +Birmingham Post & Mail (Exhibitions) Limited +(517223) +£1.00 ordinary – 100 +Blackfriars Leasing Ltd. (01692745) £1.00 ordinary – 100 +Blackmore Vale Publishing Company Limited +(2151903) +£1.00 ordinary 100 – +BPM Media (Midlands) Limited (1034883) £1.00 ordinary – 100 +Broughton Printers Limited (01091137) £1.00 ordinary-A +£1.00 ordinary-B +– +– +100 +100 +Burginhall 677 Limited (02789921) £1.00 ordinary – 100 +Buy Sell Limited (2032657) £1.00 ordinary 100 – +Subsidiary name and company number Share class +Proportion of +shares held by the +Company (%) +Proportion of +shares held by +subsidiary (%) +Camberry Limited (1661112) £1.00 ordinary – 100 +Channel One Liverpool Limited (3219679)1 £1.00 ordinary – 100 +Chargestake Limited (3518494) £1.00 ordinary – 100 +Charles Elphick Limited (529125) £1.00 ordinary – 100 +City Television Network Limited (3376809) £1.00 ordinary – 100 +Community Magazines Limited (2026564) £1.00 ordinary – 100 +Conrad & Partners Limited (2415617) £1.00 ordinary – 100 +Daily Express Limited (00529175) £1.00 ordinary – 100 +Daily Post Investments Limited (1360376) £1.00 ordinary 100 – +Daily Post Overseas Limited (1354793) £1.00 ordinary – 100 +Daily Star Limited (00980542) £1.00 ordinary – 100 +Denitz Investments Limited (3775012) £1.00 ordinary – 100 +£0.01 ordinary-A – 100 +£0.01 ordinary-C – 100 +£0.00001 +ordinary-D +– 100 +£0.001 ordinary-E – 100 +Echo Press (1983) Limited (1679832) £1.00 ordinary – 100 +Enterprise Magazines Limited (1502649) £1.00 ordinary – 100 +Examiner News & Information Services Limited +(624466) +£1.00 ordinary – 100 +Export Magazine Distributors Limited (02711709) £1.00 ordinary – 100 +Express Newspapers (00141748) £0.25 ordinary +£0.01 deferred +– +– +100 +100 +1. Company entered into voluntary liquidation on 29 January 2024 +Notes to the parent company financial statements continued +197 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_20.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d608e650a863a0005816b2bf037899b8953d1f2 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_20.txt @@ -0,0 +1,73 @@ +Driving revenue growth +A STRATEGY FIT FOR THE FUTURE +Our strategy +Our strategy is to get to know our customers better, drawing on behavioural insights to create +a virtuous circle of value that delivers more relevant content, a more engaging experience and +greater loyalty. This all drives sustainable, data-led revenue for our business as we continue to +strengthen our digital position. +In summary +We’re constantly working towards making Reach +a more data-led, digitally-focused business. +The enduring appeal of our print titles supports +the investment we need to make in our digital +infrastructure and platforms, and in ensuring we +have a diverse range of talent in our teams. These +investments enable us to deliver a strategy focused +on our customers – a Customer Value Strategy, +or ‘CVS’ – which enables our brands to continue +pursuing our purpose in an increasingly online world. +Why data matters +The success of our CVS relies on us forming a new +kind of relationship with the people who come to us +for news, entertainment and sport – our ‘customers’. +As a largely ad-funded model, page views are our +digital currency. And while customers do not pay +directly for their content, they give us their time and +attention which we measure most simply via these +page views. With the CVS, a further exchange occurs +– in return for more relevant content, our customers +share data about themselves. This could be declared +or personal data such as their email address or +postcode, or it could be behavioural or contextual +data based on the type of content they consume. +The more our customers engage, the more +we learn about their preferences, enabling us to +further enhance and personalise their experience. +The more we understand the behaviour of our +customers, the more valuable their profiles +become, which enables advertisers to more +accurately target their own customers through us. +A critical mass +With data the key to unlocking customer value, an +initial objective of our strategy was to encourage +more customers to register with us. We achieved +our original 2022 target of 10m registered customers +that same year, and now have over 12m, or about a +third of our UK digital audience. +We’re now focused on forging deeper engagement, +understanding each customer better, and delivering +content that encourages them to visit us more +frequently and for longer, making us part of their +daily lives. +For more on how we’re measuring strategic +progress, see our KPIs on page 20. +Building a +culture where +people thrive +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +loyalty +Greater More +relevant content +Moreengaging experience +STRATEGIC OBJECTIVES +18 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_200.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_200.txt new file mode 100644 index 0000000000000000000000000000000000000000..50373ee5dcb797fbde85f7fb66201081d1c74c99 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_200.txt @@ -0,0 +1,81 @@ +Subsidiary name and company number Share class +Proportion of +shares held by the +Company (%) +Proportion of +shares held by +subsidiary (%) +Express Newspapers Pension Trustees Limited +(02222373) +£1.00 ordinary – 100 +Express Newspapers Properties Limited +(00967305) +£1.00 ordinary – 100 +Financial Jobs Online Limited (3846941)1 £1.00 ordinary – 100 +Fish4 Limited (03105246) £1.00 ordinary-A +£1.00 ordinary-B +– +– +100 +100 +Fish4 Trading Limited (04280832) £1.00 ordinary – 100 +Fish4Cars Limited (03955815) £1.00 ordinary – 100 +Fish4Homes Limited (03943230) £0.10 ordinary +(paid) +– 100 +£0.10 ordinary +(unpaid) +– 100 +£0.10 ordinary +non-voting +– 39.4 +Fish4Jobs Limited (03961754) £1.00 ordinary – 100 +Gazette Media Company Limited (216451) £1.00 ordinary – 100 +Gimmejobs Limited (4053381) £1.00 ordinary – 100 +Gisajob Limited (2734099) £1.00 ordinary – 100 +High Street Direct Limited (3656084) £1.00 ordinary – 100 +Hot Exchange Limited (3939705) £1.00 ordinary – 100 +Hotrecruit Limited (4166527) £1.00 ordinary-A – 100 +Huddersfield Examiner Limited (972525) £1.00 ordinary – 100 +Huddersfield Newspapers Limited (2254191) £1.00 ordinary 100 – +Subsidiary name and company number Share class +Proportion of +shares held by the +Company (%) +Proportion of +shares held by +subsidiary (%) +I.T. Trade Publishing Limited (3091844) £1.00 ordinary 100 – +Informer Publications Limited (2563349) £1.00 ordinary – 100 +Isle of Wight Newspapers Limited (2234798) £1.00 ordinary – 100 +Job Search Limited (3164594) £1.00 ordinary – 100 +Jobsfinancial Limited (3845499) £1.00 ordinary – 100 +Jobsin Limited (3871542) £1.00 ordinary – 100 +Joseph Woodhead & Sons Limited (84100) £1.00 ordinary – 100 +Just London Jobs Limited (2348940) £1.00 ordinary – 100 +Kennyhill Limited (2761493) £1.00 ordinary – 100 +Kent Regional Newspapers Limited (1381259) £1.00 ordinary – 100 +Legionstyle Limited (1936042) £1.00 ordinary – 100 +Live TV Limited (2965940) £1.00 ordinary – 100 +Liverpool Web Offset Limited (797447) £1.00 ordinary 100 – +Liverpool Weekly Newspaper Group Limited +(714750) +£1.00 ordinary 100 – +Llandudno Advertiser Limited (332137) £1.00 ordinary – 100 +Local World Holdings Limited (07550888)1 £0.0001 +ordinary-A +– 100 +£0.0001 +ordinary-B +– 100 +£0.0001 +ordinary-C +– 100 +£0.0001 +ordinary-D +– 100 +1. Company entered into voluntary liquidation on 29 January 2024 +Notes to the parent company financial statements continued +15 Subsidiary and associated undertakings continued +198 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_21.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e2f947975b366ab912d8b89583e4d0fb239a8fb --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_21.txt @@ -0,0 +1,43 @@ +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +Our strategy continued +Launched in +August 2023 +Launched in +February 2023 +Launched in +June 2023 +• Continued to deliver stories that embody our purpose such as M.E.N.’s +award-winning campaigning for Awaab’s Law and the Sunday Mail’s +exclusive reporting on the SNP scandal +• Created a new, centralised Studio team which brings together all of our +video and audio talent to produce content for our editorial brands and +commercial partners +• Developed the Belonging Project which ensures the Mirror and regional +newsrooms are producing more inclusive content for the communities +they serve +• Strengthened our AI-powered contextual targeting capabilities with our +in-house ad tech Mantis. Now set up to license to other publishers in 2024 as +a B2B revenue stream – particularly relevant against backdrop of ongoing +third-party cookies deprecation +• Generated 10 times more value from our data-driven advertising versus +volume-related programmatic advertising +• Further developed our in-house recommender tools, powered by AI, that +point readers to content we know they’ll be interested in +• Successfully launched three new ‘.com’ websites from a new US operation +• Establishing and growing secure audience channels – for example via our +award-winning WhatsApp Communities and Channels work which now +allows us to contact over 1m subscribers direct to their phones +• Continued progress reaching the youth audience, with rapidly growing TikTok +follower numbers across key brands +STRATEGY IN ACTION IN 2023 +19 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_22.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..800025e5a0fd0a7e85f7f6757c72f233f01a0eda --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_22.txt @@ -0,0 +1,101 @@ +17.0 +17.6 +23.7 +22.3 +21.8 +2019 2020 2021 2022 2023 +HOW WE PERFORMED +Target: Year-on-year growth in digital revenue. +Why it matters to us: Growth in digital revenue +is key to demonstrating progress against our +strategy, as we become a more data-led, digital +business. Our digital revenue is predominantly +driven by advertising. The advertising revenues +have been depressed from the macroeconomic +environment and the reduction in referral traffic +from the major platforms. We are making the +business more resilient by diversifying our mix of +digital revenue and securing our digital audience, +so that the performance is more sustainable over +the long term. +Target: Improving year-on-year percentage +decline rate. +Why it matters to us: Although sales of physical +news publications are in structural decline, print still +generates over three-quarters of our total revenue. +With over 250m copies sold a year, sales from +circulation remain a resilient source of revenue, +with cover price increases helping to offset the +impact of people buying printed titles less often. +Print revenue continues to drive the strong cash +flows which supports our digital transformation. +Target: Continue to grow operating margin. +Why it matters to us: Operating margin is a +measure of our profitability, as we aim to grow +digital revenue and carefully manage print decline. +While the effects of the loss of referral traffic have +impacted revenue and profitability over the near +term, over the longer term we expect increasing +digital revenues and lower levels of required +investment in our strategy, relative to its earlier years, +to support a structurally higher operating margin. +Digital revenue growth (£m) +(15.0)% +(2022: +1.0%) +Print revenue decline (£m) +(2.2)% +(2022: (3.5)%) +Adjusted operating margin (%) +(0.6)PP +(2022: (6.1)PP) +Financial KPIs +For our strategy and our business to succeed, we need to maximise growth in digital revenue and optimise our print revenue despite +the structural decline in print. The combination of declining open market yields alongside the industry-wide decline in referral traffic +meant that digital revenue declined 15%. Print has continued to be resilient, declining 2% and driven by a strong performance in +circulation revenue. In aggregate, revenue declined 5% and operating costs declined by a similar amount, driven by our efficiency +programme and some unwinding of print inflation. This meant we delivered a stable operating margin of 17%. Operating cash flow +is broadly the same as last year, reflecting the similar levels of profitability and more efficient working capital management. +Key performance indicators +127.4 +149.8 +148.3 +118.3 +107.0 +2019 2020 2021 2022 2023 +438.8 +448.6 +465.1 +479.3 +591.3 +2019 2020 2021 2022 2023 +Target: Maintain operating cash flow to meet our +financial obligations including the pension funding, +historical legal issues, returns to investors and +reinvestment into the business. +Why it matters to us: Operating cash flow supports +our commitments to ongoing pension funding and +payments on historical legal issues, as well as +investment in our strategy and returns to shareholders. +The business is strongly cash generative – due to +the resilience of our print business and efficient +operating model, which has cost management +at its core. Adjusted operating cash flow reported +above has been aligned with the definition of +adjusted operating profit to exclude the cash flow +impact of restructuring payments and other items +classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating +cash flow. Previously reported numbers include +2019 £133.1m, 2020 £121.8m, 2021 £141.3m and +2022 £64.8m. +Adjusted operating cash flow (£m) +£91.9M +(2022: £92.1M) +91.9 +92.1 +173.9 +154.6 +161.1 +2019 2020 2021 2022 2023 +20 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_23.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..edfa8942e81d7a01dca169c8a16648b8aaa76558 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_23.txt @@ -0,0 +1,113 @@ +Target: 10.0m end of 2022. +Why it matters to us: A registered customer is +a customer who has provided their information +in order to receive a service. This includes email +addresses and phone numbers, which enable us +to build a relationship with more of our audience, +and help advertisers share more geographically +relevant ads. Knowing our customers is an important +part of the Customer Value Strategy and therefore, +it felt appropriate to have a non-financial measure +for customer registrations when we first defined +our strategy in 2020. During the course of 2023 the +referrals from major platforms adversely impacted +our page views and so we took the decision to +turn off the customer login which has reduced +customer registrations from the peak of 13.5m in +August to 12.3m in December. We have surpassed +our original target which was set at 10m for the end +of 2022 and given the current level of registrations +is now at critical mass, we will no longer be +reporting this as a key KPI within this report. +Target: Year-on-year growth. +Why it matters to us: Digital growth can come +from increased supply of advertising and/or an +increased traded price. Increasing supply for +example by increasing the number of ad units +is becoming more challenging due to the direct +impact and trade off with audience experience. It’s +important to examine and understand traded price +which is a key driver of our digital performance. +There are a few factors which drive more revenue +per thousand pages. Firstly we either have insights +into customer and customer behaviour, which can +then be used to offer opportunities to brands to +adopt better-targeted campaigns and customer +offers. Or we drive non-advertising revenues +which are not directly related to volume such as +partnerships, affiliates and ecommerce. Both of +these factors link directly to our Customer Value +Strategy and therefore we are focused on +understanding how RPM trends over time. The final +reason that this metric could move is changes in +page views, and therefore it is important that RPM +performance is considered alongside page views. +Ideally both of these KPIs would trend upwards +over time. +Total average UK page views per month +(m)1 +(21)% +(2022: 0%) +Customer registrations +(m) +12.3 +(2022: 12.5) +Revenue per 1,000 pages +(£) +£8.18 +(2022: £7.36) +Non-financial KPIs +As our strategy progresses, we are considering +evolving our KPIs. One of the key KPIs we are +tracking and considering regularly is RPM – revenue +per thousand pages. RPM is a yield measure and +gives the financial return from digital pages traded. +This has now been included as a strategic KPI and +is described below. Customer registrations were +critical to the Group’s success when the Customer +Value Strategy was relatively nascent. We have +now achieved a critical mass of registrations and +therefore this will be the last year we report on it +within the Annual Report. +1. The non-financial target relates to UK page views +which are more significant to revenue, whereas +worldwide page views are disclosed throughout +the Annual Report as an indicator of the total +reach of our content. +Key performance indicators continued +964 +1,217 +1,210 +1,234 +870 +2019 2020 2021 2022 2023 +8.18 +7.36 +7.55 +5.88 +7.02 +2019 2020 2021 2022 2023 +12.3 +12.5 +9.1 +5.0 +0.8 +2019 2020 2021 2022 2023 +Target: Year-on-year growth in total UK page views. +Why it matters to us: Page views are a strong +measure of whether customers like our content +online. As a customer views more pages, we get +to know more about them – and can collect more +valuable data. However, in 2023 we have seen +some major online platforms, most notably +Facebook, deprioritise news. This has massively +reduced the referral traffic to our site and impacted +page views by 24% globally. We are now focused +on securing our audiences to ensure a more direct +relationship, while also increasing the amount of +content our audience consumes. We’re doing this by +using data to give customers more of the content +they like to read, driving more interactions +and engagement. +21 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_24.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..13a2af078265f923c0a4a9f16d0614dccc53efa8 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_24.txt @@ -0,0 +1,73 @@ +BUILDING LONG-TERM RESILIENCE +Financial review +Looking back over the year, we have made +demonstrable progress to ensure the business +is more resilient and able to continue its digital +transformation. During a year of macroeconomic +uncertainty and some significant shifts across +the media sector, we delivered a resilient +financial performance and made significant +progress in resolving the long-standing +uncertainties. +We concluded the 2019 triennial valuation, +along with the 2022 valuation, for the MGN +pension scheme, and have subsequently +reached agreement in principle with our other +schemes and are expected to be concluded +satisfactorily by the 31 March 2024 due date. +This provides a clear view of our future pension +commitments which will materially step down +from the current rate of £60.0m in 2028. +In December, the High Court’s judgment on +the Group’s historical legal issues (HLI) provided +clarity around time limitation. This has resulted +in a material reduction in the cost of settling +outstanding claims and should largely bring an +end to future claims. This has led to a £20.2m +year-on-year release in the HLI provision. We +expect the majority, if not all, of the issued +claims to be resolved during 2024 and 2025 +which is a much shorter time frame than +previously anticipated. Resolving these two +matters has reduced uncertainty and allows +us to plan more effectively for the long term. +The macroeconomic environment in 2023 +impacted advertising spend, and there was +a material step down in digital referral traffic +from major platforms such as Facebook, +which has deprioritised news content. This has +driven a 24% year-on-year decline in digital +page views, which alongside depressed open +market yields (year on year decline 25%), +adversely impacted digital revenue, which +declined by £22.4m or 15% to £127.4m in 2023. +Conversely, our data-driven revenues +performed robustly, only declining 4% year-on +year, to now represent 43% of digital revenues +(2022: 38%). To compensate for the industry +headwinds we took clear actions to continue +to diversify our digital revenues and trade +our digital assets harder. We prioritised areas +within our Customer Value Strategy which +are higher yielding and within our control. +As a result revenue per thousand pages +(RPM) across our digital estate increased +by 11%. These actions have resulted in +improved resilience, with areas of strong +growth including curated marketplaces, +ecommerce and affiliates. +Darren Fisher +Chief Financial Officer +Revenue +568.6M +5.4% decrease on 2022 +43% +of digital revenues +now data driven +5% increase on 2022 +Adjusted operating margin +17.0% +0.6pp decrease on 2022 +22 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret flower is a "daisy". \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_25.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..a4a95bed67fed304821f2f8fc734cb50061349e1 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_25.txt @@ -0,0 +1,76 @@ +Financial review continued +We continued to invest in our digital expansion. We launched our three US-based sites, invested +in Curiously, our social-first, video-focused brand, and invested in new products to develop our +curated marketplace capability. +The print business remained robust and delivered £438.8m (2022: £448.6m) of revenue, +representing just over 75% of the Group’s revenue with a strong performance in circulation and +print advertising. The teams have access to a significant amount of data which has built up over +many years and this is used to determine optimal levels of availability and cover price increases. +These dynamics have offset the volume decline with circulation revenue growing 1.6%. Print +advertising declined by £10.3m, or 11.9% year-on-year; this was a solid performance, +outperforming volume trends which were down 17% year-on-year. +Focus on efficiency +Through our cost action plan we continue to focus on efficiency, setting up our operations +to adapt and thrive in a fast-paced and competitive digital landscape. At the start of the year +we committed to reducing total operating costs by 5-6%, and on a 52 week like-for-like basis we +achieved a 5.7% reduction. Inflation moderated through the year following the material increase in +the cost of newsprint in 2022, some of which unwound in 2023. Overall newsprint costs reduced by +21%, mainly driven by the decline in production volumes. We have implemented restructuring and +efficiency programmes and as part of these, headcount has reduced by 14% over the year. Our +largest operating cost, labour, reduced by 5% year-on year. Together these actions have driven +higher levels of efficiency, protecting the strong operating margin of 17% and mean we are better +positioned for the long term. +Strong balance sheet +The Group has a robust balance sheet with a closing cash balance of £19.9m, and net debt of +£10.1m (inclusive of £0.9m restricted cash). The Group has £30.0m drawn down on its revolving +credit facility. The Group’s revolving credit facility of £120.0m is in place until November 2026. +Cash management remains a priority. Group cash conversion was strong at 95% supported +by efficient working capital management. Pension scheme contributions during the year were +£60.0m, HLI claim settlements totalled £4.6m and we incurred £18.8m of restructuring payments. +Together these non-operating cash outflows amount to £83.4m. +In December 2023 the Group completed a £605.4m capital reduction, converting the entirety +of the share premium account into distributable reserves, which will support the payment of +dividends into the future. This did not involve any return of capital or payment to shareholders. +Looking ahead +The strength of our print business underpins the cash generation and profitability of the Group. +We will continue to carefully balance cover price increases and availability to deliver a robust +circulation performance despite the falling demand for print. Print revenue funds the Group’s +financial commitments and enables investment as we continue to build our digital business. +This year we will continue to invest in product and new markets including the US and developing +the AI-powered Mantis ad tech. We will also increase our use of AI tools to support increased +productivity in the newsrooms, under the continued guidance of our journalists. +Across our digital business we continue to build a more sustainable higher-quality digital mix, with +43% of digital revenue now data-driven. The depressed open market yields, compounded by the +decline in page views, have reinforced the benefits of our data-driven Customer Value Strategy. +This strategy will continue to increase yields and grow data-driven revenues. +As communicated in 2023, we have already actioned a further programme of cost reduction +for 2024, which we are confident will support a 5-6% in-year reduction in our operating costs and +protect our operating margin. Savings have been generated throughout the business and include +further steps in creating a digitally-led editorial business, for example the creation of a single +video studio. +Summary income statement +Adjusted 2023 +£m +Adjusted 2022 +£m +YOY change +% +Statutory 2023 +£m +Statutory 2022 +£m +YOY change +% +Revenue 568.6 601.4 (5.4) 568.6 601.4 (5.4) +Costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Associates 2.9 2.8 3.6 1.4 1.4 0.0 +Operating profit 96.5 106.1 (9.0) 46.1 71.3 (35.3) +Finance costs (3.5) (2.8) (25.0) (9.4) (5.1) (84.3) +Profit before tax 93.0 103.3 (10.0) 36.7 66.2 (44.6) +Tax charge (24.6) (18.8) (30.9) (15.2) (13.9) (9.4) +Profit after tax 68.4 84.5 (19.1) 21.5 52.3 (58.9) +Earnings per share +– basic (p) 21.8 27.1 (19.6) 6.8 16.8 (59.5) +23 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret kitchen appliance is a "microwave". \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_26.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..414df8998f7facf975cbd5b098942140d17c0957 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_26.txt @@ -0,0 +1,56 @@ +Financial review continued +The results have been prepared for the 53 weeks ending 31 December 2023. The comparative +period has been prepared for the 52 week period ending 25 December 2022. The additional week +contributed £6.2m of revenue and £0.8m of operating profit. The impact of revenue and costs is +shown on a like-for-like basis in the table on page 26. +Group revenue fell by £32.8m or 5.4% to £568.6m with print down 2.2% and digital down 15.0%. +Adjusted costs decreased by £23.1m or 4.6% to £475.0m, partially offsetting the decline in revenue. +This was driven by the reduction in circulation volumes and a small unwinding of some of last year’s +newsprint cost inflation, alongside the ongoing cost reduction programme. Statutory costs were +lower by £7.6m or 1.4%, with the increase in operating adjusted items of £15.5m (£48.9m in 2023 +versus £33.4m in 2022) partially offsetting the reduction in operating costs. +Adjusted operating profit decreased by £9.6m or 9.0% to £96.5m, driven by the decline in revenue +partially offset by the savings in costs. The adjusted operating margin of 17.0% in 2023 compares +to 17.6% for 2022. Statutory operating profit decreased by £25.2m or 35.3% primarily due to the +increase in operating adjusted items which include restructuring charges in respect of cost +reduction measures and impairment of the finance lease receivable and recognition of onerous +costs following the sub-lessee of a vacant print site entering administration, partially offset with +the release of the provision for historical legal issues. +Adjusted earnings per share decreased by 5.3p or 19.6% to 21.8p. Statutory earnings per share +decreased by 10.0p to 6.8p, principally due to the decrease in operating profit. +Revenue +2023 +£m +2022 +£m +YOY change +% +Print 438.8 448.6 (2.2) +Circulation 312.5 307.7 1.6 +Advertising 76.6 86.9 (11.9) +Printing 20.2 23.1 (12.7) +Other 29.5 30.9 (4.5) +Digital 127.4 149.8 (15.0) +Other 2.4 3.0 (16.9) +Total revenue 568.6 601.4 (5.4) +Revenue declined overall by £32.8m or 5.4%. +Print revenue decreased by £9.8m or 2.2% (2022: down 3.5%). Circulation performance was strong +with revenue up 1.6% (2022: down 1.7%) driven by carefully considered cover price increases, which +were above recent historical levels, offsetting the ongoing decline in circulation volumes. +Print advertising revenue declined by £10.3m or 11.9% (2022: down 15.9%); but outperformed the +print volume decline of 17%. During the year the strongest performing sectors for print advertising +include food retail, travel, the government and entertainment and media, which is very similar to +the prior year. +Print revenue also includes external or third-party printing revenues and other print-related +revenues which decreased by £4.3m, or 8.0% (2022: increased 10.4%). These revenues are +largely contracted on a cost-plus basis, and reflect the external market demand for print. +Digital revenue decreased by 15.0% to £127.4m (2022: 1.0% increase). Revenue has been impacted +by lower advertising demand during a period of macroeconomic uncertainty alongside a +material reduction in page views. Major platforms including Facebook have deprioritised news +content over the year which in turn has driven a reduction in referral traffic for publishers across +the sector. These changes have adversely impacted our revenues which were directly impacted +by page view volume. Strategically driven or ‘data-led revenues’, which are more resilient and +higher yielding, performed robustly. Data-driven revenues were £55.3m, down 4.0%, and now +represent 43% of digital (2022: 38%). +24 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_27.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..e6d55ed24bd9b975e24292dcd04afbd8badc54e2 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_27.txt @@ -0,0 +1,68 @@ +Financial review continued +Costs +2023 Adjusted +£m +2022 Adjusted +£m +YOY change +% +2023 Statutory +£m +2022 Statutory +£m +YOY change +% +Labour (223.0) (234.7) 5.0 (223.0) (234.7) 5.0 +Newsprint (59.5) (75.4) 21.1 (59.5) (75.4) 21.1 +Depreciation and +amortisation (21.6) (20.2) (7.0) (21.6) (20.2) (7.0) +Other (170.9) (167.8) (1.9) (219.8) (201.2) (9.2) +Total costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Adjusted costs of £475.0m (2022: £498.1m) decreased by £23.1m or 4.6%. On a 52 week like-for-like +basis adjusted costs declined by 5.7%. Labour costs decreased 5% as we implemented our +restructuring and efficiency programme with headcount falling by 14% over the year. Newsprint +costs reduced from lower volumes, and an unwinding of some of last year’s newsprint cost inflation. +Statutory costs were lower by £7.6m or 1.4%, a less significant reduction due to higher operating +adjusted items which were £15.5m higher (£48.9m in 2023 compared to £33.4m in 2022). +Operating adjusted items included in statutory costs above related to the following: +Statutory 2023 +£m +Statutory 2022 +£m +Provision for historical legal issues 20.2 (11.0) +Restructuring charges in respect of cost reduction measures (26.9) (15.5) +(Impairment of sublease)/sublet of closed print plant (19.4) 16.6 +Other property-related costs (8.0) (4.6) +Pension administrative expenses and past service costs (5.5) (14.8) +Other items (9.3) (4.1) +Operating adjusted items in statutory costs (48.9) (33.4) +The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the provision for historical +legal issues relating to the cost associated with dealing with and resolving civil claims in relation to +historical phone hacking and unlawful information gathering. This material reduction is driven by +the judgment handed down during December 2023 in respect of test claims. As a result of the +ruling, all claims issued after 31 October 2020 are now likely to be dismissed other than where +individuals can demonstrate specific exceptional circumstances, and therefore this has +significantly reduced the amounts that are expected to be paid out. +Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost management actions +taken in the period. +Following the sublet of the vacant print site during 2022 which resulted in the reversal of an +impairment in right-of-use assets of £11.0m and previously onerous costs of the vacant site of +£5.6m, the sub-lessee entered into administration during 2023. As a result, the corresponding +£10.8m finance lease receivable has been impaired along with the subsequent recognition of +onerous costs of £8.6m of the vacant site during the period. +Other property-related costs comprise the impairment of vacant freehold property costs (£4.3m), +vacant freehold property-related costs (£1.4m) and onerous lease and related costs (£2.6m) less +the profit on sale of assets (£0.3m). In 2022, other property-related costs related to the impairment +of vacant freehold property (£4.2m) and plant and equipment (£0.8m) less the profit on sale of +impaired assets (£0.4m). +Pension costs of £5.5m (2022: £14.8m) comprise pension administrative expenses (2022: £4.2m). 2022 +also included £10.6m of past service costs relating to a Barber Window equalisation adjustment. +Other adjusted items comprise the Group’s legal fees in respect of historical legal issues (£5.3m), +adviser costs in relation to the triennial funding valuations (£2.5m), internal pension administrative +expenses (£0.6m), corporate simplification costs (£0.5m), and other restructuring-related project +costs (£0.7m) less a reduction in National Insurance costs relating to share awards (£0.3m). In +2022, other adjusted items comprise the Group’s legal fees in respect of historical legal issues +(£5.2m), adviser costs in relation to the triennial funding valuations (£1.6m), less a reduction in +National Insurance costs relating to share awards (£2.7m). +25 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_30.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..2814dd349dd76575c138f6fa5b1abc28028484e6 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_30.txt @@ -0,0 +1,49 @@ +Cash balances +Net debt at the year end is £10.1m (inclusive of £0.9m restricted cash), from a net cash position of +£25.4m at the end of 2022. The Group has £30.0m drawn down on its revolving credit facility, with +the overall total cash position of £19.9m at the year end. The Group has a revolving credit facility +of £120.0m, which expires during November 2026. +Cash generated from operations on a statutory basis was £76.4m (2022: £80.1m). The Group +presents an adjusted cash flow which reconciles the adjusted operating profit to the net change +in cash and cash equivalents, which is set out in note 36. A reconciliation between the statutory +and the adjusted cash flow is set out in note 37. The adjusted operating cash flow was £91.9m +(2022: £92.1m). +Dividends +The Board proposes a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence). The final +dividend, which is subject to approval by shareholders at the Annual General Meeting on 2 May +2024, will be paid on 31 May 2024 to shareholders on the register at 10 May 2024. +An interim dividend for 2023 of 2.88 pence per share was paid on 22 September 2023 (2022: 2.88 +pence per share). +In proposing a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence per share), the +Board has considered all investment requirements and its funding commitments to the defined +benefit pension schemes. +Financial review continued +Uses for cash +The table below shows how the Group is using the cash generated from operations to meet its +financial obligations. Adjusted cash generated from operations is adjusted operating cash flow +excluding the impact of net lease payments and capital expenditure. +2023 +£m +2022 +£m +Adjusted cash generated from operations 112.6 112.1 +Pension payments (60.0) (55.1) +Historical legal issues (4.6) (9.0) +Restructuring (18.8) (13.8) +Capital expenditure (15.4) (13.3) +Final payment on acquisition (7.0) (17.1) +Other (19.2) (21.2) +Cash flow before returns to shareholders (12.4) (17.4) +Dividends paid (23.1) (22.9) +Cash flow after returns to shareholders (35.5) (40.3) +Net (debt)/cash (10.1) 25.4 +Material uses for cash include pension contributions totalling £60.0m (2022: £55.1m) and restructuring +payments of £18.8m (2022: £13.8m) which mainly relate to cost reduction programmes implemented +at the start of the year. The final payment on acquisition of £7.0m (2022: £17.1m) relates to the +Express & Star. Other comprises professional fees in respect of historical legal issues and triennial +funding valuations of £7.8m (2022: £6.8m), net lease payments of £5.3m (2022: £6.7m), interest +paid on borrowings of £3.1m (2022: £1.9m) and other movements which account for the balance +of cash flows. +The Group paid a dividend in the period of £23.1m (2022: £22.9m). +28 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_31.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..ec03acbc149e2ef2eb7bc5a6df03550fb0a2cd5c --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_31.txt @@ -0,0 +1,22 @@ +Current trading and outlook +We remain focused on delivering our Customer Value Strategy and the areas within our control, +building a more resilient growing digital business and delivering efficiencies. The sector-wide +decline in referral traffic will impact Q1 2024. We expect growing momentum across our digital +business thereafter. As previously announced we have made our operations better suited for +a digital world and are on track to deliver a 5-6% reduction in full-year operating costs in 2024. +Our financial priorities remain profitability and cash. Next year we expect working capital +requirements excluding provisions to be broadly neutral, and a small step down in our capital +expenditure. We have started the process to sell a number of our freehold properties which +will support cash generation. Our financial commitments for the year ahead are similar to 2023, +including the pensions contributions which will be broadly unchanged; we expect an acceleration +in the resolution of existing HLI claims and a further £13m restructuring outflow relating to +severance payments for the recent change programme. +Trading performance across the first two months of 2024 has been robust, with print advertising +and digital performing well. We are on track with our full year outlook, but continue to operate in +an uncertain macroeconomic environment. +Darren Fisher +Chief Financial Officer +5 March 2024 +Financial review continued +29 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_32.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..f26d205e0a65356bad5c50872f181d6a49fd0624 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_32.txt @@ -0,0 +1,63 @@ +We aim to act with integrity at all times – not just +because we have a responsibility to stakeholders, +whose lives we affect through our operations and +journalism, but because it’s simply the right thing to do. +In 2023, we built on the progress we made in 2022, +when we introduced a new formal framework to guide +our approach to responsibility and sustainability, +by identifying disclosure gaps and enhancing our +reporting. In particular we focused on progressing our +environmental reporting in 2023, as we implemented +the systems and gathered the data that will guide us +on our path to net zero. +A RESPONSIBLE, +SUSTAINABLE BUSINESS +Responsible business overview +Our responsible business framework +CREATING TRUSTED, QUALITY CONTENT +PROTECTING THE ENVIRONMENT +OPERATING WITH INTEGRITY +• sustainability +governance +and management; +• privacy and security; +• political considerations; +• the supply chain (shared); +• human rights; +• labour rights; and +• health and safety. +See page 36. +• maintaining independent +journalism, campaigning +and the role of a free +press in society; +• product stewardship; +• fair and ethical conduct; +• innovation; and +• making a wider +economic contribution. +See page 32. +• GHG emissions; +• energy and climate change; +• waste; +• biodiversity; +• other emissions, effluents +and pollution; +• water; +• the supply chain; and +• speaking up for +environmental issues in +our editorial content. +See page 46. +• supporting diversity +and inclusion; +• attracting, developing +and retaining talent; and +• supporting a positive +culture and wellbeing. +See page 40.DEVELOPING OUR TEAM +Our responsibilities… +In 2023 we installed 9,000m2 of solar panels at our +owned print sites in Oldham, Watford and Glasgow +30 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information30Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_33.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..61786db91580a26f07f965df87c09c2b8710a7a1 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_33.txt @@ -0,0 +1,101 @@ +OUR STAKEHOLDERS +Our business and brands touch the lives of: +Our people… who work from home and in our offices, in communities +and at print facilities – around the UK, Ireland and US; +Our customers… who give us their data and expect us to look after it, and +who also expect to see themselves represented in our +business, brands and journalism; +Our communities… whose voices we amplify and whose stories we share in +good times and bad; +Our advertisers and +media partners… +who expect our platforms to respect and promote their +messages in a way that’s safe and secure for their +own customers; +Our suppliers and +publishing partners… +many of whom are experiencing increased costs and +supply challenges; +Our shareholders… who are invested in the success of our business; +Pension funds and +their members… +who expect us to deliver on pension commitments and +treat them fairly; and +Government and +regulators… +who we work with to protect journalists and our brands +while setting out plans to bring tighter regulation to global +tech platforms. +Our section 172 statement can be found on pages 85 to 87. It sets out how the Board has, in +performing its duties over the course of the year, considered the matters set out in section 172 +of the Companies Act 2006, alongside examples of how each of our key stakeholders has +been considered and engaged. +We report against the Sustainability Accounting Standards Board (SASB) framework on +page 205. +Building on our responsible +business framework +To ensure that people find our strategy +credible and believe in our purpose, we must +act responsibly with the communities and +society we serve, our teams and the planet. +As a regulated news publisher in an era of +global tech platforms and ‘fake news’, the +responsibility is greater than ever. We must +continue to enlighten, empower and entertain +people everywhere through brilliant journalism +they can trust, and maintain a position +from which we can hold power to account. +Formalising our approach to +responsible business +In 2022, we carried out a detailed materiality +assessment and created a framework to +formalise our approach to being a responsible, +sustainable business – making it easier to +manage and measure our progress. It provided +a clearer articulation of our approach to +environmental, social and governance (ESG) +issues, ensuring it aligned with our purpose +and business strategy, as you’ll see over +the following pages. +This formal framework set out an approach +to responsible business that we had already +in many ways exemplified, for example by +upholding regulations and codes of conduct, +representing and campaigning on behalf of +those who need our voice, and producing our +printed newspapers with as low a carbon +footprint as possible. +In 2023, we built on the framework by +commissioning a gap analysis to define where +disclosure gaps exist against the methodologies +recommended by Sustainalytics, MSCI and +the Sustainability and Accounting Standards +Board (SASB). As a result, we have enhanced +reporting in many of these areas, though in +some – in particular those involving complex +editorial decisions – we agreed as a business +to maintain existing levels of disclosure. +We’re committed to continually challenging +and improving the standard of our reporting, +making sure we stay focused on the issues +that matter most to our stakeholders. +Overview of materiality +Our 2022 materiality assessment +included a review of current policies and +direct engagement with our key internal +and external stakeholders to establish +their priorities in relation to the long- +term sustainability of our business. +In 2023 our Sustainability Steering +Committee reviewed the material +issues within our responsible business +framework and concluded that they +reflect the current ESG challenges and +opportunities affecting Reach and our +stakeholders. We will keep the relevancy +and importance of these issues under +continuous review throughout the +coming year. +Responsible business overview continued +31 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_34.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..83903ceb84c6b5441cb21ff3802bca46c0838d8d --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_34.txt @@ -0,0 +1,29 @@ +Responsible business continued +Relevant UN SDGs +MyLondon crime reporter talking +to police about knife crime in shops +and restaurants around Croydon +We give a voice to others with our +trusted, quality content +Our titles connect people and communities +across the UK, Ireland, US and English-speaking +countries around the world. We have a +responsibility to our communities to deliver +accurate, independent journalism everybody +can trust and cover the issues that matter +most to them. +Whether it appears in print or online, our +journalism can give a voice to others, and +draw attention to, or amplify, the causes they +care for as we campaign, lobby and fight on +their behalf. At a time when misinformation +and disinformation threaten the credibility +of the industry, our commitment to creating +trusted, quality content as a regulated news +publisher ensures people and communities +have a news provider who will serve and +stand up for them. +CREATING TRUSTED, +QUALITY CONTENT +32 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_35.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..560eee2f71e279b02871818d8a19ebbb66dcce20 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_35.txt @@ -0,0 +1,103 @@ +Responsible business continued +Creating trusted, quality content +Playing our part in +a changing industry +We’ve always been proud of the prominent +role our brands play in the vibrant and +energetic free press that underpins our +democracy – and understand the rights, +privileges and responsibilities it brings. +We’re committed to upholding the highest +ethical standards of journalistic practice. As +part of that commitment, we’re a member of +the Independent Press Standards Organisation +(IPSO): an independent regulator of most of +the UK’s newspapers and magazines. As we +say in our annual statement to IPSO: we have +‘no appetite for behaviours or decisions that +knowingly lead to the publication of inaccurate, +misleading or distorted information’. +In 2023, IPSO notified us of outcomes in respect +of 81 complaints, some of which were received +in previous years. These are as follows: 17 +complaints have been upheld by IPSO with +the requirement to publish a full adjudication +or correction; and 13 where the Committee +deemed that sufficient remedial action +(SRA) had been taken by the publication. +49 complaints were not upheld and 65 were +resolved during the referral period. This is a +significant improvement against outcomes +last year – 62% of complaints not being upheld +in 2023 compared with 48% for the same +period in 2022. +Legal and ethics standards +In 2023, our legal and editorial induction +programme became a mandatory part of the +onboarding process, ensuring all new editorial +colleagues receive training in legal and +editorial standards and ethics. +The training touches on all elements of media +law, with modules on IPSO and the Editors’ +Code as well as on Reach’s required editorial +standards. Monthly legal training has been +provided, with a specific focus this year on +refresher training for colleagues as well as +specialist sessions for our magazine teams. +Alongside the training programme, all editorial +employees are sent a monthly legal bulletin +highlighting issues and updates – readership +is mandatory and timely compliance is +monitored and logged. +Regulated by IPSO +While we believe in holding ourselves to high +standards, we’re also an active member of +IPSO, which acts as an independent regulator +across many UK titles and enforces the Editors’ +Code of Practice. +HOW WE ARE USING AI +Our editorial leaders formed a +cross-functional AI steering committee +in January 2023, focusing on productivity, +innovation and governance. The group +has worked together to accelerate AI +experimentation and boost productivity +gains with a primary focus on editorial +uses of generative AI. The main objective +of the group was to develop ways for AI +to support journalists in their daily work, +in combination with continued editorial +judgement and approval. We are rapidly +scaling the most promising AI applications +and in 2024 we will be looking beyond the +editorial teams to explore productivity +gains in other departments. +In 2023, 6,000 articles were written with +the support of AI tools, generating 50m +page views. Our editors notified readers +when we began using AI and made a +public commitment that every piece of +AI-supported content will continue to be +overseen and approved by a journalist. +“We’re committed to +upholding the highest +ethical standards of +journalistic practice.” +We submit an annual statement to IPSO that +sets out how we maintain editorial standards, +our record on editorial compliance during +the year, including any details of complaints +upheld against us and how we handle them, +and training programmes for our journalists. +We publish the statement on our website. +Editorial freedom +Reach is home to many brands that differ in +audience and political ideology but which are +all built on the principles of freedom of speech +and editorial independence. We welcome +lawful expression from different perspectives, +without exclusion. With no single title or +contributor representing Reach as a whole, +we are greater than the sum of our parts. +33 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_36.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..6f0d7a91ec6522651629029fb915ae25d692bcfc --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_36.txt @@ -0,0 +1,68 @@ +Day in, day out, our journalists cover the stories that +matter most to the communities they serve. Our titles +hold power to account on both a local and national level, +give a voice to those who need it most and campaign +against injustice. +This year, we established a group-wide editors’ forum +that meets every quarter to review and document the +positive social impact of the content Reach produces. +DAILY EXPRESS’S TRIPLE LOCK PENSION AND +SAVE OUR HIGH STREET BANKS CAMPAIGNS +In 2023, the Express continued to give a voice to those +who needed it most, as illustrated by its Triple Lock Pension +and Save Our High Street Banks campaigns. The Express +reignited its Triple Lock Pension campaign in 2023, again +calling on the Government to protect and support +pensioners and recommit to the triple lock. The title +launched a petition to persuade the Government to stick +to its manifesto promise, garnering over 300,000 signatures +and resulting in the Government committing to its original +promise. In response to warnings from analysts that almost +all high street banks will be shut within four years, the Save +Our High Street Banks campaign called for high street +branches to be saved from extinction on behalf of the +country’s most vulnerable. Ultimately, the campaign +celebrated a victory in June when Nationwide +promised to keep high street branches open. +THE LIVERPOOL ECHO’S +POLITICIAN PARKING FINE EXPOSÉ +After a 16-month investigation, the Liverpool +Echo revealed 14 local politicians had 51 +penalty charge notices cancelled by officers +over a five-year period which at full price would +total more than £3,500. The investigation revealed +poor practices and behaviours from those who +had been elected to serve Liverpool and its people. +Following the investigation, two senior Liverpool councillors left +the council, with one of them banned from standing again, +and two more councillors also departed after the exposé. +The investigation led to a full audit of the council’s +parking operations. +THE DAILY RECORD’S OUR KIDS +OUR FUTURE CAMPAIGN +In February 2023, the Daily Record +launched the Our Kids Our Future +campaign in response to an epidemic of +teenage violence in Scotland. The campaign +called for the Scottish Government and local +councils to ring-fence funding to ensure +every community has a place for teenagers +to go and demanded online tech giants +fully enforce their policies on tackling harmful +content such as videos of young people attacking others. +The campaign earned its place on the Government agenda +and led to First Minister Humza Yousaf pledging to invest £2m +to protect young people in Scotland. Humza Yousaf also wrote +to the UK Government asking for an amendment to the Online +Safety Bill to help tackle online clips showing attacks on children +and this amendment was successfully approved into the Bill in +July 2023. The Scottish Government held its first emergency +summit on violence in schools as a direct result of the +Record’s reporting. +Responsible business continued +Creating trusted, quality content +CAMPAIGNING +ON BEHALF +OF OTHERS +34 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsOther Information 34Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_37.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..d72f1d0a5af3ef6605b6100348d2a28228b8b09b --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_37.txt @@ -0,0 +1,41 @@ +BIRMINGHAMLIVE’S COVERAGE OF +BIRMINGHAM CITY COUNCIL’S BANKRUPTCY +Fundamental failings at Birmingham City Council resulted +in it filing for bankruptcy, but it was the relentless coverage +from BirminghamLive that brought into sharp relief the +impact that these political decisions have on the people +of Birmingham. +BirminghamLive spent months reporting on the council +and exposed a range of issues, from political coups to the +mismanagement of refuse workers’ hours. The title ensured +that it was represented at every single council meeting +where critical issues were being discussed, further exposing +issues that would otherwise have gone without scrutiny. +THE MIRROR’S SAVE OUR TICKET OFFICES CAMPAIGN +The Mirror launched its Save Our Ticket Offices campaign in +July 2023 after it was revealed the Government had backed +proposals by train firms to shut ticket counters at 974 railway +stations across England. +With this campaign, the Mirror led the efforts to stop the closures, +which would have particularly hit the elderly, vulnerable and +disabled. Thousands of readers took part in an online rally in +August, leading to the Government abandoning the overhaul. +WALESONLINE INVESTIGATION +A WalesOnline investigation led to real-world +consequences for one direct sales firm in Cardiff. For +several months, a member of the WalesOnline team went +undercover to get a job with the company and used a +hidden camera to expose a culture of lies and pressure- +selling to manipulate vulnerable and elderly people into +providing their bank details for charity payments. As our +journalist discovered, staff at the business were lured by +job adverts with empty promises of high salaries, only to +be forced to work round the clock for far less than the +minimum wage. The shocking findings led to the firms +involved having their fundraising contracts terminated, +while the industry regulator is evaluating our footage to +assess further action. +Responsible business continued +Creating trusted, quality content +35 +Reach plc Annual Report 2023GovernanceStrategic Report Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_44.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..7aa827a4d3fe3381b3c6059caad4b8c5426ccce3 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_44.txt @@ -0,0 +1,73 @@ +Inclusion at Reach +At Reach, we break down our diversity and +inclusion approach into two simple ideas: +diversity is who we are, and inclusion is what +we do. We see improving inclusivity as an +ongoing process and are aware that we are +responsible for taking an inclusive approach +not only to our people but also to +our audiences. +In 2023, Reach was ranked in the Inclusive Top +50 UK Employers List for the third year running, +moving from 29 to 19. +Our three core inclusion focuses for 2023 were +managers, data and outreach. +Managers +Inclusion efforts in 2023 focused on helping +managers embed inclusive leadership +behaviours into their everyday work. We also +successfully communicated the importance +of managers’ accountability by launching DIY +D&I, enabling managers to participate in +workshops that enhanced a more inclusive +team culture. DIY sessions were available for +managers to run with their teams +independently. +We also updated our menopause toolkit to +help both colleagues and their managers. The +toolkit shares the most common symptoms +of menopause and perimenopause and +provides advice and help so our people feel +more comfortable talking about it. Suggested +supports include offering a change in working +hours, an adjustment to shift patterns, +increased comfort breaks and ensuring +workspaces are well-ventilated, to name just a +few. We also delivered menopause awareness +training for line managers to run with their +teams independently. +Data +Our Inclusion strategy continues to be led by +data. Be Counted is our ongoing campaign, +launched in 2021, which uses data to better +understand the make-up of our teams. +Gathering data allows us to spot gaps and +opportunities to improve inclusion and then +focus our efforts on where we can make the +most significant difference. In 2023, we +maintained our targeted Be Counted +completion rate, with 86% of employees +contributing to our data-gathering. Our people +shared data on characteristics including +social mobility, educational and occupational +backgrounds, and caring responsibilities, as +well as more traditional data, such as ethnicity +and sex. +Outreach +We made outreach a more explicit part of +our 2023 Inclusion strategy this year. Here are +some of the initiatives that gave opportunities +to different groups across the UK. +ChangeMakers Media Challenge +The ChangeMakers Media Challenge, in +partnership with youth charity Causeway +Education, was a six-week summer outreach +programme in social mobility hotspots for +students from state-funded schools. The +students received virtual masterclasses +Responsible business continued +Developing our team +Sir Keir Starmer speaking with local students during a visit to our +Manchester hub, hosted by the M.E.N. +Strategic Report Governance Financial Statements Other Information +42Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_45.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..47cce4b4ccff51f4d95bd3b7027481016ff9a597 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_45.txt @@ -0,0 +1,118 @@ +and mentoring across the summer and were +tasked with creating a media campaign to +improve the lives of 16- to 24-year-old readers. +More than 30 colleagues participated in and +supported the programme. As well as having +the opportunity to join the Mirror’s editorial +conference and hear from CEO Jim Mullen, +the students got the chance to pitch their +campaigns to a Reach judging panel, with +the winning teams taking on further work +experience in Reach newsrooms. +WalesOnline Outreach Programme +In February, WalesOnline hosted a group +of teenagers from Grangetown, Butetown +and Riverside for a taster day to help them +understand how the media works and show +potential routes into journalism. In partnership +with community group United2Change, 17 +teenagers spent three hours in WalesOnline’s +newsroom attending the morning conference, +speaking to reporters and content editors, +creating news lists and gaining an awareness +of all aspects of modern reporting, including +engagement, analytics and content. +Include Summit +Reach was one of the main sponsors of +the 2023 Include Summit, the UK’s largest +conference focused on equality, diversity +and inclusion in sport. Our colleagues from +the M.E.N., Mirror and Curiously participated +in panels, exhibitions, events and workshops. +Reach also joined forces with the BBC and +Sky to lead a discussion on the need for +under-represented communities to fill more +decision-making roles in sports media. +Networks +Colleague networks remain a vital part of +inclusion at Reach. In 2023, the business +evaluated how the networks were working, +combining some networks while expanding +others. One new network was created in 2023, +ReachSustainability, connecting like-minded +people across Reach to raise the profile of +ESG initiatives and champion best practices +around sustainability. For more information +on ReachSustainability, please see page 47. +One of the most successful network initiatives +in 2023 was Meno-Chat, which enables +colleagues to connect and gives our +people a confidential and safe space +to talk about menopause. +Editorial inclusion work +For our people to feel their work is making +a difference in society and for our brands to +remain popular, the content of our journalism +must represent both the diversity of our teams +and the communities it reaches. +This year, we refined several ways to help our +editorial colleagues achieve this. Our Editorial +Inclusion Board (EIB) reviews our processes +and content through an inclusion lens, creating +a feedback loop to make our people’s voices +heard. This year, we completed our Inclusive +Reporting programme. Led by our EIB and +working with external partners, the programme +helps our journalists feel comfortable reporting +on different topics and communities inclusively +and sensitively. The programme featured topics +including (but not limited to) race, sexual and +domestic abuse and transgender identity. +Our Speak Up for Inclusion process allows +Reach colleagues to share any concerns +about editorial content that could be more +inclusive. A panel of editorial colleagues from +across Reach editorial teams manages a +feedback inbox and discusses the next steps +and overall trends. +Celebrating inclusion in +our journalism +Since its launch in 2022, The Belonging Project +has continued to bring about a permanent +culture shift in our newsrooms. The project +aims to ensure a clear plan is in place across +all newsrooms to reach underrepresented +communities, encourage more inclusive +reporting and maintain consistent engagement +with marginalised groups. In 2023, the scope +of The Belonging Project was broadened to +include socioeconomic factors, recognising +the importance of intersectionality in inclusion. +The Belonging Project article with the most +page views of 185.6k was from the Manchester +Evening News, focusing on the uplifting story of +Jason Williams, who turned his balcony into a +beautiful ‘cloud garden’ after struggling with +his mental health through lockdown. What +started as a small, city-centre balcony +garden led to his exhibition at the +Chelsea Flower Show. +Responsible business continued +Developing our team +The total number of +The Belonging Project page +views from February 2022 +to December 2023 was… +27.4M +with +69% +of these page views attained in 2023 +Average articles published per +month have gone up… +62% +in 2023 vs 2022, and average page +views per month are up +104% +as a result +Strategic Report Governance Financial Statements Other Information +43Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_50.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..a99ab60e2036af2b798dc0dd03d8ef9343fa533e --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_50.txt @@ -0,0 +1,140 @@ +The indirect impacts of a business’s operations +are as important as the direct impacts. We +are committed to accurately measuring and +reducing our Scope 1, 2 and 3 emissions, +in line with the Paris Agreement. We have +now managed to baseline our full Scope 3 +emissions for the first time, a challenging +task which was completed in 2023. +To help reduce the energy used within our +digital processes, including Reach Publishing, +we have adopted best practices for cloud- +based technology in order to achieve +significant emission reductions. During +2023, we have continued to find efficiencies +and improvements which will reduce our +associated emissions and strive to continue +this downward trend throughout 2024. +Enhancements are focused on cloud +efficiencies and an increased use of +AWS renewable energy sources. +With the assistance of our EMS, we can +continually review, identify and implement +opportunities to reduce negative environmental +impacts. This includes initiatives such as +substituting conventional lights and carbon- +intensive equipment with energy-efficient +alternatives, responsibly procuring equipment +and incorporating more recycled materials +into our processes. +Each of our print sites has a dedicated team +responsible for encouraging employees to +look after their work environments and specific +environmental action areas. This year, they +carried out litter picks across the sites, acted +on energy-saving initiatives, shared best +practices and continued to develop +and deliver their Toolbox Talks on waste +management, recycling, pollution control, +energy management and biodiversity. +Environmental governance and +the path to net zero +Our Environment, Social and Governance +(ESG) Steering Committee, chaired by our +Chief Financial Officer, sits under our Board +Sustainability Committee. The ESG Steering +Committee met three times in 2023 and +all meetings were well attended by +representatives from relevant departments +from across the business. The Committee +oversees all our environment-based key +performance indicators (KPIs), including our +emission reduction targets and actions and +the timeframes to achieve them. These targets +were set in 2022, based on the data available +at the time and were approved by the +Sustainability Committee. +In 2022, we commissioned external experts +to put together a materiality assessment, an +important step in informing our future ESG +agenda. The assessment led to a five-year +climate strategy, approved by our Sustainability +Committee. This presented our ESG Steering +Committee with a set of strategic targets and +an overall ambition to focus on and it has +been measuring and ensuring progress +towards these targets throughout 2023. +We have continued to make progress with +TCFD in 2023 by identifying the physical and +transitional risks posed by climate change, as +well as the opportunities that may arise as a +prevalent: ‘Purchased Goods and Services’, +‘Upstream Transport and Distribution’ and ‘Use +of Sold Products’ (includes digital emissions). +The graphic below shows the breakdown of +these emissions, with Purchased Goods and +Services being the largest contributor to our +GHG emissions. +The Scope 3 categories not deemed relevant +to Reach and which therefore will not be +reported, are: +• Category 9 – Downstream Transport and +Distribution (our distribution of goods is +covered in Category 4); +• Category 10 – Processing of Sold Products +(Reach does not process intermediate +products); +• Category 13 – Downstream Leased Assets +(Reach had no sublets in 2022); and +• Category 14 – Franchises (Reach does +not have any franchises). +Responsible business continued +Protecting our environment +Breakdown of Reach baseline emissions 2022 +result of the transition. Our cross-functional +team continues to meet to assess our risks +and opportunities and engages with relevant +employees to ensure environmental-based +risks, issues and opportunities are being +identified as well as robustly managed and +mitigated. In 2023, we have undertaken a +quantitative assessment of our most material +climate-related risks. See more in our Risk report +on pages 66 to 72 and our TCFD report on +pages 54 to 64. The ESG Steering Committee +and Sustainability Committee will continue to +monitor the progress against our strategy. +Having a thorough and full understanding of our +Scope 3 emissions is an essential part of our +climate strategy. We have been expanding +our reporting on categories since 2019 and +in 2022 made great progress on reporting +greenhouse gas (GHG) emissions. In 2023, we +are proud to have continued that progress by +completing a full baseline of all of our GHG +emissions. We identified 11 ‘upstream’ and +‘downstream’ Scope 3 categories relevant +to Reach, three of which are particularly +54.1% +Purchased Goods +and Services +1.0% +Capital Goods +23.3% +Upstream Transport +and Distribution +2.77% +Other +3.82% +End of Life +Treatment +11.65% +Use of Sold +Products +1.75% +Employee +Commuting +1.6% +Our operations +48 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_51.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_51.txt new file mode 100644 index 0000000000000000000000000000000000000000..f3556116b97f8335f9aa731f97dbaa74db8f66fb --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_51.txt @@ -0,0 +1,142 @@ +Our five-year climate strategy involves more +than just measuring emissions. We have +continued to meet our ambitious reduction +targets and having achieved and maintained +a 75% reduction in Scope 1 and 2 emissions +two years early, we are able to pursue further, +even more ambitious commitments (see +page 50 for details). We are also committed +to enhancing our engagement with our value +chain and using our leverage where possible to +persuade others to set their own net zero targets, +ideally aligned to a science-based target (SBT). +We recognise that the issues of climate +change and sustainability are complex. +We therefore provide regular training to +colleagues across the Group to help them +to better understand how they can make a +difference and help us on our net zero journey. +Our newly-formed Sustainability network +ran several events in 2023, including a +Sustainability Awareness training event +open to all employees. We also delivered +an in-depth training session on climate +emissions and environmental best practice +for our executive team and Board. +Our environmental performance +in 2023 +Our total Scope 1 and 2 (market-based) +emissions has reduced by 15% from 2022 +and has reduced 77% from the 2019 baseline. +For the first time, we are able to report our full +Scope 3 GHG emissions and can compare +them with our completed baseline of GHG +emissions for 2022. Our Scope 3 emissions +have reduced by 17% when compared to 2022. +The reductions are predominantly attributed +to Purchased Goods and Services, Upstream +Transport and Distribution and Use of +Sold Products. +Due to improvements in data quality we have +re-stated some 2022 emissions. For full details +of our environmental performance, see the +tables on pages 52 and 53. +Energy and emissions +Our gas consumption (kWh) in 2023 reduced +by 0.73% and electricity by 18.5% compared +with 2022. +Environmental management +Each year, our print and publishing sites are +both internally and externally audited against +the international environmental standard +ISO 14001:2015, which requires continuous +improvement on environmental impacts. +We work hard to meet and maintain, or ideally +better, our standards by continually reviewing +our risks and opportunities. It’s rare that +non-conformances are raised and all +hubs maintained the standard in 2023. +The year also saw the three print sites +integrate their standard under one ISO +certification. The newly-integrated management +system enhances the consistency of print ISO +management, covering Environment, Health +and Safety and Quality. In 2024, the scope for +the Publishing ISO 14001:2015 standard will be +reviewed to ensure it is still relevant and +reflective after the wider operational +changes carried out in 2022 and 2023. +Supply chain +As a news publisher, paper is essential to our +business, which is why we are committed to +responsible procurement. We set ourselves +ambitious targets to support our commitment +to using graphic paper from fibre that has +been recycled or that has been independently +certified as sustainable. In 2023, we sourced +97.28% of graphic paper from recycled +materials or wood from certified sustainable +sources, against our target of 95%. We +collaborate with contractors for the printing +of our magazine supplements and the +distribution of our printed products so when +entering into a contract we carefully consider +our contractors’ dedication to environmental +sustainability. We expect them to assess and +disclose the energy consumption and carbon +emissions linked to the work conducted during +the reporting year. Our five-year climate +strategy has outlined our desire to engage +more deeply with our biggest suppliers and +work with them to continually enhance the +environmental credentials of our products. +Waste +The unnecessary creation and poor +management of waste can profoundly +impact the wellbeing of our planet and natural +environments. We are therefore committed to +utilising the waste hierarchy – a ranking system +of waste management options according to +which is the best for the environment – in our +management of waste. We aim to reduce the +types and volumes of waste we generate while +reusing and recycling as much of it as possible. +This year, we also aim to enhance the granularity +of our waste reporting, continuing to report the +total volumes of hazardous waste from our +print sites, where most of the waste is produced, +and total weights of paper waste we recycle +from our print sites, which is our main non- +hazardous waste stream. +The comprehensive renovation of our hubs for +team members embracing the advantages of +hybrid work is now complete and we ensured +that we made as much use of sustainable and +recycled materials in this process as possible. +We are committed to ensuring 100% of our +waste electrical and electronic equipment +(WEEE) avoids landfill and is either recycled +or reused, so we have chosen a contractor, +Restore, that has a ‘zero to landfill’ policy. +Restore also uses electric vehicles, powers its +recycling processes via solar panels, and is a +signatory of the Climate Group’s EV100 project, +which brings together companies ‘committed +to accelerating the shift to electric transport +from around the world’. We have also been +considering the potential to donate electronic +items before they become WEEE and engaging +with charitable organisations who could +benefit from this. +Responsible business continued +Protecting our environment +Energy Efficiency Actions +• Invested in solar panels at all owned +print sites in order to increase our +renewable electricity usage. +• Replaced refrigerant gas cooling +equipment at our Watford print site +with a more efficient model to reduce +refrigerant usage. +49 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_78.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_78.txt new file mode 100644 index 0000000000000000000000000000000000000000..5ea7fbceaf6863c8f11122e2fb147caf86181697 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_78.txt @@ -0,0 +1,62 @@ +Our Board +Nick Prettejohn +Chairman +Jim Mullen +Chief Executive Officer +Darren Fisher +Chief Financial Officer +Appointment date: March 2018 +(appointed as Chairman in May 2018) +Skills, experience and contribution: Nick has significant +chairmanship and listed company experience. Since his +appointment in 2018, Nick has successfully led the Board through +a period of transition, bringing on board a new CEO, two CFOs, a +Senior Independent Director and Audit & Risk Committee Chair. +Nick has deep financial services experience, in-depth regulatory +knowledge, significant experience in strategic planning and +implementation, and strong leadership qualities. The Board +believes Nick’s strong leadership and chairing skills means he +continues to effectively lead the Board. Some of Nick’s previous +appointments include Chairman of the Financial Services +Practitioner Panel, the Britten-Pears Foundation, Brit Insurance, the +Royal Northern College of Music and Scottish Widows Limited; +Non-Executive Director of Lloyds Banking Group plc, the Prudential +Regulation Authority and Legal & General plc; Member of the BBC +Trust; and CEO of Prudential UK and Europe, and Lloyd’s of London. +Current external appointments: Chairman of TSB Banking Group +plc and the charity Prisoners Abroad, Senior Independent Director +of YouGov plc and a Trustee of the charity Opera Ventures. +Appointment date: August 2019 +Skills, experience and contribution: Jim has significant +experience in advertising and communications, having spent +more than 10 years in some of the industry’s leading marketing +and communications groups, as well as on significant digital +transformation projects. Since his appointment in August 2019, +Jim has developed and communicated a clear strategic vision +for the future of the business, and the Board considers his +continuing leadership critical to executing the strategy. Some +of Jim’s previous appointments include Group CEO of Ladbrokes +Coral plc and Ladbrokes plc, Chief Operating Officer of William +Hill Online, and Director of Digital Strategy and Product +Management at News International. +Current external appointments: Senior Non-Executive Director +of Racecourse Media Group. +Appointment date: February 2023 +Skills, experience and contribution: Darren is a seasoned +finance professional with more than 30 years’ leadership +experience in global multi-service sector, blue-chip companies +in the UK, India and Australia. Darren has worked across the +media, technology, business services and aviation sectors. +His extensive experience means he offers the Board relevant +insight into strategy development and implementation, +business transformation and integrating acquisitions. +Darren was previously Group Director of Finance of ITV plc, +responsible for the group finance functions and operations. +He was also divisional CFO for the Media & Entertainment division, +which contains the UK broadcast business as well as ITV’s digital +offerings (ITVX). He has previously served as Director of Finance +for Micro Focus plc, Sage plc and Xchanging plc. +Current external appointments: None. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +76 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_79.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_79.txt new file mode 100644 index 0000000000000000000000000000000000000000..a7ec6e5fbed7ecaa1355a5bec87cb9b97eb967aa --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_79.txt @@ -0,0 +1,67 @@ +Our Board continued +Denise Jagger +Senior Independent Director +Priya Guha, MBE +Independent +Non-Executive Director +Anne Bulford, CBE +Independent +Non-Executive Director +Appointment date: December 2022 +Skills, experience and contribution: Denise is a qualified +solicitor, having been a partner at Addleshaw Goddard and, +until 2020, at Eversheds Sutherlands LLP. Denise brings extensive +governance and plc experience to the Board, having held a +number of non-executive positions during her career. Her +previous appointments include Non-Executive Director at CLS +Holdings plc, Bellway plc, Pool Reinsurance Company Limited, +Redrow plc, and the British Olympic Association, and Chair and +Pro Chancellor of the University of York. She was also a Director +of Asda Stores, and Group General Counsel and Company +Secretary of Asda Walmart. Through these roles, she has +acquired a broad range of M&A, finance raising, competition, +regulation compliance, HR, and remuneration and +benefits experience. +Current external appointments: Non-Executive Director of +Topps Tiles plc, Trustee of the National Trust and a Member +of the Advisory Panel of the charity IntoUniversity. +Appointment date: September 2022 +Skills, experience and contribution: Priya brings a unique +mix of senior diplomatic and governmental leadership to the +Board, alongside extensive experience of the technology sector. +She is a Venture Partner at Merian Ventures, with a focus +on women-led innovation investments. She is also a Non- +Executive Director of Herald Investment Trust, UK Research & +Innovation and the Digital Catapult. Previously, Priya was a +career diplomat, most recently as British Consul General to San +Francisco, with postings before that in India and Spain. In 2021, +Priya was awarded an MBE for services to international trade +and women in innovation. +Current external appointments: Venture Partner at Merian +Ventures, Non-Executive Director of Herald Investment Trust, +UK Research & Innovation and the Digital Catapult, Adjunct +Faculty at the Hult Ashridge Business School, Member of the +Royal Academy of Engineering International Committee and +Trustee of TechSheCan. +Appointment date: June 2019 +Skills, experience and contribution: Anne is a chartered +accountant and an experienced media CFO and Audit +Committee Chair. The Board considers her continuing +leadership of the Audit & Risk Committee to be important +to ensuring the Company continues to benefit from an +independent and objective audit. Anne was awarded an +OBE in 2012 for services to UK broadcasting and, in 2020, a +CBE for services to broadcasting and charity. Some of Anne’s +previous appointments include Deputy Director General of +the BBC and Chief Operating Officer of Channel 4. Her previous +non-executive roles include Chair of the Audit Committee of the +Executive Committee of the Army Board, and Audit Committee +Chair of Ofcom and the Ministry of Justice. Anne qualified as a +chartered accountant with KPMG and spent 12 years in practice. +Current external appointments: Non-Executive Member of +KPMG’s Public Interest Committee, Non-Executive Chair of +Trustees of Great Ormond Street Children’s Hospital Charity, +and Governor of the Royal Ballet. +Nomination Committee Audit & Risk Committee Sustainability Committee Remuneration Committee Denotes committee chair +77 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_8.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d479c4c89a05fa40a0705fce3a01818c2221ad1 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_8.txt @@ -0,0 +1,24 @@ +A POWERFUL +Brands across UK & US +120+ +We reach +85% +of the regional +news audience +monthly +We reach +72% +of the online UK +audience +monthly +PORTFOLIO +We’re Reach plc, the largest commercial news publisher in the UK and +Ireland. We’re home to more than 120 trusted brands, from national +titles including the Mirror, Express, Daily Record and Daily Star, to local +brands like WalesOnline, BelfastLive and the Manchester Evening News. +Every month, 72% of the online UK population come to us for news, +entertainment and sport they can trust. As a proudly mainstream +publisher, we connect people everywhere with what’s going on in +their area and throughout the world. +6 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_86.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_86.txt new file mode 100644 index 0000000000000000000000000000000000000000..52892035d6b59b290dee9d70bbee5c15821f2d93 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_86.txt @@ -0,0 +1,70 @@ +What is your background and why did +you join the Company? +Throughout my career, I have enjoyed working +in large, multi-site organisations with high +numbers of employees, similar to Reach. +I like fast-paced, competitive and dynamic +marketplaces and consumer-facing +businesses. In complex and geographically +spread organisations, the company’s purpose +and its strategy to deliver must be clearly +understood and well communicated across +all areas, and the challenge of achieving this +at Reach interested me. A further motivation +was the opportunity to oversee digitisation, +which is particularly significant for Reach +as the Company focuses on accelerating +development in this area against a backdrop +of print decline. I was also keen to join an +impressive and diverse Board focused on +ensuring the business is modernised and in +tune with changing consumer demand and +emerging technologies. +Which sites did you visit last year and +what impressions and insights did you +gain from them? +I visited the Newcastle office, and also the +Oldham site as part of the Board’s off-site +strategy days. I’m a big advocate of site visits, +not least because of my retail background but +also because you can experience the culture +of a company first-hand and ascertain +whether colleagues are empowered to do +their job, rather than just hearing about it +second-hand in the boardroom. +Board in action continued +Q&A WITH +DENISE JAGGER +Senior Independent Director +“We want to look beyond those +people immediately visible to the +Board so that we are informed and +can more effectively support the +executive’s plans for their teams.” +I’ve met colleagues at all stages of their careers, +which is important when looking at succession. +Site visits are a great litmus test for the +strategy, enabling you to understand whether +it’s understood across all business functions. +Site visits also enable Board members to +increase their understanding of operating +parameters, which informs strategic +decision-making. +How have you found the induction +process, and do you have any +suggested improvements? +The induction process was thorough. I was +well briefed through a series of meetings +with senior executive team members and +key advisers on the operating landscape and +the issues the Company faces, which helped +me quickly get up to speed. Future director +appointments would benefit from additional +briefings in 6-12 months once a greater +understanding of the business has been +established, resulting in a more rigorous line +of questioning and specific areas of interest. +I also highly recommend site visits as a +useful part of the induction process. +84 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsOther Information 84Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_87.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_87.txt new file mode 100644 index 0000000000000000000000000000000000000000..7fc31e7e65617d392d0b0e2a6a26c315ab9f3ddd --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_87.txt @@ -0,0 +1,124 @@ +Under the UK Companies Act 2006 (the Act), +we must promote the success of the +Company for the benefit of its members as a +whole – and, in doing so, consider the interests +of all our stakeholders in the decisions we +make, along with any other relevant factors. +We consider the interests and views of all our +stakeholder groups (as outlined in the table on +pages 86 and 87), the effect of the Company’s +operations on the community and the +environment and the need to act fairly +between stakeholders. +We acknowledge that key decisions we make +will affect long-term performance. We also +recognise that every decision we make will not +necessarily result in a positive or equivalent +outcome for all our stakeholders. By +considering our purpose, vision and values, +together with our strategic priorities, we are +better able to choose the best course of +action for the Company while maintaining +our reputation for high standards of business +conduct. In the same way, by assessing the +outcomes of our decisions and engaging with +stakeholders, we can determine and revise +potential decisions in the future. +In this section, we set out how the Board has, in +performing its duties over the year, considered +matters set out in section 172 of the Act, +alongside examples of how each of our +key stakeholders has been considered and +engaged. We also discuss how we do this +on pages 30 to 53 of the Strategic Report. +Principal decisions in 2023 +Here are three examples of our principal +decisions in 2023 and how we considered +section 172 matters. +PLANNING FOR THE FUTURE +In March and November 2023, the Board +approved and the Company announced a +cost-reduction programme that committed to +a 5-6% reduction in the Company’s operating +costs for 2023 and 2024. Part of the programme +for 2024 proposed the reduction of the +workforce by an estimated 450 full-time roles. +These difficult decisions were made against +the backdrop of the macro-environment: +fundamental changes in the external market, +rising interest and inflation and a change +in audience behaviour resulting in shifts in +advertising spend. Throughout the year, the +Board has considered the information and +data available to it, and debated and +discussed the pros and cons to satisfy itself +that any decisions were made after taking +into account all stakeholder interests. +While the business is having to let a number of +colleagues leave the business and drive cost +efficiencies, the Board’s decision on this was +taken to safeguard the sustainability of the +business in the medium to long term. As +a result, we can ensure that the business +operates in a way that creates value for our +shareholders, continues to make progress to +deliver our core purpose and protects the +future of our journalism. Alongside this, in +considering the needs of other stakeholders +when making such decisions, the overall +reduction in costs enables the Board to +reform the shape of the business. This will +allow us to capture a wider audience online +in accordance with their changing habits, +ensuring our journalism remains relevant and +engaging to the communities that are served, +which in turn secures advertising spend. It is +also critical that as a company, our financial +obligations, particularly to our pension trustees, +continue to be met. +PENSION SCHEMES +Having settled all but one of the 2019 triennial +review of pensions within the statutory +15 month period, the Company continued +to work with the Trustees of the MGN pension +scheme during 2023 to achieve its resolution. +In October 2023, the Board approved, and the +MGNPS Trustee agreed, both the 2019 and 2022 +triennial valuations for the MGN pension scheme. +The decision was taken to settle the pension +funding at an extra cost of £5m per annum to +the business. While the Board recognises the +additional financial burden, this agreement +was made having carefully considered +stakeholders’ expectations around pension +commitments and the benefit to be gained +by all stakeholders in creating certainty for the +business that enables it to plan for the future. +CAPITAL REDUCTION +In October 2023, the Board decided to seek +shareholder and subsequent court approval +of a reduction in capital. A shareholder +General Meeting was held on 15 November +2023 and court approval was given on +5 December 2023. The reduction in capital +resulted in the cancellation of the balance +standing to the credit of the Company’s share +premium account (£605.4m) and the creation +of distributable reserves of the same amount. +The capital reduction itself did not involve any +return of capital to any shareholder. +In taking this decision, the Board was +unanimously of the view that such reserves +would be available to support the future +payment by the Company of dividends or +other distributions to its shareholders (as +considered appropriate and in accordance, +and subject to, the Company’s Dividend +Policy) while also meeting our funding +commitments to the defined benefit +pension schemes. +SECTION 172 +STATEMENT + +85 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_9.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..ad05da4e42f415314c2559ec5f748cb26a96bf37 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_9.txt @@ -0,0 +1,65 @@ +DEVELOPING +OUR AUDIENCE +Securing our digital distribution +While we still by some distance command +the largest audience of any news publisher in +the UK and Ireland, we contended with several +dramatic shifts in online traffic trends in 2023. +We responded to these challenges by +focusing on areas within our control, driving +our Customer Value Strategy (CVS) to +maximise the ‘secure’ audience we reach +directly and by strengthening our search +engine optimisation (SEO) capability to make +our online content more visible to searchers. +We also successfully grew our secure +audience by focusing on distribution channels +we can control. For example we began using +WhatsApp groups around key topics and +brands, reaching over 1m subscribers in +just seven months. +We now have over 9.1m sign-ups from people +to receive content to their devices via these +secure channels, including newsletters, +WhatsApp and push notifications. +Widening our appeal +2023 saw us leverage our expertise in +reaching a mass audience by expanding +our operations in the US with the launch of +three ‘.com’ sites to a massive and largely +untapped audience. +We also grew our relationship with and +data-led understanding of key demographics, +in particular the youth audience, to support +our Customer Value Strategy. Our youth- +oriented brand Curiously has attracted a +healthy following (250k TikTok followers as +of January 2024), and has also provided a +valuable testing ground for our established +brands. For example, we applied learnings +from Curiously to the Mirror TikTok channel, +which by the end of the year had secured +360k followers, up from 66k in January 2023. +We will further develop our youth and video +proposition in 2024 with our newly created +multimedia Studio team. +And we continued our work to reach previously +under-served audiences via our Belonging +Project, which holds every regional newsroom +and the Mirror accountable for producing +more inclusive content and reaching more +segments of the communities they serve – +read more on page 43. +We have the largest +Arsenal WhatsApp +channel globally, with +over 600,000 members +9.1M +Sign-ups to +secure channels +(newsletters, +WhatsApp, push +notifications) +7 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret currency is a "ruble". \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_92.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_92.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3b6b2d14787b3e58a4f9365450c766dbc956647 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_92.txt @@ -0,0 +1,90 @@ +The table below sets out the actions undertaken during the year as a result of the 2022 evaluation, and also actions to be taken in 2024 as a result of +the 2023 evaluation. +Issues and recommendations from 2022 evaluation Actions undertaken in 2023 +ESG +Having established the responsible business framework +in 2022, further develop and articulate the Company’s +approach to ESG +Reach has created a Sustainability Network to bring together people across the Company +who are keen to make a difference on ESG initiatives, and to discuss how the Company can be +more sustainable. +We organised two colleague breakfasts, each attended by two non-executive directors, providing +an opportunity for the Board to engage with employees. +We completed a full Scope 3 emissions inventory, a key goal in our climate strategy. More details +can be found on page 48. +Market developments +More information about market developments and how +the Company is performing relative to competitors to be +provided to the Board +The Board discussed and reviewed a paper on the competitive landscape of Reach at a Board +meeting. An external expert was then invited to join a subsequent Board meeting to present +insights into the development and potential of AI. +Training +Offer the Board more training and deep dive sessions on +topics requested by the Board, from both an internal and +external perspective +External subject matter experts delivered financial and climate-related training to the Board. +The Audit & Risk Committee conducted deep dives into brand reputation and ongoing business +funding, overseas operations, cyber risk and data protection. +The Board conducted a deep dive into how the curated marketplace worked, and how Mantis +was being used to enable the monetisation of data. +Lessons learnt +Ensure that lessons learnt from past decisions are +reviewed and captured, and are used as part of +decision-making for future strategic initiatives +The Board has regularly discussed how its decision-making process has changed and directors +continue to be open and honest about lessons learnt. +Issues and recommendations from 2023 evaluation Actions to be undertaken in 2024 +Board engagement +Continue the Board’s formal and informal engagement +activities with key talent across the Group +Key talent (including the level below the Executive Committee) to present where appropriate to +the Board and Committees. Informal Board engagement with leaders to also be arranged during +the year. +Succession planning +Review the Board’s composition and the skill sets needed +over the medium term +Board skills matrix to be revisited to determine desired skills for future Board members. +Succession planning for the roles of Remuneration Committee Chair and Colleague +Ambassador to be considered. +Risks and controls +Continue work to strengthen governance and controls in +light of upcoming governance reforms +Continue to document and where necessary further strengthen controls, and ensure compliance +with the new FRC’s UK Corporate Governance Code requirements under the sponsorship of the +Audit & Risk Committee. +Nomination Committee Report continued +Evaluating performance +A formal review of the Board, its Committees +and the Chairman is performed annually. The +Board last undertook an externally facilitated +evaluation in 2021. The 2022 and 2023 reviews +were conducted internally and led by the +Chairman, Nick Prettejohn. The non-executive +directors, led by the Senior Independent +Director, Denise Jagger, conducted a review +of the Chairman’s performance, with Denise +providing feedback from this review to Nick. +A detailed questionnaire was completed +by all Board members, regular Committee +attendees from senior management and +external advisers. The questionnaire sought +feedback on a range of matters, including the +Board’s oversight of purpose, values, strategy +and risk, and the composition and diversity of +the Board, as well as themes and issues that +emerged from the last external evaluation in +2021. The 2023 evaluation confirmed that +the Board was operating effectively, with +appropriately balanced agendas and +discussions to cover all key areas and issues. +The four directors that joined the Board at the +end of 2022 and the start of 2023 had embedded +well, contributing to robust debate and +challenge, and open communication. Further +progress had been made in interactions with +colleagues, through the comprehensive +programme of awaydays, site visits, and +colleague lunches and breakfasts. +90 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_93.txt b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_93.txt new file mode 100644 index 0000000000000000000000000000000000000000..254c24bb3bc050ef1faf898c0b6b5e9636930809 --- /dev/null +++ b/Reach/Reach_200Pages/Text_TextNeedles/Reach_200Pages_TextNeedles_page_93.txt @@ -0,0 +1,116 @@ +The Board aims to maintain or improve this +level of diversity in the future and also looks +to make progress on diversity in other areas of +the business. The Committee keeps the Board +composition and size under review to maintain +an appropriate balance of skills, experience, +diversity and knowledge for the Group. The +Board also recognises the importance of D&I +at senior management level. The Group’s +Executive Committee, the members of which +are direct reports of the CEO and CFO, is made +up of nine members, including the CEO and +CFO. In 2023, there were three women on the +Executive Committee (2022: two). There are +80 direct reports to the Executive Committee +for the purposes of FTSE 350 Women Leaders +Review reporting, of whom 37 were female. +Information on senior management initiatives +on D&I can be found on pages 41 to 44 of the +Strategic Report. The percentage of women +within the Group overall decreased slightly to +39.0% (2022: 39.1%), with women occupying +36.3% of senior managerial roles across the +Group (2022: 39.4%). +In 2021, Reach plc joined the 30% Club, +committing the Company to 30% +representation of women on the Board, +including one person of colour by 2023, and +30% representation of women on the Executive +Committee, including one person of colour +by 2023. By committing to these targets, the +Board also voluntarily committed to meeting +the Parker Review requirements by 2024. At the +end of 2023, these targets had been met, other +than the Executive Committee including one +person of colour. +Nomination Committee Report continued +The Board also aspires to meet the Parker +Review requirement on a voluntary basis for +the Executive Committee that at least 10% of +the Executive Committee will self-identify as +being from an ethnic minority background +by 2027. +Our Be Counted initiative was launched in +2021, to capture colleague demographic and +diversity data and develop the D&I strategy. +According to the protected characteristics of +the Equality Act 2010, along with socioeconomic +data, Reach is able to identify areas of +opportunity, along with challenges, to help +drive D&I activity. Regular updates of the results +of the Be Counted initiative have been provided +to the Board, including how this has fed into +progressing the social mobility agenda. +The following table sets out the information +required under Listing Rule 9.8.6R (10) on the +Board’s and executive management’s ethnic +background and gender identity or sex: +Number of +Board +members +Percentage +of the Board +Number of +senior positions +on the Board +(CEO, CFO, SID +and Chair) +Number +in executive +management +Percentage +of executive +management +Men 5 55.6% 3 6 66.7% +Women 4 44.4% 1 3 33.3% +Other categories 0 0 0 0 0 +Not specified/prefer not to say 0 0 0 0 0 +White British or other White +(including minority-white groups) 4 44.4% 2 8 88.8% +Mixed/Multiple Ethnic Groups 1 11.1% 0 0 0 +Asian/Asian British 1 11.1% 0 0 0 +Black/African/Caribbean/Black British 0 0 0 0 0 +Other ethnic group, including Arab 0 0 0 0 0 +Not specified/prefer not to say 3 33.3% 2 1 11.1% +Diversity +Valuing D&I is an integral priority of the Company. +While the Board Diversity and Inclusion Policy +applies to the Board only, it sits alongside +the wider Company Diversity and Inclusion +Policy, setting out the Company’s broader +commitment to D&I. It is implemented, in part, +through the Code of Conduct programme. +The Board recognises the importance of D&I in +the boardroom and seeks to recruit directors +with varied backgrounds, skills and experience. +Reach seeks to broaden the diversity of +the Board to reflect its audience and their +communities. This will continue to be a +key consideration when appointing new +non-executive directors in the future. +As at 31 December 2023, the Company has +met the targets on Board diversity required to +be reported on under Listing Rule 9.8.6R(9)(a), +with 44.4% of Board members being women +(four of nine in total), the senior Board position +of senior independent director being held by a +woman, and two Board members being from +a minority ethnic background. In addition, +each of the Audit & Risk, the Remuneration and +the Sustainability Committee is chaired by a +woman and all of the non-executive directors +are members of all committees, therefore +reflecting the diversity of our Board. +91 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_200Pages/needles.csv b/Reach/Reach_200Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..923c034508e70e06f2ffe7e753e6fda9d942cd4c --- /dev/null +++ b/Reach/Reach_200Pages/needles.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". +The secret object #3 is a "bowl". +The secret animal #5 is a "squirrel". +The secret clothing is a "sock". +The secret instrument is a "violin". +The secret transportation is a "bike". +The secret object #1 is a "clock". +The secret fruit is a "lemon". +The secret animal #3 is a "spider". +The secret food is "chocolate". +The secret animal #4 is a "cow". +The secret drink is a "smoothie". +The secret shape is a "heart". +The secret office supply is a "calculator". +The secret animal #1 is a "giraffe". +The secret object #5 is a "vase". +The secret vegetable is "cauliflower". +The secret tool is a "ruler". +The secret animal #2 is a "penguin". +The secret object #4 is a "pillow". +The secret object #2 is a "bottle". diff --git a/Reach/Reach_200Pages/needles_info.csv b/Reach/Reach_200Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..4e7aaa31cfb8ccc435d365f262b8060f737f5df4 --- /dev/null +++ b/Reach/Reach_200Pages/needles_info.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben".,6,7,white,black,0.743,0.772,helvetica-bold,137 +The secret currency is a "ruble".,9,10,purple,white,0.972,0.2,times-bold,103 +The secret flower is a "daisy".,24,10,green,white,0.481,0.652,times-bolditalic,82 +The secret kitchen appliance is a "microwave".,25,9,orange,black,0.453,0.331,helvetica,65 +The secret sport is "surfing".,39,8,yellow,black,0.289,0.216,courier,78 +The secret object #3 is a "bowl".,48,10,blue,white,0.766,0.896,times-roman,93 +The secret animal #5 is a "squirrel".,56,11,gray,white,0.583,0.213,helvetica-boldoblique,103 +The secret clothing is a "sock".,64,12,black,white,0.199,0.615,times-italic,88 +The secret instrument is a "violin".,66,12,brown,white,0.418,0.607,courier-oblique,120 +The secret transportation is a "bike".,74,10,red,white,0.484,0.294,courier-bold,114 +The secret object #1 is a "clock".,82,10,gray,white,0.422,0.311,courier-oblique,84 +The secret fruit is a "lemon".,94,12,black,white,0.887,0.149,times-bolditalic,133 +The secret animal #3 is a "spider".,104,9,orange,black,0.051,0.852,courier,86 +The secret food is "chocolate".,110,13,green,white,0.175,0.956,times-bold,82 +The secret animal #4 is a "cow".,117,11,blue,white,0.527,0.406,times-roman,61 +The secret drink is a "smoothie".,127,11,red,white,0.134,0.08,courier-bold,82 +The secret shape is a "heart".,131,10,purple,white,0.228,0.033,helvetica-boldoblique,77 +The secret office supply is a "calculator".,142,11,brown,white,0.306,0.677,helvetica-bold,86 +The secret animal #1 is a "giraffe".,149,13,white,black,0.115,0.553,times-italic,87 +The secret object #5 is a "vase".,153,11,yellow,black,0.859,0.032,helvetica,106 +The secret vegetable is "cauliflower".,168,11,brown,white,0.403,0.771,courier-oblique,123 +The secret tool is a "ruler".,176,12,white,black,0.571,0.218,helvetica-bold,90 +The secret animal #2 is a "penguin".,184,8,black,white,0.098,0.331,helvetica-boldoblique,90 +The secret object #4 is a "pillow".,185,9,orange,black,0.059,0.741,helvetica,68 +The secret object #2 is a "bottle".,197,9,blue,white,0.221,0.007,courier-bold,118 diff --git a/Reach/Reach_200Pages/prompt_questions.txt b/Reach/Reach_200Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..584cb3dae905052c00727690ef04f604488edee3 --- /dev/null +++ b/Reach/Reach_200Pages/prompt_questions.txt @@ -0,0 +1,25 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? +What is the secret object #3 in the document? +What is the secret animal #5 in the document? +What is the secret clothing in the document? +What is the secret instrument in the document? +What is the secret transportation in the document? +What is the secret object #1 in the document? +What is the secret fruit in the document? +What is the secret animal #3 in the document? +What is the secret food in the document? +What is the secret animal #4 in the document? +What is the secret drink in the document? +What is the secret shape in the document? +What is the secret office supply in the document? +What is the secret animal #1 in the document? +What is the secret object #5 in the document? +What is the secret vegetable in the document? +What is the secret tool in the document? +What is the secret animal #2 in the document? +What is the secret object #4 in the document? +What is the secret object #2 in the document? diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_1.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..e870baf01a7aaa245aee0caffb75b195b9c2d3ec --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_1.txt @@ -0,0 +1,8 @@ +Annual Report 2023 +Developing +our audience +Diversifying +our revenue +Focusing +on efficiency +The secret landmark is "Big Ben". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_10.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..ca1531013f4071b97cb5dc0014a0092673b9547f --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_10.txt @@ -0,0 +1,57 @@ +The habitual nature of newspaper +consumption means we continue to see +reliable but falling demand for our printed +products. We still sell hundreds of thousands +of our print products every day. +Part of our strategy is to maintain this +considerable revenue stream and profit +generator for as long as possible. This is +achieved by carefully managing the levels of +publication availability across the country and +undertaking carefully planned price increases +and promotional activity. We benefit from a +significant amount of data and expertise in +these areas which help achieve the optimal +changes. Whilst availability varies by geography +and publication, it averages for the Group at +over 85%. We periodically increase the cover +prices, and over 2023 we increased these an +average of 14% per title, ahead of 4% inflation. +These actions have more than offset the 17% +volume decline, driving an increase in overall +circulation revenues. +We also work hard to manage our cost +base to address the challenges from falling +volumes and inflation. Our print business is +run by highly experienced production teams +who excel in evolving production systems, +procurement and planning our distribution +network. These actions have helped address +the rising unit costs of production and +maintained the strong profitability of the print +business. This means we have been able to +successfully ensure that print revenues and +profitability remain resilient. +DIGITAL +PRINT +Print circulation revenue +£313M +Up 1.6% on 2022 despite 17% +reduction in print volume +Print business revenue +£439M +Down 2.2% on 2022 +Print copies sold a year +250M+ +Retail availability ++85% +BUSINESS +A RESILIENT +RPM +(revenue per 1,000 pages) ++11% +Total data-driven revenue +£55M +8 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret transportation is a "bike". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_11.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..3a8851deadded35e91dfaf800618c362aa47c303 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_11.txt @@ -0,0 +1,57 @@ +DIVERSIFYING +While print remains important, both as a +revenue stream and as a source of trusted +news for millions of readers, our overall +direction of travel continues steadily towards +digital. Using the Customer Value Strategy +(CVS) as our guide, and now with over 12.3m +registered customers, we continue to explore +ways to drive further resilience. +Affiliates and ecommerce +Our affiliates business allows us to work with ad +partners to produce quality content directing +readers to purchase, earning us steady +non-advertising revenue. Over the past three +years, our affiliates revenues have doubled, +demonstrating the benefit of relevant content +– especially across the Black Friday period +where revenue was up 90% versus last year. +We also continue to drive our ecommerce +business, for example with our OK! Beauty Box, +an early CVS initiative which now has circa +12k subscribers. +Mantis B2B +Through 2023 we continued to refine our +AI-powered ad tech tool, Mantis, in order +to open up a further B2B revenue stream. +In past years we have successfully licensed +Mantis for its brand safety capabilities. We +have now tested and built up its first-party +data contextual targeting capabilities, an +element that will be more important in 2024 +and beyond thanks to Google’s well-publicised +deprecation of third-party cookies. In 2023 +we invested in this in-house tech to support +a bigger B2B licensing business in 2024. +Audience diversification +And we continue to diversify our audience +and strengthen our video capabilities to +reach more of the youth market and take +better advantage of the branded social +opportunity. For more on this, see page 7. +OUR REVENUE ++45% +Affiliates/ +ecommerce/ +partnerships +revenue growth +>1M +people receiving +content by +WhatsApp +12,000 +OK! Beauty Box +subscribers +9 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #1 is a "clock". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_12.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..4b985538254b7bb64eb8d1c5af0eba913eda1355 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_12.txt @@ -0,0 +1,62 @@ +A PROACTIVE +Both our business and more broadly our +sector are constantly evolving and each year +we are faced with new challenges. However, +we consistently prove ourselves adept at +weathering difficulties, delivering against +our commitments and adapting to change. +Resolving past uncertainties +In 2023 we made significant progress in +resolving two long-standing issues, both +with material benefits. Firstly we were able to +reach agreement on our outstanding pension +valuation with the MGN pension scheme, +avoiding costly regulatory intervention and +providing clarity that these financial obligations +will in the main unwind in early 2028. +After a lengthy legal process we have also +been able to achieve clarity around our +historical legal issues. December’s judgment +on time limitation has materially reduced +our expected obligations and, barring +exceptional circumstances, brought +an end to any future claims. +↓ £20M +Estimated reduction in +historical legal issue costs +↓ c.£40M +Estimated reduction in +pension obligations in 2028 +43% +Data-driven revenues +11% +RPM increase +Moving forward to digital-first +In 2023 we delivered a 5.7% reduction in +operating costs (on a like-for-like basis) +and in November announced a similar 5-6% +reduction for 2024. These savings decisions, +while never easy, are made to support the +future of our business. +A guiding principle behind these changes was +the need to more firmly orientate our newsrooms +and wider organisation towards our digital +audience. This meant considering online +behaviour in all of our decisions – topics, +timing, format – and rethinking how we tell +every story in today’s digital landscape. +Initiatives include the automation of our +content management system (CMS) so +journalists can save time uploading stories, +sharing more content across brands, and +organising teams for maximum impact. +For example we have brought together +our video and audio talent into one Studio +team, to produce content for both our +editorial brands and commercial partners +and to better support the branded content +revenue opportunity. +APPROACH +10 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret fruit is a "lemon". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_13.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..964a7fbc02512bd3fe24c9e0d508a6e6007d0800 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_13.txt @@ -0,0 +1,80 @@ +FOCUSING +5.7% +Like-for-like cost savings 2022-23 +17% +Adjusted operating margin +£91.9M +Adjusted operating cash flow +Responsible cost management +We have a proven track record in meeting +challenges and managing costs responsibly, +as evidenced over the past few years. +In 2020 we undertook a transformation +programme to reshape the Group into a +more efficient organisation, and as part of this +closed two of our print plants. These decisions +are always carefully weighed, but when well +executed allow us to mitigate the structural +decline in print and ensure we have a +sustainable unit cost of production. +In 2021, we adopted a hybrid working model, +following employee feedback largely in favour +of retaining more remote working options +post-Covid. This allowed us to streamline +our property portfolio and reduce those +costs, while also providing many of our +teams with greater flexibility. +During 2022, high levels of inflation drove +an unprecedented increase in like-for-like +newsprint costs (+£40m). In response, we +identified numerous ways to optimise costs, for +example by changing print pagination and +supply as well as managing availability to +reduce the volume of unsold copies. +In 2023, we took a number of actions to +support our 5.7% (like-for-like) operating cost +reduction, across several areas. As a content +business that deals in ideas and creativity, +it is unsurprising but no less challenging that +our workforce represents around half of our +operating cost base. Therefore reducing the +headcount, as we have done across all areas +of the business, has been a necessary step +in our cost management. However we also +carefully reviewed our costs in several other +key areas in 2023, from property to energy +to distribution. +For example we undertook a review of our +primary and secondary distribution plans, +reducing costs by consolidating routes and +sharing vans across both our own and +third-party publications. Print production +accounts for 13% of our costs so we +ON EFFICIENCY +Total adjusted operating costs +2022-23 +continuously review our supply chain, from raw +materials through to production planning, to +drive incremental savings. +We also reassessed our real estate portfolio +in 2023, analysing how our spaces have been +used since we introduced hybrid working, and +decided to replace two larger and underused +spaces with smaller offices. This has enabled +us to manage our costs while still providing +teams with flexibility and a place to work or +collaborate when needed. +In addition we installed solar panels at all +three of our print sites in 2023, which will +mitigate some of the increases we have seen +in energy costs – more on these on page 47. +Through these changes and alongside steady +Customer Value Strategy progress, we are +able to meet our obligations as well as +position the business for the future. +2022 2023 +/sterling.cap/four.cap/seven.cap/five.capM +/sterling.cap/four.cap/nine.cap/eight.capM +11 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #3 is a "spider". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_14.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..2b7e14f912aa006662a169d1d100e9b46d49f307 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_14.txt @@ -0,0 +1,110 @@ +Chief Executive’s review +2023 was far from a straightforward year, but +it was an important and necessary one for the +business. We can now look to the future having +removed several long-term uncertainties and +delivered market expectations, while also +having progressed our Customer Value +Strategy (CVS) and more firmly pointed +the business towards our digital audiences. +Much of this progress was several years +in the making, for example the preparation +that supported us in 2023’s trial around several +long-standing historical legal issues. While +confronting the past in this way is not easy, the +resulting judgment on time limitation for future +claims around historical legal issues means +that a significant number of outstanding +claims can be resolved, and this should +largely bring an end to future claims. +We also took decisive action to resolve the +outstanding pension funding valuations, which +has similarly given us a firm end in sight for an +obligation that has hindered this organisation +for several decades. Together these two +achievements give the business much- +needed financial clarity and allow us to +plan for the future with far greater certainty. +Throughout the year, we made significant +progress in becoming a data-driven, digitally- +focused business, supported by a predictable +and reliable print business. +The average revenue (RPM) we generate from +our digital page views is now up over 10% from +last year, not something I take for granted +against a challenging backdrop. While we +have seen yields decline in our open market +programmatic advertising, we have been +able to add increased value by growing +non-advertising revenue streams like +ecommerce, affiliates and partnerships, +reinforcing the benefit of our Customer Value +Strategy (CVS). Crucially this has reduced the +impact from the industry-wide decline in +referral traffic, a trend that we have long +expected – albeit not as quickly and severely +as it came – and which CVS was always +intended to mitigate. +We continued our transformation in the year, +taking action to ensure that our cost base +reflects the economic environment in which +we operate, and to enable us to become +a digital-first organisation. To achieve this, +we needed to reduce the size of some of +our teams. This is not a decision I or my +management team take lightly. However, +recent trends have only reinforced our belief +that we must be willing to make big changes +to exert more control over our own destiny +and protect our brands in the long term. +The strong yield performance and efficient +management of our cost base meant we +delivered a sustainable operating margin of +17%, broadly in line with last year and giving +us a strong foundation for 2024. +A fast-changing environment +We operate in a dynamic, competitive and +constantly evolving market and 2023 was no +exception. The period of economic volatility +that began in 2020 has continued to impact +the market, placing pressure on advertising +spend and inflating costs for both businesses +and consumers. Throughout the year, our +entire industry saw a fall in referral traffic +from tech platforms and we were not immune +from that. Facebook, one of our largest traffic +referrers, has shifted away from news content +and we have contended with numerous +Google core algorithm updates, each one +requiring us to pivot on how we deliver +content to our audiences. +These changes have impacted our organic +search traffic and therefore our growth in the +near term, with page views down 24% versus +last year, in line with the wider news publishing +market. Despite the decline in volume, our +commercial teams have expertly traded +the value of our content and ad space, +capitalising on our Customer Value +Strategy progress to drive our revenue. +Telling the stories that matter +It’s clear that audience behaviour and digital +trends can shift rapidly, but what remains +constant is our core purpose to enlighten, +empower and entertain our mainstream +audiences, wherever they might find us. +A PATH TO +PROGRESS +Jim Mullen +Chief +Executive +Officer +“We can now look to the +future having removed +several long-term +uncertainties and +delivered market +expectations.” +12 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret food is "chocolate". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_15.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..b556d9d31a148b88e6b09e11235aeba01ad26aa6 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_15.txt @@ -0,0 +1,76 @@ +Great content will always be at the heart of our +business and this year our teams produced an +abundance of it. The editorial highlights that +come to mind for me personally include the +Sunday Mail’s exclusive scoop on the SNP +scandal, the Mirror’s campaign for free school +meals which so far has seen Sadiq Khan +announce free hot meals for all primary pupils, +and the Express’s campaign calling for the +Government to invest more in radiotherapy +and increase services for cancer patients. +Meanwhile, the Manchester Evening News’ +award-winning Awaab’s Law campaign has +made its way through Parliament and will +change many people’s lives for the better. +And while it’s always an honour to watch +everyday heroes at the Mirror’s Pride of Britain +Awards, in 2023 it was particularly inspiring to +see members of the Windrush generation be +recognised for their outstanding contribution +to British life since the first passengers on that +vessel arrived 75 years ago. +These highlights all wield the power and +impact they do precisely because of our wide +reach, with our scale and editorial purpose +working hand in hand. Despite the challenges +of the business environment, Reach remains +the largest publisher in the UK and Ireland, and +continues to command the sixth largest digital +audience of any UK business, reaching 36m +adults digitally every month which is 72% of the +online population. Our transformation actions +in 2023 will ensure the continuation of our core +purpose into 2024 and beyond. +Enhancing resilience and efficiency +Our print business continues to generate strong +returns, despite the falling demand across the +sector. Our experienced circulation teams +use decades of data to expertly inform our +approach to price increases and availability, +both of which are critical to underpinning +sales volumes. We maintain a track record of +effective cost management and are constantly +reviewing and making changes to our supply +chain, optimising distribution and right-sizing +our property footprint. +Across the business, we successfully +delivered a 5.7% reduction in operating +costs (on a like-for-like basis), against the +5-6% reduction we targeted at the start of +the year. As announced in November 2023, to +set ourselves up for success in 2024 we have +committed to and already started to deliver +a further 5-6% reduction in our operating cost +base. In the wider industry context, with many +organisations now making similar decisions to +those we took in late 2023, we believe our early +action demonstrates responsible foresight +and planning. +As labour represents our single largest cost, +there is no getting away from the fact that +we have had to reduce the size of our teams +to save cost and re-shape for the future. +I do not underestimate the impact of these +decisions on all of our people. With that +in mind I committed to working through +them with fairness and integrity, and to +communicating openly throughout. During +this period, I led a programme of small group +discussions and town hall meetings with +Manchester Evening News reporter delivers the Awaab’s Law petition +to Downing Street alongside Awaab’s father and campaigners +Chief Executive’s review continued +13 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information13Reach plc Annual Report 2023 13Reach plc Annual Report 2023 +The secret animal #4 is a "cow". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_16.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..ad3f50cedd18bd74a7adbf9a49dafa98b6fc01ee --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_16.txt @@ -0,0 +1,122 @@ +leaders and colleagues, to share updates, +provide important context about the need for +change, and facilitate open dialogue. Honest +colleague communication remains something +that I’m passionate about and committed to +investing time into, all year round. +Our emphasis on efficiency goes beyond +traditional cost-cutting measures as we +must also organise our ways of working to put +ourselves in the best position to achieve our +strategic aims and accelerate our journey to +being a digital-first content organisation. As +part of this work we created the Reach Studio +team, which pools all of our video and audio +talent in one super team that will provide +multimedia content for both editorial +audiences and commercial partners, +maximising the value for both. +Progressing our strategic priorities +During volatile times it is all the more +important to pursue a strategy that gives us +greater long-term stability and control over +our business. +Over the year, our Customer Value Strategy +(CVS) continued to progress on key metrics. +Against falling referral traffic, we continued +to grow our yield or RPM (+11% from 2022), an +increasingly important metric as we focus +on controlling digital revenue. +We also see that as a result of our CVS +progress, the return on data-driven advertising +is currently 10 times more valuable than +volume-related programmatic advertising +returns. These figures demonstrate that +whatever market trends may come, we are +able to consistently adapt to optimise the +value of our content, data and audience. +Our commercial activity continues to be led +by data, while focusing on direct customer +relationships and more diversified revenues +that support higher-quality digital earnings. +These efforts are reflected in our mix, which +is now made up of 43% of digital revenues +generated by data-driven, higher value and +better performing advertising, a trend which +will continue. +Part of the strategy has been to strengthen +and expand our audience base with key +demographics and into valuable regions. +In 2023 we successfully launched three ‘.com’ +websites from a new US operation, which by +the end of the year were regularly attracting +an audience of a million a day. +Additionally, we have worked to secure our +audience, which will make us less vulnerable +to changing tech platform algorithms and +better able to directly engage with our millions +of customers and drive them to our content. +There have been several initiatives on this +front, including an award-winning project to +reach people via WhatsApp Communities and +Channels, through which we reach more than +1.65m people directly as of February 2024. +One early standout in this area is our Arsenal +channel which sends multiple stories a day +directly to over 600k people, making it the +biggest Arsenal channel in the world. Through +work like this we are able to speak to our +audiences on our own terms and ensure +that our great content reaches them. +Our tech and commercial teams have played +a key role in supporting our discoverability +challenge, further developing in-house +recommender tools powered by AI that +point readers to content we know they’ll be +interested in. One of these tools alone has +reduced customer bounce rate by over 10% +and generated 2bn page views through the +year. Our in-house first-party data capabilities, +in particular our proprietary Mantis tool, will +stand us in good stead as Google continues +to phase out third-party cookies, a process we +have now seen beginning in 2024. This will be a +major shift in the landscape for publishers and +advertisers, who for years have depended on +third-party data to target their advertising. +We will be significantly ahead of the curve on +this front, with 12.3m registered customers, of +which approximately 4m are active over each +four-week period, and advanced capability +to effectively place advertising using +contextual targeting. +43% +of digital revenues now data-driven +We have further strengthened our position +by growing our revenue streams outside +traditional advertising revenue, with +important work being done with affiliates +and ecommerce. It’s great to see the +continued success of the OK! Beauty Box, +which we launched in late 2020 as one of +our first Customer Value Strategy initiatives, +and now has c.12k paying subscribers. +Our goal with this work is not to replace our +business model but to continuously evolve, +strengthen and broaden it, and to give our +audiences more choice about how they +engage with our content. +“As a result of our +Customer Value +Strategy progress, the +return on data-driven +advertising is currently +over 10 times more +valuable than +volume-related +programmatic +advertising returns.” +Chief Executive’s review continued +14 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret drink is a "smoothie". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_17.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..64127dd0dfbac4a54cb0e14ca45a0ce16757e1a4 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_17.txt @@ -0,0 +1,126 @@ +Resolving long-term uncertainties +For several years now, the leadership team +and I have been working to resolve a number +of long-standing hurdles facing this business. +Over the past months I am proud to say we +have made real headway in clearing these. +Ahead of 2023 we took the decision to go to +trial to achieve greater certainty around the +future impact of long-standing historical +legal issues. The judgment we received in +December set out very clear parameters on +time limitation which enables us to draw a line +under these issues. Simply, this means we now +have a much clearer view on the estimated +cost of resolving these long-standing issues +and, crucially, these costs are expected to be +materially lower than our previous estimates. +Over the last four years we had not been +able to come to an agreement with the +MGN Pension Trustees on the 2019 triennial +valuation. I cannot overstate the importance +of having successfully concluded both the +2019 and 2022 triennial pension reviews for +the MGN pension scheme. Agreement with +our other schemes is also expected to be +completed by the 31 March 2024 due date. This +provides much needed clarity on the scale of +our funding obligations, which are scheduled +to materially step down in early 2028. +These developments will both benefit the +wider business and enable better planning +for our future. Thank you to all the teams who +have been involved in bringing these matters +to a close. +Exploring AI as a tool +At the start of 2023 the conversation around +how businesses and media organisations +use AI was only beginning to take shape. Our +editorial leaders created a cross-functional +workstream to manage this complex issue, +exploring the many opportunities while also +gaining a firmer understanding of the risks. +Their primary focus has been to test tools that +help journalists to tell their stories more quickly +and effectively. As a result of this work, the +team has identified several areas with +strong potential, such as spotting trends +and analysing large volumes of data. +We have steadily increased our use of AI +through the year, while carefully controlling its +roll-out, and by the end of 2023 over a dozen +newsrooms were set up to use an AI tool to +support their work. As we continue to test AI’s +potential, we ensure that every story is edited +and approved by a journalist, maintaining our +commitment to responsible journalism. + +Fighting our case +I have also been putting our case to political +decision-makers, ensuring that those in power +and in opposition understand the issues facing +Reach and the entire media industry. The stakes +are high and I have had many encouraging +discussions this year on the crucial questions +that will decide the future of journalism in this +country, such as: how can tech platforms work +fairly with the media to support a free press +and functioning democracy? +2023 marked my last year as chair of the NMA +(News Media Association), but I will continue +to discuss these vital issues in 2024 with our +legislators, particularly as we watch the Digital +Markets Bill progress through Parliament. +Looking after our people and +our future +All of this progress is made possible by our +talented and passionate colleagues in all +departments. We have made many necessary +changes to our teams this year but I remain +committed to retaining and developing the +great people who are shaping the future of +this business. +Developing our teams is just one pillar of our +formalised responsible business framework, +now one year in (read more on this on page +40). We continue to prioritise becoming a +more inclusive organisation, and in 2023 +were once again recognised by Inclusive +Companies with our highest ranking yet and +testament to the dedication of many people +here. We’re also working to protect all our +futures through our environmental efforts, +which continued to progress this year as we +implemented the systems and gathered the +data that will inform our path to net zero. +Looking ahead +2023 was a critical moment for this business, +allowing us to put several significant issues +in the past and to focus instead on looking +forward, and I am confident that we are +now well positioned to take on the future. +As always, there are challenges ahead. +The macro environment is unlikely to provide +much relief over the near term and we are +working to secure our audience and build +our data-driven digital business. This will be +achieved through small incremental gains +and by continuing to build direct relationships +with our audiences. +Our industry has a history of change and the +future will undoubtedly see yet more. That’s +why it’s essential we set ourselves up to +win by making our operations suited to +an increasingly fast-paced, competitive +and digital world. +Jim Mullen +Chief Executive Officer +5 March 2024 +“We now have a much clearer view on the estimated +cost of resolving these long-standing issues and, +crucially, these costs are expected to be materially +lower than our previous estimates.” +Chief Executive’s review continued +15 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret shape is a "heart". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_18.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..290bb33933b125682a1eebd842f02d00abbdc967 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_18.txt @@ -0,0 +1,83 @@ +DELIVERING VALUE +Our business model +We are transforming how we deliver value to our stakeholders, evolving and growing a digitally-focused business while +maintaining our strong foundations in print. This transition is underpinned by the strength of our talented people and our +iconic brands, united and guided by our purpose and focused on providing the content that attracts the largest audience +of any commercial news publisher in the UK and Ireland. +Our people +The talent and commitment of our employees +are central to our success as we transform and +become more digitally-oriented. We’re building +a workplace where our people are empowered +to deliver excellence and facilitate change, while +enjoying balance in their lives. +Our audience +We have the largest audience of any commercial +news publisher in the UK and Ireland. Every month, +47m people come to us, in print and online, across +our national and local titles, for news, entertainment +and sport they can trust. We are a proudly +mainstream publisher, reaching 72% of the UK’s +online population, and now bring that approach +to our US-based sites. +Our technology +Vital to our transformation is investment in data and +technology, which helps us better understand our +customers and drive digital revenue. Our in-house +adtech tool Mantis enables us to capture consented +customer data to improve our content and provide +targeted advertising for the brands we work with. +Our infrastructure +Our newspapers are produced at our three +printing sites and, with the help of our distribution +partners, reach all corners of the UK and Ireland. +Our newsrooms, local and national, are +increasingly integrated, and strategically share +data, content and expertise. Reach operates a +range of larger office hubs as well as smaller +workplaces throughout the country, serving a +now well-established hybrid working model. +Our brands +We are home to over 120 titles in the UK and Ireland. +Our portfolio is unique, including iconic national +titles such as the Mirror, Express, Daily Star and Daily +Record, and local ones which sit at the heart of their +communities, such as the Manchester Evening +News, Liverpool Echo and MyLondon. While our +titles share key central services, they each have +a strong identity, together reaching a broad +demographic across the political spectrum. +Our news coverage is award-winning, with our +titles reflecting the diverse interests and political +leanings of our audiences. We aim to inform and +explain, as well as lending a voice to the causes +that matter to the communities we represent. +While our news coverage is often serious, some +of our titles excel in finding the funny side of the +day’s biggest stories. +We cover a range of sport, from English Premier +League to Scottish football, to Welsh Rugby, +Formula 1 and our industry-leading coverage of +the Cheltenham Festival. Meanwhile our local titles +remain the ‘go to’ sources of information for local +sports fans supporting a range of levels, whether +the Liverpool Echo for LFC or Hull Live for Hull City FC. +We are proudly mainstream, which is key to our +broad appeal and widespread audience. From +celebrities to science, TV to travel and beauty to +bingo, our brands cover a huge number of topics. +Providing content for a wide range of interests +has helped us become part of our customers’ +daily lives. +Entertainment +Sport +Enabled by our assets Focused on contentDriven by +our purpose +through brilliant +journalism. +News +Read more about our purpose +on page 2. +16 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret office supply is a "calculator". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_19.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..b0078304cd91eb5357083f87178edd6c00a32613 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_19.txt @@ -0,0 +1,103 @@ +Delivering stakeholder valueOur transformational operating model +Long-term revenue driver +Reinvestment to fund growth +Print +Market dynamic +We sell hundreds of thousands of copies +daily. While volumes are in decline, cover +price rises alongside loyal demand +support significant print cash flows. +Demographics +The average age of a print customer is +52 and this older demographic have a +high degree of loyalty and are of high +value to advertisers. +How we generate revenue +Newspaper sales account for +approximately 71% of our print revenue. +We also generate revenue from +advertising and printing for third parties. +Digital +Market dynamic +Large tech platforms continue to shape +the market – a key driver of our data- +led approach. +Demographics +We develop our evolving audience base +by evolving our formats and building +niche ‘fan’ communities across sport +and entertainment content. +How we generate revenue +Advertising-led, sold directly by our sales +teams or programmatically via auction +platforms. Increasingly our advertising is +supported by data, resulting in higher +yields, and we have also increased our +non-advertising mix with affiliates +and ecommerce. +Our brands and products +National +Our portfolio has a strong heritage. +The Mirror and Express have been a key +part of British culture and society for over +120 years. +Local +What makes us different is our unique +combination of national and local titles, +such as the Manchester Evening News +and Newcastle Chronicle, which lie at +the heart of their communities. +Magazines +OK! and New focus on celebrity news, +pop culture, fashion and real-life reader +stories. We also produce the Sunday +supplement magazines Notebook +and S Magazine. +Foundation revenue driver +More engaging +experience +More customer +data +More targeting +capabilities +More effective +advertising +More relevant +content +Increasing +yield +Increasing +volume Underpinned by data +Our people By setting the business up for a sustainable future +we’re able to invest in the teams we need for long- +term growth, and in fostering an inclusive culture. +Customers Delivering our digital strategy enables us to provide +increasingly engaging and relevant content that +maintains and builds audiences. +Communities We’re committed to contributing positively to the +diverse communities we serve, discussing issues +and supporting causes that matter to them. +Advertisers Building a deeper understanding of our customers +enables us to help advertisers deliver more targeted +campaigns that reach the right audiences. +Suppliers +and partners +Our supply chain includes distributors, retailers and +newsprint suppliers. We work closely with all to ensure +fair economics. +Shareholders Working in the interest of our shareholders and other +stakeholders by removing long-term uncertainties +and providing balanced and clear communications +for investors that set out our prospects for growth. +Pension funds Delivering our strategy and maximising business +performance demonstrate that Reach is being +managed responsibly and sustainably. +Government +and regulators +A vibrant news sector is key to a functioning +democracy. Our transition to digital is a key part +of the sector’s future, as is the right regulation. +Our business model continued +17 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #1 is a "giraffe". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_2.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..6ca90459438f6fb5f30dc6d8f20d8dbfb3adb65e --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_2.txt @@ -0,0 +1,72 @@ +CONTENTS +Disclaimer +This Annual Report is sent to shareholders who have elected to receive a hard copy and is available on our website www.reachplc.com for those shareholders who have elected to receive a copy +electronically. In this document, references to ‘the Group’, ‘the Company’, ‘we’ or ‘our’ are to Reach plc and its subsidiaries. A reference to a year expressed as 2023 is to the 53 weeks ended 31 December +2023 and a reference to a year expressed as 2022 is to the 52 weeks ended 25 December 2022. Where we reference ‘like-for-like’, we are comparing a 52 week period. References to ‘the year’ and ‘the +current year’ are to 2023 and references to ‘last year’ and ‘the prior year’ are to 2022. The Annual Report contains forward-looking statements. By their nature, forward-looking statements involve a number +of risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to +differ materially from those expressed in or implied by the forward looking statements. No assurance can be given that the forward-looking statements will be realised. Statements about the directors’ +expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors +which are in some cases outside the Company’s control. The Annual Report has been prepared on the basis of the knowledge and information available to directors at the date of its preparation and +the Company does not undertake any obligation to update or revise the information during the financial year ahead. It is believed that the expectations set out in these forward-looking statements are +reasonable, but they may be affected by a wide range of variables which could cause actual results or trends to differ materially. The forward-looking statements should be read in the context of the +principal risk factors set out in the Strategic Report. +Strategic Report +2 Our purpose +3 Reach in numbers +4 Chairman’s statement +6 A powerful portfolio +7 Developing our audience +8 A resilient business +9 Diversifying our revenue +10 A proactive approach +11 Focusing on efficiency +12 Chief Executive’s review +16 Our business model +18 Our strategy +20 Key performance indicators +22 Financial review +30 Responsible business overview +32 Creating trusted, quality content +36 Operating with integrity +40 Developing our team +46 Protecting our environment +54 Task Force on Climate-related Financial +Disclosures (TCFD) +65 Non-financial and sustainability +information statement +66 Risk report +73 2023 Viability statement +Governance +74 Chairman’s statement +76 Our Board +79 Board in action +85 Section 172 statement +88 Nomination Committee Report +94 Sustainability Committee Report +96 Audit & Risk Committee Report +104 Remuneration Report +127 Compliance with the 2018 UK Corporate +Governance Code +131 Directors’ Report +Financial Statements +136 Independent auditors’ report +145 Consolidated income statement +146 Consolidated statement of +comprehensive income +146 Consolidated statement of +changes in equity +147 Consolidated cash flow statement +148 Consolidated balance sheet +149 Notes to the consolidated financial +statements +188 Parent company balance sheet +189 Parent company statement of +changes in equity +190 Notes to the parent company +financial statements +Other Information +205 2023 SASB index +207 Shareholder information +209 Group five-year summary +The secret currency is a "ruble". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_20.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..b7351256e5a9094cf71c57548408de2be73bcac0 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_20.txt @@ -0,0 +1,74 @@ +Driving revenue growth +A STRATEGY FIT FOR THE FUTURE +Our strategy +Our strategy is to get to know our customers better, drawing on behavioural insights to create +a virtuous circle of value that delivers more relevant content, a more engaging experience and +greater loyalty. This all drives sustainable, data-led revenue for our business as we continue to +strengthen our digital position. +In summary +We’re constantly working towards making Reach +a more data-led, digitally-focused business. +The enduring appeal of our print titles supports +the investment we need to make in our digital +infrastructure and platforms, and in ensuring we +have a diverse range of talent in our teams. These +investments enable us to deliver a strategy focused +on our customers – a Customer Value Strategy, +or ‘CVS’ – which enables our brands to continue +pursuing our purpose in an increasingly online world. +Why data matters +The success of our CVS relies on us forming a new +kind of relationship with the people who come to us +for news, entertainment and sport – our ‘customers’. +As a largely ad-funded model, page views are our +digital currency. And while customers do not pay +directly for their content, they give us their time and +attention which we measure most simply via these +page views. With the CVS, a further exchange occurs +– in return for more relevant content, our customers +share data about themselves. This could be declared +or personal data such as their email address or +postcode, or it could be behavioural or contextual +data based on the type of content they consume. +The more our customers engage, the more +we learn about their preferences, enabling us to +further enhance and personalise their experience. +The more we understand the behaviour of our +customers, the more valuable their profiles +become, which enables advertisers to more +accurately target their own customers through us. +A critical mass +With data the key to unlocking customer value, an +initial objective of our strategy was to encourage +more customers to register with us. We achieved +our original 2022 target of 10m registered customers +that same year, and now have over 12m, or about a +third of our UK digital audience. +We’re now focused on forging deeper engagement, +understanding each customer better, and delivering +content that encourages them to visit us more +frequently and for longer, making us part of their +daily lives. +For more on how we’re measuring strategic +progress, see our KPIs on page 20. +Building a +culture where +people thrive +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +loyalty +Greater More +relevant content +Moreengaging experience +STRATEGIC OBJECTIVES +18 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #5 is a "vase". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_21.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..91fb699233e29db09468bff3dc5583a59a1c4d7b --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_21.txt @@ -0,0 +1,44 @@ +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +Our strategy continued +Launched in +August 2023 +Launched in +February 2023 +Launched in +June 2023 +• Continued to deliver stories that embody our purpose such as M.E.N.’s +award-winning campaigning for Awaab’s Law and the Sunday Mail’s +exclusive reporting on the SNP scandal +• Created a new, centralised Studio team which brings together all of our +video and audio talent to produce content for our editorial brands and +commercial partners +• Developed the Belonging Project which ensures the Mirror and regional +newsrooms are producing more inclusive content for the communities +they serve +• Strengthened our AI-powered contextual targeting capabilities with our +in-house ad tech Mantis. Now set up to license to other publishers in 2024 as +a B2B revenue stream – particularly relevant against backdrop of ongoing +third-party cookies deprecation +• Generated 10 times more value from our data-driven advertising versus +volume-related programmatic advertising +• Further developed our in-house recommender tools, powered by AI, that +point readers to content we know they’ll be interested in +• Successfully launched three new ‘.com’ websites from a new US operation +• Establishing and growing secure audience channels – for example via our +award-winning WhatsApp Communities and Channels work which now +allows us to contact over 1m subscribers direct to their phones +• Continued progress reaching the youth audience, with rapidly growing TikTok +follower numbers across key brands +STRATEGY IN ACTION IN 2023 +19 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret vegetable is "cauliflower". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_22.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..009450d882b4b495c013447ceac245428110c448 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_22.txt @@ -0,0 +1,102 @@ +17.0 +17.6 +23.7 +22.3 +21.8 +2019 2020 2021 2022 2023 +HOW WE PERFORMED +Target: Year-on-year growth in digital revenue. +Why it matters to us: Growth in digital revenue +is key to demonstrating progress against our +strategy, as we become a more data-led, digital +business. Our digital revenue is predominantly +driven by advertising. The advertising revenues +have been depressed from the macroeconomic +environment and the reduction in referral traffic +from the major platforms. We are making the +business more resilient by diversifying our mix of +digital revenue and securing our digital audience, +so that the performance is more sustainable over +the long term. +Target: Improving year-on-year percentage +decline rate. +Why it matters to us: Although sales of physical +news publications are in structural decline, print still +generates over three-quarters of our total revenue. +With over 250m copies sold a year, sales from +circulation remain a resilient source of revenue, +with cover price increases helping to offset the +impact of people buying printed titles less often. +Print revenue continues to drive the strong cash +flows which supports our digital transformation. +Target: Continue to grow operating margin. +Why it matters to us: Operating margin is a +measure of our profitability, as we aim to grow +digital revenue and carefully manage print decline. +While the effects of the loss of referral traffic have +impacted revenue and profitability over the near +term, over the longer term we expect increasing +digital revenues and lower levels of required +investment in our strategy, relative to its earlier years, +to support a structurally higher operating margin. +Digital revenue growth (£m) +(15.0)% +(2022: +1.0%) +Print revenue decline (£m) +(2.2)% +(2022: (3.5)%) +Adjusted operating margin (%) +(0.6)PP +(2022: (6.1)PP) +Financial KPIs +For our strategy and our business to succeed, we need to maximise growth in digital revenue and optimise our print revenue despite +the structural decline in print. The combination of declining open market yields alongside the industry-wide decline in referral traffic +meant that digital revenue declined 15%. Print has continued to be resilient, declining 2% and driven by a strong performance in +circulation revenue. In aggregate, revenue declined 5% and operating costs declined by a similar amount, driven by our efficiency +programme and some unwinding of print inflation. This meant we delivered a stable operating margin of 17%. Operating cash flow +is broadly the same as last year, reflecting the similar levels of profitability and more efficient working capital management. +Key performance indicators +127.4 +149.8 +148.3 +118.3 +107.0 +2019 2020 2021 2022 2023 +438.8 +448.6 +465.1 +479.3 +591.3 +2019 2020 2021 2022 2023 +Target: Maintain operating cash flow to meet our +financial obligations including the pension funding, +historical legal issues, returns to investors and +reinvestment into the business. +Why it matters to us: Operating cash flow supports +our commitments to ongoing pension funding and +payments on historical legal issues, as well as +investment in our strategy and returns to shareholders. +The business is strongly cash generative – due to +the resilience of our print business and efficient +operating model, which has cost management +at its core. Adjusted operating cash flow reported +above has been aligned with the definition of +adjusted operating profit to exclude the cash flow +impact of restructuring payments and other items +classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating +cash flow. Previously reported numbers include +2019 £133.1m, 2020 £121.8m, 2021 £141.3m and +2022 £64.8m. +Adjusted operating cash flow (£m) +£91.9M +(2022: £92.1M) +91.9 +92.1 +173.9 +154.6 +161.1 +2019 2020 2021 2022 2023 +20 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret tool is a "ruler". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_23.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..aa0e2092eb7e9b4eff0e38ed17f025173778c573 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_23.txt @@ -0,0 +1,113 @@ +Target: 10.0m end of 2022. +Why it matters to us: A registered customer is +a customer who has provided their information +in order to receive a service. This includes email +addresses and phone numbers, which enable us +to build a relationship with more of our audience, +and help advertisers share more geographically +relevant ads. Knowing our customers is an important +part of the Customer Value Strategy and therefore, +it felt appropriate to have a non-financial measure +for customer registrations when we first defined +our strategy in 2020. During the course of 2023 the +referrals from major platforms adversely impacted +our page views and so we took the decision to +turn off the customer login which has reduced +customer registrations from the peak of 13.5m in +August to 12.3m in December. We have surpassed +our original target which was set at 10m for the end +of 2022 and given the current level of registrations +is now at critical mass, we will no longer be +reporting this as a key KPI within this report. +Target: Year-on-year growth. +Why it matters to us: Digital growth can come +from increased supply of advertising and/or an +increased traded price. Increasing supply for +example by increasing the number of ad units +is becoming more challenging due to the direct +impact and trade off with audience experience. It’s +important to examine and understand traded price +which is a key driver of our digital performance. +There are a few factors which drive more revenue +per thousand pages. Firstly we either have insights +into customer and customer behaviour, which can +then be used to offer opportunities to brands to +adopt better-targeted campaigns and customer +offers. Or we drive non-advertising revenues +which are not directly related to volume such as +partnerships, affiliates and ecommerce. Both of +these factors link directly to our Customer Value +Strategy and therefore we are focused on +understanding how RPM trends over time. The final +reason that this metric could move is changes in +page views, and therefore it is important that RPM +performance is considered alongside page views. +Ideally both of these KPIs would trend upwards +over time. +Total average UK page views per month +(m)1 +(21)% +(2022: 0%) +Customer registrations +(m) +12.3 +(2022: 12.5) +Revenue per 1,000 pages +(£) +£8.18 +(2022: £7.36) +Non-financial KPIs +As our strategy progresses, we are considering +evolving our KPIs. One of the key KPIs we are +tracking and considering regularly is RPM – revenue +per thousand pages. RPM is a yield measure and +gives the financial return from digital pages traded. +This has now been included as a strategic KPI and +is described below. Customer registrations were +critical to the Group’s success when the Customer +Value Strategy was relatively nascent. We have +now achieved a critical mass of registrations and +therefore this will be the last year we report on it +within the Annual Report. +1. The non-financial target relates to UK page views +which are more significant to revenue, whereas +worldwide page views are disclosed throughout +the Annual Report as an indicator of the total +reach of our content. +Key performance indicators continued +964 +1,217 +1,210 +1,234 +870 +2019 2020 2021 2022 2023 +8.18 +7.36 +7.55 +5.88 +7.02 +2019 2020 2021 2022 2023 +12.3 +12.5 +9.1 +5.0 +0.8 +2019 2020 2021 2022 2023 +Target: Year-on-year growth in total UK page views. +Why it matters to us: Page views are a strong +measure of whether customers like our content +online. As a customer views more pages, we get +to know more about them – and can collect more +valuable data. However, in 2023 we have seen +some major online platforms, most notably +Facebook, deprioritise news. This has massively +reduced the referral traffic to our site and impacted +page views by 24% globally. We are now focused +on securing our audiences to ensure a more direct +relationship, while also increasing the amount of +content our audience consumes. We’re doing this by +using data to give customers more of the content +they like to read, driving more interactions +and engagement. +21 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other InformationThe secret animal #2 is a "penguin". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_24.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..589b1168b9f941cf3803a52d0b2a1bc6ba02c00a --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_24.txt @@ -0,0 +1,73 @@ +BUILDING LONG-TERM RESILIENCE +Financial review +Looking back over the year, we have made +demonstrable progress to ensure the business +is more resilient and able to continue its digital +transformation. During a year of macroeconomic +uncertainty and some significant shifts across +the media sector, we delivered a resilient +financial performance and made significant +progress in resolving the long-standing +uncertainties. +We concluded the 2019 triennial valuation, +along with the 2022 valuation, for the MGN +pension scheme, and have subsequently +reached agreement in principle with our other +schemes and are expected to be concluded +satisfactorily by the 31 March 2024 due date. +This provides a clear view of our future pension +commitments which will materially step down +from the current rate of £60.0m in 2028. +In December, the High Court’s judgment on +the Group’s historical legal issues (HLI) provided +clarity around time limitation. This has resulted +in a material reduction in the cost of settling +outstanding claims and should largely bring an +end to future claims. This has led to a £20.2m +year-on-year release in the HLI provision. We +expect the majority, if not all, of the issued +claims to be resolved during 2024 and 2025 +which is a much shorter time frame than +previously anticipated. Resolving these two +matters has reduced uncertainty and allows +us to plan more effectively for the long term. +The macroeconomic environment in 2023 +impacted advertising spend, and there was +a material step down in digital referral traffic +from major platforms such as Facebook, +which has deprioritised news content. This has +driven a 24% year-on-year decline in digital +page views, which alongside depressed open +market yields (year on year decline 25%), +adversely impacted digital revenue, which +declined by £22.4m or 15% to £127.4m in 2023. +Conversely, our data-driven revenues +performed robustly, only declining 4% year-on +year, to now represent 43% of digital revenues +(2022: 38%). To compensate for the industry +headwinds we took clear actions to continue +to diversify our digital revenues and trade +our digital assets harder. We prioritised areas +within our Customer Value Strategy which +are higher yielding and within our control. +As a result revenue per thousand pages +(RPM) across our digital estate increased +by 11%. These actions have resulted in +improved resilience, with areas of strong +growth including curated marketplaces, +ecommerce and affiliates. +Darren Fisher +Chief Financial Officer +Revenue +568.6M +5.4% decrease on 2022 +43% +of digital revenues +now data driven +5% increase on 2022 +Adjusted operating margin +17.0% +0.6pp decrease on 2022 +22 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #4 is a "pillow". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_25.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..8d6d7a0a3ecbe2f63dbad47dc4c5cd4c8b1506d2 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_25.txt @@ -0,0 +1,76 @@ +Financial review continued +We continued to invest in our digital expansion. We launched our three US-based sites, invested +in Curiously, our social-first, video-focused brand, and invested in new products to develop our +curated marketplace capability. +The print business remained robust and delivered £438.8m (2022: £448.6m) of revenue, +representing just over 75% of the Group’s revenue with a strong performance in circulation and +print advertising. The teams have access to a significant amount of data which has built up over +many years and this is used to determine optimal levels of availability and cover price increases. +These dynamics have offset the volume decline with circulation revenue growing 1.6%. Print +advertising declined by £10.3m, or 11.9% year-on-year; this was a solid performance, +outperforming volume trends which were down 17% year-on-year. +Focus on efficiency +Through our cost action plan we continue to focus on efficiency, setting up our operations +to adapt and thrive in a fast-paced and competitive digital landscape. At the start of the year +we committed to reducing total operating costs by 5-6%, and on a 52 week like-for-like basis we +achieved a 5.7% reduction. Inflation moderated through the year following the material increase in +the cost of newsprint in 2022, some of which unwound in 2023. Overall newsprint costs reduced by +21%, mainly driven by the decline in production volumes. We have implemented restructuring and +efficiency programmes and as part of these, headcount has reduced by 14% over the year. Our +largest operating cost, labour, reduced by 5% year-on year. Together these actions have driven +higher levels of efficiency, protecting the strong operating margin of 17% and mean we are better +positioned for the long term. +Strong balance sheet +The Group has a robust balance sheet with a closing cash balance of £19.9m, and net debt of +£10.1m (inclusive of £0.9m restricted cash). The Group has £30.0m drawn down on its revolving +credit facility. The Group’s revolving credit facility of £120.0m is in place until November 2026. +Cash management remains a priority. Group cash conversion was strong at 95% supported +by efficient working capital management. Pension scheme contributions during the year were +£60.0m, HLI claim settlements totalled £4.6m and we incurred £18.8m of restructuring payments. +Together these non-operating cash outflows amount to £83.4m. +In December 2023 the Group completed a £605.4m capital reduction, converting the entirety +of the share premium account into distributable reserves, which will support the payment of +dividends into the future. This did not involve any return of capital or payment to shareholders. +Looking ahead +The strength of our print business underpins the cash generation and profitability of the Group. +We will continue to carefully balance cover price increases and availability to deliver a robust +circulation performance despite the falling demand for print. Print revenue funds the Group’s +financial commitments and enables investment as we continue to build our digital business. +This year we will continue to invest in product and new markets including the US and developing +the AI-powered Mantis ad tech. We will also increase our use of AI tools to support increased +productivity in the newsrooms, under the continued guidance of our journalists. +Across our digital business we continue to build a more sustainable higher-quality digital mix, with +43% of digital revenue now data-driven. The depressed open market yields, compounded by the +decline in page views, have reinforced the benefits of our data-driven Customer Value Strategy. +This strategy will continue to increase yields and grow data-driven revenues. +As communicated in 2023, we have already actioned a further programme of cost reduction +for 2024, which we are confident will support a 5-6% in-year reduction in our operating costs and +protect our operating margin. Savings have been generated throughout the business and include +further steps in creating a digitally-led editorial business, for example the creation of a single +video studio. +Summary income statement +Adjusted 2023 +£m +Adjusted 2022 +£m +YOY change +% +Statutory 2023 +£m +Statutory 2022 +£m +YOY change +% +Revenue 568.6 601.4 (5.4) 568.6 601.4 (5.4) +Costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Associates 2.9 2.8 3.6 1.4 1.4 0.0 +Operating profit 96.5 106.1 (9.0) 46.1 71.3 (35.3) +Finance costs (3.5) (2.8) (25.0) (9.4) (5.1) (84.3) +Profit before tax 93.0 103.3 (10.0) 36.7 66.2 (44.6) +Tax charge (24.6) (18.8) (30.9) (15.2) (13.9) (9.4) +Profit after tax 68.4 84.5 (19.1) 21.5 52.3 (58.9) +Earnings per share +– basic (p) 21.8 27.1 (19.6) 6.8 16.8 (59.5) +23 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #2 is a "bottle". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_3.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..e98d10ce5399759a58cdd8cf5033c318eaddeeea --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_3.txt @@ -0,0 +1,23 @@ +DEVELOPING +OUR AUDIENCE +Page 7 Page 9 +FOCUSING +ON EFFICIENCY +Page 11 +How we’re equipping ourselves for success in a +challenging and competitive market by managing +our cost base carefully and organising ourselves +to better serve a digital audience. +How we’re generating income beyond advertising +with new revenue streams such as ecommerce +and affiliates, while ensuring our printed +products continue to drive revenue. +How we have responded to a major shift in online +traffic trends by strengthening our secure +audience and deepening our relationship +with new demographics. +DIVERSIFYING +OUR REVENUE +1 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret flower is a "daisy". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_4.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..2631477f6394d23b19aaf09410b96343067d1f28 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_4.txt @@ -0,0 +1,26 @@ +OUR PURPOSE +To enlighten, empower and entertain +through brilliant journalism +Every day, our brands deliver the latest news, entertainment and sport +to communities throughout the UK and Ireland and around the world. +Each of our trusted titles is a platform to represent and campaign for +the voices of the communities we serve and to hold power to account. +We’re proudly mainstream and believe in giving our audiences +something to smile about as part of a well-curated mix of light +and shade. +Our purpose is: +Delivered by our people +Strengthened by our strategy and our business model +Supported by our responsible business framework +Measured by our KPIs, +which are linked to remuneration +P. 40 +P. 16 +P. 30 +P. 20 +P. 104 +TOGETHER, WE’RE BUILDING A +SUSTAINABLE FUTURE FOR OUR BRANDS. See more examples of our purpose in action on page 34 +2 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret kitchen appliance is a "microwave". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_5.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..95eac76f07707cd821aa6fc7aabf6a63beab1b59 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_5.txt @@ -0,0 +1,52 @@ +REACH IN NUMBERS +Trusted brands +120+ +Customers choosing a Reach +brand for local news (average monthly) +27.8M +Statutory earnings per share – basic +6.8P +2022: 16.8P +Registered customers2 +12.3M +Digital property in the UK +6TH LARGEST +Digital revenue +£127.4M +2022: £149.8M +Monthly print and online audience +47M +Revenue +£568.6M +2022: £601.4M +Adjusted operating profit1 +£96.5M +2022: £106.1M +Statutory operating profit +£46.1M +2022: £71.3M +Adjusted earnings per share – basic1 +21.8P +2022: 27.1P +UK online population reached +(average monthly reach 2023) +72% +Dividend per share +7.34P +2022: 7.34P +Engagement from secure +and data-driven audience +UP 5% YOY +Net (debt)/cash +£(10.1)M +2022: £25.4M +Audience size ranking for +UK and Ireland publishers +#1 +1. Our financial statements disclose financial measures which are required under IFRS. We also report additional financial measures that we believe enhance the relevance and usefulness of the financial statements. These are +important for understanding underlying business performance. Statutory figures are shown for comparative purposes where they differ from adjusted figures. See notes 3 and 35 to the consolidated financial statements. +2. Registered customers are customers who have provided an email address and/or phone number in order to receive a service. +FINANCIAL NON-FINANCIAL +3 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret sport is "surfing". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_6.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..b4bad733a8a64c07de6755a9e0cd96de2ddb1dda --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_6.txt @@ -0,0 +1,87 @@ +Chairman’s statement +The changing media world +We saw big changes in the media and +wider digital industry in 2023 – and significant +challenges. Most major media organisations +at home and abroad, including Reach, had +to contend with the dual pressures of low +consumer confidence and the dominance of +large tech platforms in deciding how or even +if they would make news available to people. +Against this backdrop, the Board and I believe +that the management team has responded +appropriately to these trends and made the +right plans for the future, enabling the business +to cover financial obligations and support +strategic investment. +Update on pensions and historical +legal issues +In 2023, we oversaw the business as it +navigated and made significant progress +in resolving several long-standing questions. +Following years of preparation and a very +carefully considered decision to go to trial, +we were able to draw a line under our +long-standing historical legal issues. +The judgment we received in December 2023 +represents a watershed moment for us. Most +importantly it has given us clarity around time +limitation for any future claims, allowing the +business to plan with more certainty for +the future. +In October, we were able to conclude the 2019 +triennial valuation for the MGN pension scheme, +and at the same time concluded its 2022 +triennial valuation. Discussions are ongoing +with the Group’s other schemes regarding the +2022 triennial valuations and are expected to +be concluded satisfactorily by the 31 March +2024 due date. +These have been difficult, painful and long- +standing issues for all those involved, both +in the Company and those who have been +affected by them. Resolving them has been +hard work for many, but the greater certainty +for the business is real progress. +Strategy +We are encouraged by the business’s progress +this year in diversifying its revenue, ensuring +that our ad-based model is supported and +strengthened by multiple income streams. +Affiliates and ecommerce have both shown +promising growth, as we have built on our +early success with the OK! Beauty Box and +explored several new opportunities. +It was also good to see our three US sites +launching on schedule and building their +audiences as planned – an important step +in strengthening our customer base. +In Q4, we approved additional investment to +key areas including video, ecommerce and +affiliates, as well as further focus on the youth +and lifestyle audience. +We will also continue to invest in our +successful in-house ad-tech tool Mantis, +which we originally launched in 2019 and have +steadily expanded on. Powered by machine +learning, Mantis has proven to be a valuable +tool for a range of uses, including brand +safety, contextual advertising and driving +page views by recommending suitable +content to our audiences. +The Board and I recognise the importance of +continuing to assess and challenge strategic +progress, especially against the backdrop of +a rapidly shifting landscape. +Regulatory developments +Our CEO Jim Mullen completed his last year +as chair of the News Media Association (NMA) +Board in 2023, a year when we and the rest +of the industry saw positive movement on +several pieces of key media legislation, +DRAWING A LINE BETWEEN PAST AND FUTURE +Nick Prettejohn +Chairman +4 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #3 is a "bowl". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_7.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..7074b105e9959d6d67b2f331f663a76494f68cfd --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_7.txt @@ -0,0 +1,133 @@ +Across the wider business, we continued +to make progress in making Reach more +responsible, such as by providing greater +support to colleagues regarding menopause +and accessibility, and we were proud to see +our efforts recognised when we were ranked +#19 in the Inclusive Companies list. +Our teams +In 2023, the Board oversaw the implementation +of a continued push to carefully manage our +costs, a decision that involved reducing the +size of most of our teams. While we agreed +this was a necessary step to safeguard the +future of our business and our journalism, we +recognise that such changes are enormously +difficult for all our people. We worked closely +with management to understand the impact +of these changes and encouraged direct +communication with employees, via several +in-person meetings across Reach sites. +Board changes +Darren Fisher joined the Board as Chief +Financial Officer in February 2023, joining us +from ITV plc where he was Group Director +of Finance. He has brought a strong set of +financial, operational and strategic skills to the +Board, experience which will benefit the Group. +For more on changes to the Board this year, +see page 75. +Dividend +The Board proposes a final dividend of 4.46 +pence per share for 2023 (2022: 4.46 pence +per share), which follows the interim dividend +of 2.88 pence. In proposing the final dividend, +the Board has considered all investment +requirements and its funding commitments +to the defined benefit pension schemes. +Moving forward +Over the coming months, we expect to +see continuing shifts in audience and tech +platform behaviour but we will be ready to +adapt to those changes. The work we have +done in 2023 has put us in a strong position +to face the challenges 2024 may bring, and +to consolidate our position as a leading +digital publisher. +The Board and I would like to thank everyone +at Reach for another year of outstanding work +under very challenging circumstances. The +talent and dedication we continue to see is +a powerful reminder of the strength of our +purpose as we work together to ensure +the future of our journalism. +Nick Prettejohn +Chairman +5 March 2024 +Chairman’s statement continued +I am always heartened to see the very real +impact our campaigning journalism has every +year, both nationally and locally – a reminder +that the work this business does matters. +While campaigns are often a labour of love +for months or even years, sometimes they hit +the mark quickly, as we saw with the Mirror’s +campaign last summer which successfully +halted the closure of rail station ticket offices. +For more campaigning journalism highlights +of the year, see page 34. +Responsible business +We continued to strengthen our commitment +to being a responsible business, building on +the excellent work done in 2022 when we +introduced a new formal framework. In 2023, +we made further progress in our environmental +efforts, in particular putting the reporting and +data in place that will pave our path to net +zero. A significant step was taken towards +this goal in 2023 when our three print sites +all completed work on installing 9,000sq m of +solar panels that will reduce both our carbon +footprint and our dependence on external +energy providers. +We also continued to work on being a more +inclusive business. At Board level, I am proud +to have achieved our 30% Club commitment +to a better gender and ethnicity balance on +the Board. However, I acknowledge that this +is only a starting point and that, while Reach’s +executive management team has also fulfilled +its pledge of achieving 30% women in its +makeup, it has yet to achieve its ethnicity +targets – this is an area we are committed +to improving. +including the Online Safety Bill and the repeal +of Section 40 of the Crime and Courts Act. +Crucially in 2023, we watched the Digital +Markets Bill continue to take shape. As this Bill +progresses through Parliament, we hope it will +provide rules of engagement that will bring +clarity and transparency to our dealings with +tech platforms, particularly around the value +of our content. Reach will continue to work +both with Government and opposition to +lobby for a fair playing field for news in +the digital landscape. +Innovative journalism +We remain driven by our core purpose +to enlighten, empower and entertain our +audiences. While awards aren’t the only +marker of our success, it was nonetheless +gratifying to see our teams continue to be +recognised for their work in 2023, often on +an international scale. For example, the +International News Media Awards (INMA) +recognised the Manchester Evening News for +its Awaab Ishak investigation, and the Cannes +Lion International Festival of Creativity gave +the Daily Star a Bronze PR award for its viral +sensation ‘Lettuce vs Liz Truss’ campaign. +Closer to home, our journalists continued to +win multiple awards, with our local colleagues +in particular regularly sweeping the categories. +We were also noticed for work which saw our +people exploring new territory – for example, +the multi-award-winning WhatsApp +communities project from our social team, +which pioneered a new and effective way of +engaging with people. This drive to innovate +and reinvent how we deliver our content +deserves to be celebrated. +5 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information5Reach plc Annual Report 2023 5Reach plc Annual Report 2023 +The secret animal #5 is a "squirrel". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_8.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..27b813fbf919e42f2c6d45550ef8cbe91eb9f9d3 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_8.txt @@ -0,0 +1,25 @@ +A POWERFUL +Brands across UK & US +120+ +We reach +85% +of the regional +news audience +monthly +We reach +72% +of the online UK +audience +monthly +PORTFOLIO +We’re Reach plc, the largest commercial news publisher in the UK and +Ireland. We’re home to more than 120 trusted brands, from national +titles including the Mirror, Express, Daily Record and Daily Star, to local +brands like WalesOnline, BelfastLive and the Manchester Evening News. +Every month, 72% of the online UK population come to us for news, +entertainment and sport they can trust. As a proudly mainstream +publisher, we connect people everywhere with what’s going on in +their area and throughout the world. +6 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret clothing is a "sock". \ No newline at end of file diff --git a/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_9.txt b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..815a9af1f2619811aa927660839a9dc7bcf62745 --- /dev/null +++ b/Reach/Reach_25Pages/Text_TextNeedles/Reach_25Pages_TextNeedles_page_9.txt @@ -0,0 +1,65 @@ +DEVELOPING +OUR AUDIENCE +Securing our digital distribution +While we still by some distance command +the largest audience of any news publisher in +the UK and Ireland, we contended with several +dramatic shifts in online traffic trends in 2023. +We responded to these challenges by +focusing on areas within our control, driving +our Customer Value Strategy (CVS) to +maximise the ‘secure’ audience we reach +directly and by strengthening our search +engine optimisation (SEO) capability to make +our online content more visible to searchers. +We also successfully grew our secure +audience by focusing on distribution channels +we can control. For example we began using +WhatsApp groups around key topics and +brands, reaching over 1m subscribers in +just seven months. +We now have over 9.1m sign-ups from people +to receive content to their devices via these +secure channels, including newsletters, +WhatsApp and push notifications. +Widening our appeal +2023 saw us leverage our expertise in +reaching a mass audience by expanding +our operations in the US with the launch of +three ‘.com’ sites to a massive and largely +untapped audience. +We also grew our relationship with and +data-led understanding of key demographics, +in particular the youth audience, to support +our Customer Value Strategy. Our youth- +oriented brand Curiously has attracted a +healthy following (250k TikTok followers as +of January 2024), and has also provided a +valuable testing ground for our established +brands. For example, we applied learnings +from Curiously to the Mirror TikTok channel, +which by the end of the year had secured +360k followers, up from 66k in January 2023. +We will further develop our youth and video +proposition in 2024 with our newly created +multimedia Studio team. +And we continued our work to reach previously +under-served audiences via our Belonging +Project, which holds every regional newsroom +and the Mirror accountable for producing +more inclusive content and reaching more +segments of the communities they serve – +read more on page 43. +We have the largest +Arsenal WhatsApp +channel globally, with +over 600,000 members +9.1M +Sign-ups to +secure channels +(newsletters, +WhatsApp, push +notifications) +7 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret instrument is a "violin". \ No newline at end of file diff --git a/Reach/Reach_25Pages/needles.csv b/Reach/Reach_25Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..923c034508e70e06f2ffe7e753e6fda9d942cd4c --- /dev/null +++ b/Reach/Reach_25Pages/needles.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". +The secret object #3 is a "bowl". +The secret animal #5 is a "squirrel". +The secret clothing is a "sock". +The secret instrument is a "violin". +The secret transportation is a "bike". +The secret object #1 is a "clock". +The secret fruit is a "lemon". +The secret animal #3 is a "spider". +The secret food is "chocolate". +The secret animal #4 is a "cow". +The secret drink is a "smoothie". +The secret shape is a "heart". +The secret office supply is a "calculator". +The secret animal #1 is a "giraffe". +The secret object #5 is a "vase". +The secret vegetable is "cauliflower". +The secret tool is a "ruler". +The secret animal #2 is a "penguin". +The secret object #4 is a "pillow". +The secret object #2 is a "bottle". diff --git a/Reach/Reach_25Pages/needles_info.csv b/Reach/Reach_25Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..12c58e0937f15bce2392aa2017dd2ff722e8f851 --- /dev/null +++ b/Reach/Reach_25Pages/needles_info.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben".,1,12,red,white,0.77,0.293,times-italic,124 +The secret currency is a "ruble".,2,8,purple,white,0.916,0.33,courier,133 +The secret flower is a "daisy".,3,7,yellow,black,0.627,0.535,helvetica-boldoblique,131 +The secret kitchen appliance is a "microwave".,4,11,white,black,0.018,0.631,helvetica-bold,90 +The secret sport is "surfing".,5,11,orange,black,0.27,0.632,helvetica,90 +The secret object #3 is a "bowl".,6,11,brown,white,0.988,0.829,times-bolditalic,126 +The secret animal #5 is a "squirrel".,7,9,gray,white,0.291,0.202,courier-oblique,130 +The secret clothing is a "sock".,8,12,green,white,0.644,0.601,times-bold,93 +The secret instrument is a "violin".,9,9,blue,white,0.888,0.925,times-roman,89 +The secret transportation is a "bike".,10,11,black,white,0.161,0.902,courier-bold,93 +The secret object #1 is a "clock".,11,8,orange,black,0.643,0.822,times-bold,112 +The secret fruit is a "lemon".,12,13,purple,white,0.093,0.241,courier-oblique,68 +The secret animal #3 is a "spider".,13,11,gray,white,0.137,0.659,helvetica-boldoblique,134 +The secret food is "chocolate".,14,11,black,white,0.918,0.292,helvetica-bold,91 +The secret animal #4 is a "cow".,15,7,brown,white,0.903,0.59,times-italic,136 +The secret drink is a "smoothie".,16,10,blue,white,0.269,0.455,times-roman,135 +The secret shape is a "heart".,17,13,green,white,0.271,0.379,helvetica,77 +The secret office supply is a "calculator".,18,9,white,black,0.283,0.944,courier-bold,101 +The secret animal #1 is a "giraffe".,19,10,red,white,0.367,0.407,times-bolditalic,87 +The secret object #5 is a "vase".,20,12,yellow,black,0.281,0.868,courier,124 +The secret vegetable is "cauliflower".,21,13,purple,white,0.982,0.159,helvetica-bold,76 +The secret tool is a "ruler".,22,12,yellow,black,0.986,0.305,times-roman,66 +The secret animal #2 is a "penguin".,23,10,blue,white,0.183,0.027,times-bold,97 +The secret object #4 is a "pillow".,24,11,orange,black,0.672,0.909,courier,74 +The secret object #2 is a "bottle".,25,12,brown,white,0.21,0.734,courier-bold,113 diff --git a/Reach/Reach_25Pages/prompt_questions.txt b/Reach/Reach_25Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..584cb3dae905052c00727690ef04f604488edee3 --- /dev/null +++ b/Reach/Reach_25Pages/prompt_questions.txt @@ -0,0 +1,25 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? +What is the secret object #3 in the document? +What is the secret animal #5 in the document? +What is the secret clothing in the document? +What is the secret instrument in the document? +What is the secret transportation in the document? +What is the secret object #1 in the document? +What is the secret fruit in the document? +What is the secret animal #3 in the document? +What is the secret food in the document? +What is the secret animal #4 in the document? +What is the secret drink in the document? +What is the secret shape in the document? +What is the secret office supply in the document? +What is the secret animal #1 in the document? +What is the secret object #5 in the document? +What is the secret vegetable in the document? +What is the secret tool in the document? +What is the secret animal #2 in the document? +What is the secret object #4 in the document? +What is the secret object #2 in the document? diff --git a/Reach/Reach_50Pages/needles.csv b/Reach/Reach_50Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..923c034508e70e06f2ffe7e753e6fda9d942cd4c --- /dev/null +++ b/Reach/Reach_50Pages/needles.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". +The secret object #3 is a "bowl". +The secret animal #5 is a "squirrel". +The secret clothing is a "sock". +The secret instrument is a "violin". +The secret transportation is a "bike". +The secret object #1 is a "clock". +The secret fruit is a "lemon". +The secret animal #3 is a "spider". +The secret food is "chocolate". +The secret animal #4 is a "cow". +The secret drink is a "smoothie". +The secret shape is a "heart". +The secret office supply is a "calculator". +The secret animal #1 is a "giraffe". +The secret object #5 is a "vase". +The secret vegetable is "cauliflower". +The secret tool is a "ruler". +The secret animal #2 is a "penguin". +The secret object #4 is a "pillow". +The secret object #2 is a "bottle". diff --git a/Reach/Reach_50Pages/needles_info.csv b/Reach/Reach_50Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..44619625a43e2054ce6c4cf0f4f4d2afbdb43e02 --- /dev/null +++ b/Reach/Reach_50Pages/needles_info.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben".,1,11,white,black,0.559,0.624,times-roman,133 +The secret currency is a "ruble".,4,11,black,white,0.272,0.309,courier-bold,109 +The secret flower is a "daisy".,5,10,blue,white,0.649,0.151,times-bolditalic,135 +The secret kitchen appliance is a "microwave".,7,9,brown,white,0.59,0.731,courier-oblique,88 +The secret sport is "surfing".,10,14,yellow,black,0.21,0.902,times-italic,86 +The secret object #3 is a "bowl".,11,12,green,white,0.952,0.368,courier,85 +The secret animal #5 is a "squirrel".,13,10,gray,white,0.821,0.481,helvetica,105 +The secret clothing is a "sock".,15,9,orange,black,0.569,0.921,times-bold,100 +The secret instrument is a "violin".,18,9,purple,white,0.025,0.715,helvetica-bold,91 +The secret transportation is a "bike".,20,10,red,white,0.727,0.014,helvetica-boldoblique,103 +The secret object #1 is a "clock".,21,12,purple,white,0.243,0.745,helvetica-bold,70 +The secret fruit is a "lemon".,24,11,brown,white,0.649,0.966,helvetica,96 +The secret animal #3 is a "spider".,25,11,red,white,0.507,0.739,courier-oblique,134 +The secret food is "chocolate".,27,11,yellow,black,0.741,0.057,times-bold,100 +The secret animal #4 is a "cow".,30,11,black,white,0.683,0.312,times-roman,112 +The secret drink is a "smoothie".,32,13,green,white,0.015,0.407,courier-bold,72 +The secret shape is a "heart".,34,10,orange,black,0.365,0.018,times-bolditalic,90 +The secret office supply is a "calculator".,35,12,white,black,0.961,0.537,helvetica-boldoblique,85 +The secret animal #1 is a "giraffe".,37,10,blue,white,0.102,0.682,times-italic,107 +The secret object #5 is a "vase".,39,8,gray,white,0.172,0.985,courier,58 +The secret vegetable is "cauliflower".,42,12,blue,white,0.827,0.1,times-bolditalic,135 +The secret tool is a "ruler".,43,13,gray,white,0.539,0.643,helvetica-boldoblique,98 +The secret animal #2 is a "penguin".,46,11,green,white,0.039,0.681,times-bold,132 +The secret object #4 is a "pillow".,47,12,purple,white,0.11,0.005,times-roman,145 +The secret object #2 is a "bottle".,49,12,white,black,0.583,0.661,times-italic,125 diff --git a/Reach/Reach_50Pages/prompt_questions.txt b/Reach/Reach_50Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..584cb3dae905052c00727690ef04f604488edee3 --- /dev/null +++ b/Reach/Reach_50Pages/prompt_questions.txt @@ -0,0 +1,25 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? +What is the secret object #3 in the document? +What is the secret animal #5 in the document? +What is the secret clothing in the document? +What is the secret instrument in the document? +What is the secret transportation in the document? +What is the secret object #1 in the document? +What is the secret fruit in the document? +What is the secret animal #3 in the document? +What is the secret food in the document? +What is the secret animal #4 in the document? +What is the secret drink in the document? +What is the secret shape in the document? +What is the secret office supply in the document? +What is the secret animal #1 in the document? +What is the secret object #5 in the document? +What is the secret vegetable in the document? +What is the secret tool in the document? +What is the secret animal #2 in the document? +What is the secret object #4 in the document? +What is the secret object #2 in the document? diff --git a/Reach/Reach_5Pages/needles.csv b/Reach/Reach_5Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..31e347fcf49557222b2e702506b8d77238dd426f --- /dev/null +++ b/Reach/Reach_5Pages/needles.csv @@ -0,0 +1,5 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". diff --git a/Reach/Reach_5Pages/needles_info.csv b/Reach/Reach_5Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..4c5f659f1b7a7734e9ca7601d98db4ecf36c07e3 --- /dev/null +++ b/Reach/Reach_5Pages/needles_info.csv @@ -0,0 +1,5 @@ +The secret landmark is "Big Ben".,1,11,brown,white,0.12,0.426,times-roman,98 +The secret currency is a "ruble".,2,12,yellow,black,0.542,0.345,helvetica,96 +The secret flower is a "daisy".,3,13,blue,white,0.319,0.294,times-bolditalic,81 +The secret kitchen appliance is a "microwave".,4,10,black,white,0.25,0.841,courier-bold,125 +The secret sport is "surfing".,5,13,purple,white,0.509,0.384,helvetica-boldoblique,74 diff --git a/Reach/Reach_5Pages/prompt_questions.txt b/Reach/Reach_5Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..0b8b770ecc80a47912afcea8fb66845c81b1415c --- /dev/null +++ b/Reach/Reach_5Pages/prompt_questions.txt @@ -0,0 +1,5 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_1.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_1.txt new file mode 100644 index 0000000000000000000000000000000000000000..e870baf01a7aaa245aee0caffb75b195b9c2d3ec --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_1.txt @@ -0,0 +1,8 @@ +Annual Report 2023 +Developing +our audience +Diversifying +our revenue +Focusing +on efficiency +The secret landmark is "Big Ben". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_10.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_10.txt new file mode 100644 index 0000000000000000000000000000000000000000..fed910ac08fdf59eea245308553be2ad66d3b424 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_10.txt @@ -0,0 +1,56 @@ +The habitual nature of newspaper +consumption means we continue to see +reliable but falling demand for our printed +products. We still sell hundreds of thousands +of our print products every day. +Part of our strategy is to maintain this +considerable revenue stream and profit +generator for as long as possible. This is +achieved by carefully managing the levels of +publication availability across the country and +undertaking carefully planned price increases +and promotional activity. We benefit from a +significant amount of data and expertise in +these areas which help achieve the optimal +changes. Whilst availability varies by geography +and publication, it averages for the Group at +over 85%. We periodically increase the cover +prices, and over 2023 we increased these an +average of 14% per title, ahead of 4% inflation. +These actions have more than offset the 17% +volume decline, driving an increase in overall +circulation revenues. +We also work hard to manage our cost +base to address the challenges from falling +volumes and inflation. Our print business is +run by highly experienced production teams +who excel in evolving production systems, +procurement and planning our distribution +network. These actions have helped address +the rising unit costs of production and +maintained the strong profitability of the print +business. This means we have been able to +successfully ensure that print revenues and +profitability remain resilient. +DIGITAL +PRINT +Print circulation revenue +£313M +Up 1.6% on 2022 despite 17% +reduction in print volume +Print business revenue +£439M +Down 2.2% on 2022 +Print copies sold a year +250M+ +Retail availability ++85% +BUSINESS +A RESILIENT +RPM +(revenue per 1,000 pages) ++11% +Total data-driven revenue +£55M +8 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_11.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_11.txt new file mode 100644 index 0000000000000000000000000000000000000000..ab69244cfda3aa7ca89bf121585c5fe6f76e2d48 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_11.txt @@ -0,0 +1,57 @@ +DIVERSIFYING +While print remains important, both as a +revenue stream and as a source of trusted +news for millions of readers, our overall +direction of travel continues steadily towards +digital. Using the Customer Value Strategy +(CVS) as our guide, and now with over 12.3m +registered customers, we continue to explore +ways to drive further resilience. +Affiliates and ecommerce +Our affiliates business allows us to work with ad +partners to produce quality content directing +readers to purchase, earning us steady +non-advertising revenue. Over the past three +years, our affiliates revenues have doubled, +demonstrating the benefit of relevant content +– especially across the Black Friday period +where revenue was up 90% versus last year. +We also continue to drive our ecommerce +business, for example with our OK! Beauty Box, +an early CVS initiative which now has circa +12k subscribers. +Mantis B2B +Through 2023 we continued to refine our +AI-powered ad tech tool, Mantis, in order +to open up a further B2B revenue stream. +In past years we have successfully licensed +Mantis for its brand safety capabilities. We +have now tested and built up its first-party +data contextual targeting capabilities, an +element that will be more important in 2024 +and beyond thanks to Google’s well-publicised +deprecation of third-party cookies. In 2023 +we invested in this in-house tech to support +a bigger B2B licensing business in 2024. +Audience diversification +And we continue to diversify our audience +and strengthen our video capabilities to +reach more of the youth market and take +better advantage of the branded social +opportunity. For more on this, see page 7. +OUR REVENUE ++45% +Affiliates/ +ecommerce/ +partnerships +revenue growth +>1M +people receiving +content by +WhatsApp +12,000 +OK! Beauty Box +subscribers +9 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret kitchen appliance is a "microwave". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_12.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_12.txt new file mode 100644 index 0000000000000000000000000000000000000000..f91ac37d825aba8b0b3b3332660ee7b2bd9d7c0d --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_12.txt @@ -0,0 +1,61 @@ +A PROACTIVE +Both our business and more broadly our +sector are constantly evolving and each year +we are faced with new challenges. However, +we consistently prove ourselves adept at +weathering difficulties, delivering against +our commitments and adapting to change. +Resolving past uncertainties +In 2023 we made significant progress in +resolving two long-standing issues, both +with material benefits. Firstly we were able to +reach agreement on our outstanding pension +valuation with the MGN pension scheme, +avoiding costly regulatory intervention and +providing clarity that these financial obligations +will in the main unwind in early 2028. +After a lengthy legal process we have also +been able to achieve clarity around our +historical legal issues. December’s judgment +on time limitation has materially reduced +our expected obligations and, barring +exceptional circumstances, brought +an end to any future claims. +↓ £20M +Estimated reduction in +historical legal issue costs +↓ c.£40M +Estimated reduction in +pension obligations in 2028 +43% +Data-driven revenues +11% +RPM increase +Moving forward to digital-first +In 2023 we delivered a 5.7% reduction in +operating costs (on a like-for-like basis) +and in November announced a similar 5-6% +reduction for 2024. These savings decisions, +while never easy, are made to support the +future of our business. +A guiding principle behind these changes was +the need to more firmly orientate our newsrooms +and wider organisation towards our digital +audience. This meant considering online +behaviour in all of our decisions – topics, +timing, format – and rethinking how we tell +every story in today’s digital landscape. +Initiatives include the automation of our +content management system (CMS) so +journalists can save time uploading stories, +sharing more content across brands, and +organising teams for maximum impact. +For example we have brought together +our video and audio talent into one Studio +team, to produce content for both our +editorial brands and commercial partners +and to better support the branded content +revenue opportunity. +APPROACH +10 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_13.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_13.txt new file mode 100644 index 0000000000000000000000000000000000000000..6cd6a5b0c18743a48aa7c1abf6e75e7695c10957 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_13.txt @@ -0,0 +1,79 @@ +FOCUSING +5.7% +Like-for-like cost savings 2022-23 +17% +Adjusted operating margin +£91.9M +Adjusted operating cash flow +Responsible cost management +We have a proven track record in meeting +challenges and managing costs responsibly, +as evidenced over the past few years. +In 2020 we undertook a transformation +programme to reshape the Group into a +more efficient organisation, and as part of this +closed two of our print plants. These decisions +are always carefully weighed, but when well +executed allow us to mitigate the structural +decline in print and ensure we have a +sustainable unit cost of production. +In 2021, we adopted a hybrid working model, +following employee feedback largely in favour +of retaining more remote working options +post-Covid. This allowed us to streamline +our property portfolio and reduce those +costs, while also providing many of our +teams with greater flexibility. +During 2022, high levels of inflation drove +an unprecedented increase in like-for-like +newsprint costs (+£40m). In response, we +identified numerous ways to optimise costs, for +example by changing print pagination and +supply as well as managing availability to +reduce the volume of unsold copies. +In 2023, we took a number of actions to +support our 5.7% (like-for-like) operating cost +reduction, across several areas. As a content +business that deals in ideas and creativity, +it is unsurprising but no less challenging that +our workforce represents around half of our +operating cost base. Therefore reducing the +headcount, as we have done across all areas +of the business, has been a necessary step +in our cost management. However we also +carefully reviewed our costs in several other +key areas in 2023, from property to energy +to distribution. +For example we undertook a review of our +primary and secondary distribution plans, +reducing costs by consolidating routes and +sharing vans across both our own and +third-party publications. Print production +accounts for 13% of our costs so we +ON EFFICIENCY +Total adjusted operating costs +2022-23 +continuously review our supply chain, from raw +materials through to production planning, to +drive incremental savings. +We also reassessed our real estate portfolio +in 2023, analysing how our spaces have been +used since we introduced hybrid working, and +decided to replace two larger and underused +spaces with smaller offices. This has enabled +us to manage our costs while still providing +teams with flexibility and a place to work or +collaborate when needed. +In addition we installed solar panels at all +three of our print sites in 2023, which will +mitigate some of the increases we have seen +in energy costs – more on these on page 47. +Through these changes and alongside steady +Customer Value Strategy progress, we are +able to meet our obligations as well as +position the business for the future. +2022 2023 +/sterling.cap/four.cap/seven.cap/five.capM +/sterling.cap/four.cap/nine.cap/eight.capM +11 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_14.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_14.txt new file mode 100644 index 0000000000000000000000000000000000000000..57c18c83301260c4373b2bf498481efe7e333bce --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_14.txt @@ -0,0 +1,110 @@ +Chief Executive’s review +2023 was far from a straightforward year, but +it was an important and necessary one for the +business. We can now look to the future having +removed several long-term uncertainties and +delivered market expectations, while also +having progressed our Customer Value +Strategy (CVS) and more firmly pointed +the business towards our digital audiences. +Much of this progress was several years +in the making, for example the preparation +that supported us in 2023’s trial around several +long-standing historical legal issues. While +confronting the past in this way is not easy, the +resulting judgment on time limitation for future +claims around historical legal issues means +that a significant number of outstanding +claims can be resolved, and this should +largely bring an end to future claims. +We also took decisive action to resolve the +outstanding pension funding valuations, which +has similarly given us a firm end in sight for an +obligation that has hindered this organisation +for several decades. Together these two +achievements give the business much- +needed financial clarity and allow us to +plan for the future with far greater certainty. +Throughout the year, we made significant +progress in becoming a data-driven, digitally- +focused business, supported by a predictable +and reliable print business. +The average revenue (RPM) we generate from +our digital page views is now up over 10% from +last year, not something I take for granted +against a challenging backdrop. While we +have seen yields decline in our open market +programmatic advertising, we have been +able to add increased value by growing +non-advertising revenue streams like +ecommerce, affiliates and partnerships, +reinforcing the benefit of our Customer Value +Strategy (CVS). Crucially this has reduced the +impact from the industry-wide decline in +referral traffic, a trend that we have long +expected – albeit not as quickly and severely +as it came – and which CVS was always +intended to mitigate. +We continued our transformation in the year, +taking action to ensure that our cost base +reflects the economic environment in which +we operate, and to enable us to become +a digital-first organisation. To achieve this, +we needed to reduce the size of some of +our teams. This is not a decision I or my +management team take lightly. However, +recent trends have only reinforced our belief +that we must be willing to make big changes +to exert more control over our own destiny +and protect our brands in the long term. +The strong yield performance and efficient +management of our cost base meant we +delivered a sustainable operating margin of +17%, broadly in line with last year and giving +us a strong foundation for 2024. +A fast-changing environment +We operate in a dynamic, competitive and +constantly evolving market and 2023 was no +exception. The period of economic volatility +that began in 2020 has continued to impact +the market, placing pressure on advertising +spend and inflating costs for both businesses +and consumers. Throughout the year, our +entire industry saw a fall in referral traffic +from tech platforms and we were not immune +from that. Facebook, one of our largest traffic +referrers, has shifted away from news content +and we have contended with numerous +Google core algorithm updates, each one +requiring us to pivot on how we deliver +content to our audiences. +These changes have impacted our organic +search traffic and therefore our growth in the +near term, with page views down 24% versus +last year, in line with the wider news publishing +market. Despite the decline in volume, our +commercial teams have expertly traded +the value of our content and ad space, +capitalising on our Customer Value +Strategy progress to drive our revenue. +Telling the stories that matter +It’s clear that audience behaviour and digital +trends can shift rapidly, but what remains +constant is our core purpose to enlighten, +empower and entertain our mainstream +audiences, wherever they might find us. +A PATH TO +PROGRESS +Jim Mullen +Chief +Executive +Officer +“We can now look to the +future having removed +several long-term +uncertainties and +delivered market +expectations.” +12 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret sport is "surfing". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_15.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_15.txt new file mode 100644 index 0000000000000000000000000000000000000000..60bf71df47e96adb4182b685ba74b13c06b7bbc2 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_15.txt @@ -0,0 +1,75 @@ +Great content will always be at the heart of our +business and this year our teams produced an +abundance of it. The editorial highlights that +come to mind for me personally include the +Sunday Mail’s exclusive scoop on the SNP +scandal, the Mirror’s campaign for free school +meals which so far has seen Sadiq Khan +announce free hot meals for all primary pupils, +and the Express’s campaign calling for the +Government to invest more in radiotherapy +and increase services for cancer patients. +Meanwhile, the Manchester Evening News’ +award-winning Awaab’s Law campaign has +made its way through Parliament and will +change many people’s lives for the better. +And while it’s always an honour to watch +everyday heroes at the Mirror’s Pride of Britain +Awards, in 2023 it was particularly inspiring to +see members of the Windrush generation be +recognised for their outstanding contribution +to British life since the first passengers on that +vessel arrived 75 years ago. +These highlights all wield the power and +impact they do precisely because of our wide +reach, with our scale and editorial purpose +working hand in hand. Despite the challenges +of the business environment, Reach remains +the largest publisher in the UK and Ireland, and +continues to command the sixth largest digital +audience of any UK business, reaching 36m +adults digitally every month which is 72% of the +online population. Our transformation actions +in 2023 will ensure the continuation of our core +purpose into 2024 and beyond. +Enhancing resilience and efficiency +Our print business continues to generate strong +returns, despite the falling demand across the +sector. Our experienced circulation teams +use decades of data to expertly inform our +approach to price increases and availability, +both of which are critical to underpinning +sales volumes. We maintain a track record of +effective cost management and are constantly +reviewing and making changes to our supply +chain, optimising distribution and right-sizing +our property footprint. +Across the business, we successfully +delivered a 5.7% reduction in operating +costs (on a like-for-like basis), against the +5-6% reduction we targeted at the start of +the year. As announced in November 2023, to +set ourselves up for success in 2024 we have +committed to and already started to deliver +a further 5-6% reduction in our operating cost +base. In the wider industry context, with many +organisations now making similar decisions to +those we took in late 2023, we believe our early +action demonstrates responsible foresight +and planning. +As labour represents our single largest cost, +there is no getting away from the fact that +we have had to reduce the size of our teams +to save cost and re-shape for the future. +I do not underestimate the impact of these +decisions on all of our people. With that +in mind I committed to working through +them with fairness and integrity, and to +communicating openly throughout. During +this period, I led a programme of small group +discussions and town hall meetings with +Manchester Evening News reporter delivers the Awaab’s Law petition +to Downing Street alongside Awaab’s father and campaigners +Chief Executive’s review continued +13 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information13Reach plc Annual Report 2023 13Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_16.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_16.txt new file mode 100644 index 0000000000000000000000000000000000000000..1171535ef86e682386d1cb73e8c17571b78bb839 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_16.txt @@ -0,0 +1,121 @@ +leaders and colleagues, to share updates, +provide important context about the need for +change, and facilitate open dialogue. Honest +colleague communication remains something +that I’m passionate about and committed to +investing time into, all year round. +Our emphasis on efficiency goes beyond +traditional cost-cutting measures as we +must also organise our ways of working to put +ourselves in the best position to achieve our +strategic aims and accelerate our journey to +being a digital-first content organisation. As +part of this work we created the Reach Studio +team, which pools all of our video and audio +talent in one super team that will provide +multimedia content for both editorial +audiences and commercial partners, +maximising the value for both. +Progressing our strategic priorities +During volatile times it is all the more +important to pursue a strategy that gives us +greater long-term stability and control over +our business. +Over the year, our Customer Value Strategy +(CVS) continued to progress on key metrics. +Against falling referral traffic, we continued +to grow our yield or RPM (+11% from 2022), an +increasingly important metric as we focus +on controlling digital revenue. +We also see that as a result of our CVS +progress, the return on data-driven advertising +is currently 10 times more valuable than +volume-related programmatic advertising +returns. These figures demonstrate that +whatever market trends may come, we are +able to consistently adapt to optimise the +value of our content, data and audience. +Our commercial activity continues to be led +by data, while focusing on direct customer +relationships and more diversified revenues +that support higher-quality digital earnings. +These efforts are reflected in our mix, which +is now made up of 43% of digital revenues +generated by data-driven, higher value and +better performing advertising, a trend which +will continue. +Part of the strategy has been to strengthen +and expand our audience base with key +demographics and into valuable regions. +In 2023 we successfully launched three ‘.com’ +websites from a new US operation, which by +the end of the year were regularly attracting +an audience of a million a day. +Additionally, we have worked to secure our +audience, which will make us less vulnerable +to changing tech platform algorithms and +better able to directly engage with our millions +of customers and drive them to our content. +There have been several initiatives on this +front, including an award-winning project to +reach people via WhatsApp Communities and +Channels, through which we reach more than +1.65m people directly as of February 2024. +One early standout in this area is our Arsenal +channel which sends multiple stories a day +directly to over 600k people, making it the +biggest Arsenal channel in the world. Through +work like this we are able to speak to our +audiences on our own terms and ensure +that our great content reaches them. +Our tech and commercial teams have played +a key role in supporting our discoverability +challenge, further developing in-house +recommender tools powered by AI that +point readers to content we know they’ll be +interested in. One of these tools alone has +reduced customer bounce rate by over 10% +and generated 2bn page views through the +year. Our in-house first-party data capabilities, +in particular our proprietary Mantis tool, will +stand us in good stead as Google continues +to phase out third-party cookies, a process we +have now seen beginning in 2024. This will be a +major shift in the landscape for publishers and +advertisers, who for years have depended on +third-party data to target their advertising. +We will be significantly ahead of the curve on +this front, with 12.3m registered customers, of +which approximately 4m are active over each +four-week period, and advanced capability +to effectively place advertising using +contextual targeting. +43% +of digital revenues now data-driven +We have further strengthened our position +by growing our revenue streams outside +traditional advertising revenue, with +important work being done with affiliates +and ecommerce. It’s great to see the +continued success of the OK! Beauty Box, +which we launched in late 2020 as one of +our first Customer Value Strategy initiatives, +and now has c.12k paying subscribers. +Our goal with this work is not to replace our +business model but to continuously evolve, +strengthen and broaden it, and to give our +audiences more choice about how they +engage with our content. +“As a result of our +Customer Value +Strategy progress, the +return on data-driven +advertising is currently +over 10 times more +valuable than +volume-related +programmatic +advertising returns.” +Chief Executive’s review continued +14 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_17.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_17.txt new file mode 100644 index 0000000000000000000000000000000000000000..e00a9b0cff7f3452e21aba4dfe8df78f9c6d2d92 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_17.txt @@ -0,0 +1,126 @@ +Resolving long-term uncertainties +For several years now, the leadership team +and I have been working to resolve a number +of long-standing hurdles facing this business. +Over the past months I am proud to say we +have made real headway in clearing these. +Ahead of 2023 we took the decision to go to +trial to achieve greater certainty around the +future impact of long-standing historical +legal issues. The judgment we received in +December set out very clear parameters on +time limitation which enables us to draw a line +under these issues. Simply, this means we now +have a much clearer view on the estimated +cost of resolving these long-standing issues +and, crucially, these costs are expected to be +materially lower than our previous estimates. +Over the last four years we had not been +able to come to an agreement with the +MGN Pension Trustees on the 2019 triennial +valuation. I cannot overstate the importance +of having successfully concluded both the +2019 and 2022 triennial pension reviews for +the MGN pension scheme. Agreement with +our other schemes is also expected to be +completed by the 31 March 2024 due date. This +provides much needed clarity on the scale of +our funding obligations, which are scheduled +to materially step down in early 2028. +These developments will both benefit the +wider business and enable better planning +for our future. Thank you to all the teams who +have been involved in bringing these matters +to a close. +Exploring AI as a tool +At the start of 2023 the conversation around +how businesses and media organisations +use AI was only beginning to take shape. Our +editorial leaders created a cross-functional +workstream to manage this complex issue, +exploring the many opportunities while also +gaining a firmer understanding of the risks. +Their primary focus has been to test tools that +help journalists to tell their stories more quickly +and effectively. As a result of this work, the +team has identified several areas with +strong potential, such as spotting trends +and analysing large volumes of data. +We have steadily increased our use of AI +through the year, while carefully controlling its +roll-out, and by the end of 2023 over a dozen +newsrooms were set up to use an AI tool to +support their work. As we continue to test AI’s +potential, we ensure that every story is edited +and approved by a journalist, maintaining our +commitment to responsible journalism. + +Fighting our case +I have also been putting our case to political +decision-makers, ensuring that those in power +and in opposition understand the issues facing +Reach and the entire media industry. The stakes +are high and I have had many encouraging +discussions this year on the crucial questions +that will decide the future of journalism in this +country, such as: how can tech platforms work +fairly with the media to support a free press +and functioning democracy? +2023 marked my last year as chair of the NMA +(News Media Association), but I will continue +to discuss these vital issues in 2024 with our +legislators, particularly as we watch the Digital +Markets Bill progress through Parliament. +Looking after our people and +our future +All of this progress is made possible by our +talented and passionate colleagues in all +departments. We have made many necessary +changes to our teams this year but I remain +committed to retaining and developing the +great people who are shaping the future of +this business. +Developing our teams is just one pillar of our +formalised responsible business framework, +now one year in (read more on this on page +40). We continue to prioritise becoming a +more inclusive organisation, and in 2023 +were once again recognised by Inclusive +Companies with our highest ranking yet and +testament to the dedication of many people +here. We’re also working to protect all our +futures through our environmental efforts, +which continued to progress this year as we +implemented the systems and gathered the +data that will inform our path to net zero. +Looking ahead +2023 was a critical moment for this business, +allowing us to put several significant issues +in the past and to focus instead on looking +forward, and I am confident that we are +now well positioned to take on the future. +As always, there are challenges ahead. +The macro environment is unlikely to provide +much relief over the near term and we are +working to secure our audience and build +our data-driven digital business. This will be +achieved through small incremental gains +and by continuing to build direct relationships +with our audiences. +Our industry has a history of change and the +future will undoubtedly see yet more. That’s +why it’s essential we set ourselves up to +win by making our operations suited to +an increasingly fast-paced, competitive +and digital world. +Jim Mullen +Chief Executive Officer +5 March 2024 +“We now have a much clearer view on the estimated +cost of resolving these long-standing issues and, +crucially, these costs are expected to be materially +lower than our previous estimates.” +Chief Executive’s review continued +15 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #3 is a "bowl". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_18.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_18.txt new file mode 100644 index 0000000000000000000000000000000000000000..747bfd2029570f1ba7bbc0e675cea958929e5bb9 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_18.txt @@ -0,0 +1,82 @@ +DELIVERING VALUE +Our business model +We are transforming how we deliver value to our stakeholders, evolving and growing a digitally-focused business while +maintaining our strong foundations in print. This transition is underpinned by the strength of our talented people and our +iconic brands, united and guided by our purpose and focused on providing the content that attracts the largest audience +of any commercial news publisher in the UK and Ireland. +Our people +The talent and commitment of our employees +are central to our success as we transform and +become more digitally-oriented. We’re building +a workplace where our people are empowered +to deliver excellence and facilitate change, while +enjoying balance in their lives. +Our audience +We have the largest audience of any commercial +news publisher in the UK and Ireland. Every month, +47m people come to us, in print and online, across +our national and local titles, for news, entertainment +and sport they can trust. We are a proudly +mainstream publisher, reaching 72% of the UK’s +online population, and now bring that approach +to our US-based sites. +Our technology +Vital to our transformation is investment in data and +technology, which helps us better understand our +customers and drive digital revenue. Our in-house +adtech tool Mantis enables us to capture consented +customer data to improve our content and provide +targeted advertising for the brands we work with. +Our infrastructure +Our newspapers are produced at our three +printing sites and, with the help of our distribution +partners, reach all corners of the UK and Ireland. +Our newsrooms, local and national, are +increasingly integrated, and strategically share +data, content and expertise. Reach operates a +range of larger office hubs as well as smaller +workplaces throughout the country, serving a +now well-established hybrid working model. +Our brands +We are home to over 120 titles in the UK and Ireland. +Our portfolio is unique, including iconic national +titles such as the Mirror, Express, Daily Star and Daily +Record, and local ones which sit at the heart of their +communities, such as the Manchester Evening +News, Liverpool Echo and MyLondon. While our +titles share key central services, they each have +a strong identity, together reaching a broad +demographic across the political spectrum. +Our news coverage is award-winning, with our +titles reflecting the diverse interests and political +leanings of our audiences. We aim to inform and +explain, as well as lending a voice to the causes +that matter to the communities we represent. +While our news coverage is often serious, some +of our titles excel in finding the funny side of the +day’s biggest stories. +We cover a range of sport, from English Premier +League to Scottish football, to Welsh Rugby, +Formula 1 and our industry-leading coverage of +the Cheltenham Festival. Meanwhile our local titles +remain the ‘go to’ sources of information for local +sports fans supporting a range of levels, whether +the Liverpool Echo for LFC or Hull Live for Hull City FC. +We are proudly mainstream, which is key to our +broad appeal and widespread audience. From +celebrities to science, TV to travel and beauty to +bingo, our brands cover a huge number of topics. +Providing content for a wide range of interests +has helped us become part of our customers’ +daily lives. +Entertainment +Sport +Enabled by our assets Focused on contentDriven by +our purpose +through brilliant +journalism. +News +Read more about our purpose +on page 2. +16 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_19.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_19.txt new file mode 100644 index 0000000000000000000000000000000000000000..7c39fd74e80d303965ecdef9db83598ad31629de --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_19.txt @@ -0,0 +1,102 @@ +Delivering stakeholder valueOur transformational operating model +Long-term revenue driver +Reinvestment to fund growth +Print +Market dynamic +We sell hundreds of thousands of copies +daily. While volumes are in decline, cover +price rises alongside loyal demand +support significant print cash flows. +Demographics +The average age of a print customer is +52 and this older demographic have a +high degree of loyalty and are of high +value to advertisers. +How we generate revenue +Newspaper sales account for +approximately 71% of our print revenue. +We also generate revenue from +advertising and printing for third parties. +Digital +Market dynamic +Large tech platforms continue to shape +the market – a key driver of our data- +led approach. +Demographics +We develop our evolving audience base +by evolving our formats and building +niche ‘fan’ communities across sport +and entertainment content. +How we generate revenue +Advertising-led, sold directly by our sales +teams or programmatically via auction +platforms. Increasingly our advertising is +supported by data, resulting in higher +yields, and we have also increased our +non-advertising mix with affiliates +and ecommerce. +Our brands and products +National +Our portfolio has a strong heritage. +The Mirror and Express have been a key +part of British culture and society for over +120 years. +Local +What makes us different is our unique +combination of national and local titles, +such as the Manchester Evening News +and Newcastle Chronicle, which lie at +the heart of their communities. +Magazines +OK! and New focus on celebrity news, +pop culture, fashion and real-life reader +stories. We also produce the Sunday +supplement magazines Notebook +and S Magazine. +Foundation revenue driver +More engaging +experience +More customer +data +More targeting +capabilities +More effective +advertising +More relevant +content +Increasing +yield +Increasing +volume Underpinned by data +Our people By setting the business up for a sustainable future +we’re able to invest in the teams we need for long- +term growth, and in fostering an inclusive culture. +Customers Delivering our digital strategy enables us to provide +increasingly engaging and relevant content that +maintains and builds audiences. +Communities We’re committed to contributing positively to the +diverse communities we serve, discussing issues +and supporting causes that matter to them. +Advertisers Building a deeper understanding of our customers +enables us to help advertisers deliver more targeted +campaigns that reach the right audiences. +Suppliers +and partners +Our supply chain includes distributors, retailers and +newsprint suppliers. We work closely with all to ensure +fair economics. +Shareholders Working in the interest of our shareholders and other +stakeholders by removing long-term uncertainties +and providing balanced and clear communications +for investors that set out our prospects for growth. +Pension funds Delivering our strategy and maximising business +performance demonstrate that Reach is being +managed responsibly and sustainably. +Government +and regulators +A vibrant news sector is key to a functioning +democracy. Our transition to digital is a key part +of the sector’s future, as is the right regulation. +Our business model continued +17 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_2.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_2.txt new file mode 100644 index 0000000000000000000000000000000000000000..24c2fc22cfb2e89961c55b78cbc475377dc99055 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_2.txt @@ -0,0 +1,71 @@ +CONTENTS +Disclaimer +This Annual Report is sent to shareholders who have elected to receive a hard copy and is available on our website www.reachplc.com for those shareholders who have elected to receive a copy +electronically. In this document, references to ‘the Group’, ‘the Company’, ‘we’ or ‘our’ are to Reach plc and its subsidiaries. A reference to a year expressed as 2023 is to the 53 weeks ended 31 December +2023 and a reference to a year expressed as 2022 is to the 52 weeks ended 25 December 2022. Where we reference ‘like-for-like’, we are comparing a 52 week period. References to ‘the year’ and ‘the +current year’ are to 2023 and references to ‘last year’ and ‘the prior year’ are to 2022. The Annual Report contains forward-looking statements. By their nature, forward-looking statements involve a number +of risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to +differ materially from those expressed in or implied by the forward looking statements. No assurance can be given that the forward-looking statements will be realised. Statements about the directors’ +expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors +which are in some cases outside the Company’s control. The Annual Report has been prepared on the basis of the knowledge and information available to directors at the date of its preparation and +the Company does not undertake any obligation to update or revise the information during the financial year ahead. It is believed that the expectations set out in these forward-looking statements are +reasonable, but they may be affected by a wide range of variables which could cause actual results or trends to differ materially. The forward-looking statements should be read in the context of the +principal risk factors set out in the Strategic Report. +Strategic Report +2 Our purpose +3 Reach in numbers +4 Chairman’s statement +6 A powerful portfolio +7 Developing our audience +8 A resilient business +9 Diversifying our revenue +10 A proactive approach +11 Focusing on efficiency +12 Chief Executive’s review +16 Our business model +18 Our strategy +20 Key performance indicators +22 Financial review +30 Responsible business overview +32 Creating trusted, quality content +36 Operating with integrity +40 Developing our team +46 Protecting our environment +54 Task Force on Climate-related Financial +Disclosures (TCFD) +65 Non-financial and sustainability +information statement +66 Risk report +73 2023 Viability statement +Governance +74 Chairman’s statement +76 Our Board +79 Board in action +85 Section 172 statement +88 Nomination Committee Report +94 Sustainability Committee Report +96 Audit & Risk Committee Report +104 Remuneration Report +127 Compliance with the 2018 UK Corporate +Governance Code +131 Directors’ Report +Financial Statements +136 Independent auditors’ report +145 Consolidated income statement +146 Consolidated statement of +comprehensive income +146 Consolidated statement of +changes in equity +147 Consolidated cash flow statement +148 Consolidated balance sheet +149 Notes to the consolidated financial +statements +188 Parent company balance sheet +189 Parent company statement of +changes in equity +190 Notes to the parent company +financial statements +Other Information +205 2023 SASB index +207 Shareholder information +209 Group five-year summary \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_20.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_20.txt new file mode 100644 index 0000000000000000000000000000000000000000..5ca7b3220624c9adbbe98f6d397bc50d99ac4073 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_20.txt @@ -0,0 +1,74 @@ +Driving revenue growth +A STRATEGY FIT FOR THE FUTURE +Our strategy +Our strategy is to get to know our customers better, drawing on behavioural insights to create +a virtuous circle of value that delivers more relevant content, a more engaging experience and +greater loyalty. This all drives sustainable, data-led revenue for our business as we continue to +strengthen our digital position. +In summary +We’re constantly working towards making Reach +a more data-led, digitally-focused business. +The enduring appeal of our print titles supports +the investment we need to make in our digital +infrastructure and platforms, and in ensuring we +have a diverse range of talent in our teams. These +investments enable us to deliver a strategy focused +on our customers – a Customer Value Strategy, +or ‘CVS’ – which enables our brands to continue +pursuing our purpose in an increasingly online world. +Why data matters +The success of our CVS relies on us forming a new +kind of relationship with the people who come to us +for news, entertainment and sport – our ‘customers’. +As a largely ad-funded model, page views are our +digital currency. And while customers do not pay +directly for their content, they give us their time and +attention which we measure most simply via these +page views. With the CVS, a further exchange occurs +– in return for more relevant content, our customers +share data about themselves. This could be declared +or personal data such as their email address or +postcode, or it could be behavioural or contextual +data based on the type of content they consume. +The more our customers engage, the more +we learn about their preferences, enabling us to +further enhance and personalise their experience. +The more we understand the behaviour of our +customers, the more valuable their profiles +become, which enables advertisers to more +accurately target their own customers through us. +A critical mass +With data the key to unlocking customer value, an +initial objective of our strategy was to encourage +more customers to register with us. We achieved +our original 2022 target of 10m registered customers +that same year, and now have over 12m, or about a +third of our UK digital audience. +We’re now focused on forging deeper engagement, +understanding each customer better, and delivering +content that encourages them to visit us more +frequently and for longer, making us part of their +daily lives. +For more on how we’re measuring strategic +progress, see our KPIs on page 20. +Building a +culture where +people thrive +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +loyalty +Greater More +relevant content +Moreengaging experience +STRATEGIC OBJECTIVES +18 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #5 is a "squirrel". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_21.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_21.txt new file mode 100644 index 0000000000000000000000000000000000000000..1e2f947975b366ab912d8b89583e4d0fb239a8fb --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_21.txt @@ -0,0 +1,43 @@ +Developing +a data-led +proposition +Growing +through +audience +engagement +Delivering +the stories +that matter +Our strategy continued +Launched in +August 2023 +Launched in +February 2023 +Launched in +June 2023 +• Continued to deliver stories that embody our purpose such as M.E.N.’s +award-winning campaigning for Awaab’s Law and the Sunday Mail’s +exclusive reporting on the SNP scandal +• Created a new, centralised Studio team which brings together all of our +video and audio talent to produce content for our editorial brands and +commercial partners +• Developed the Belonging Project which ensures the Mirror and regional +newsrooms are producing more inclusive content for the communities +they serve +• Strengthened our AI-powered contextual targeting capabilities with our +in-house ad tech Mantis. Now set up to license to other publishers in 2024 as +a B2B revenue stream – particularly relevant against backdrop of ongoing +third-party cookies deprecation +• Generated 10 times more value from our data-driven advertising versus +volume-related programmatic advertising +• Further developed our in-house recommender tools, powered by AI, that +point readers to content we know they’ll be interested in +• Successfully launched three new ‘.com’ websites from a new US operation +• Establishing and growing secure audience channels – for example via our +award-winning WhatsApp Communities and Channels work which now +allows us to contact over 1m subscribers direct to their phones +• Continued progress reaching the youth audience, with rapidly growing TikTok +follower numbers across key brands +STRATEGY IN ACTION IN 2023 +19 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_22.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_22.txt new file mode 100644 index 0000000000000000000000000000000000000000..b1860b193eb4af896c56bb477ddd0c914e28209c --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_22.txt @@ -0,0 +1,102 @@ +17.0 +17.6 +23.7 +22.3 +21.8 +2019 2020 2021 2022 2023 +HOW WE PERFORMED +Target: Year-on-year growth in digital revenue. +Why it matters to us: Growth in digital revenue +is key to demonstrating progress against our +strategy, as we become a more data-led, digital +business. Our digital revenue is predominantly +driven by advertising. The advertising revenues +have been depressed from the macroeconomic +environment and the reduction in referral traffic +from the major platforms. We are making the +business more resilient by diversifying our mix of +digital revenue and securing our digital audience, +so that the performance is more sustainable over +the long term. +Target: Improving year-on-year percentage +decline rate. +Why it matters to us: Although sales of physical +news publications are in structural decline, print still +generates over three-quarters of our total revenue. +With over 250m copies sold a year, sales from +circulation remain a resilient source of revenue, +with cover price increases helping to offset the +impact of people buying printed titles less often. +Print revenue continues to drive the strong cash +flows which supports our digital transformation. +Target: Continue to grow operating margin. +Why it matters to us: Operating margin is a +measure of our profitability, as we aim to grow +digital revenue and carefully manage print decline. +While the effects of the loss of referral traffic have +impacted revenue and profitability over the near +term, over the longer term we expect increasing +digital revenues and lower levels of required +investment in our strategy, relative to its earlier years, +to support a structurally higher operating margin. +Digital revenue growth (£m) +(15.0)% +(2022: +1.0%) +Print revenue decline (£m) +(2.2)% +(2022: (3.5)%) +Adjusted operating margin (%) +(0.6)PP +(2022: (6.1)PP) +Financial KPIs +For our strategy and our business to succeed, we need to maximise growth in digital revenue and optimise our print revenue despite +the structural decline in print. The combination of declining open market yields alongside the industry-wide decline in referral traffic +meant that digital revenue declined 15%. Print has continued to be resilient, declining 2% and driven by a strong performance in +circulation revenue. In aggregate, revenue declined 5% and operating costs declined by a similar amount, driven by our efficiency +programme and some unwinding of print inflation. This meant we delivered a stable operating margin of 17%. Operating cash flow +is broadly the same as last year, reflecting the similar levels of profitability and more efficient working capital management. +Key performance indicators +127.4 +149.8 +148.3 +118.3 +107.0 +2019 2020 2021 2022 2023 +438.8 +448.6 +465.1 +479.3 +591.3 +2019 2020 2021 2022 2023 +Target: Maintain operating cash flow to meet our +financial obligations including the pension funding, +historical legal issues, returns to investors and +reinvestment into the business. +Why it matters to us: Operating cash flow supports +our commitments to ongoing pension funding and +payments on historical legal issues, as well as +investment in our strategy and returns to shareholders. +The business is strongly cash generative – due to +the resilience of our print business and efficient +operating model, which has cost management +at its core. Adjusted operating cash flow reported +above has been aligned with the definition of +adjusted operating profit to exclude the cash flow +impact of restructuring payments and other items +classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating +cash flow. Previously reported numbers include +2019 £133.1m, 2020 £121.8m, 2021 £141.3m and +2022 £64.8m. +Adjusted operating cash flow (£m) +£91.9M +(2022: £92.1M) +91.9 +92.1 +173.9 +154.6 +161.1 +2019 2020 2021 2022 2023 +20 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret clothing is a "sock". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_23.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_23.txt new file mode 100644 index 0000000000000000000000000000000000000000..edfa8942e81d7a01dca169c8a16648b8aaa76558 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_23.txt @@ -0,0 +1,113 @@ +Target: 10.0m end of 2022. +Why it matters to us: A registered customer is +a customer who has provided their information +in order to receive a service. This includes email +addresses and phone numbers, which enable us +to build a relationship with more of our audience, +and help advertisers share more geographically +relevant ads. Knowing our customers is an important +part of the Customer Value Strategy and therefore, +it felt appropriate to have a non-financial measure +for customer registrations when we first defined +our strategy in 2020. During the course of 2023 the +referrals from major platforms adversely impacted +our page views and so we took the decision to +turn off the customer login which has reduced +customer registrations from the peak of 13.5m in +August to 12.3m in December. We have surpassed +our original target which was set at 10m for the end +of 2022 and given the current level of registrations +is now at critical mass, we will no longer be +reporting this as a key KPI within this report. +Target: Year-on-year growth. +Why it matters to us: Digital growth can come +from increased supply of advertising and/or an +increased traded price. Increasing supply for +example by increasing the number of ad units +is becoming more challenging due to the direct +impact and trade off with audience experience. It’s +important to examine and understand traded price +which is a key driver of our digital performance. +There are a few factors which drive more revenue +per thousand pages. Firstly we either have insights +into customer and customer behaviour, which can +then be used to offer opportunities to brands to +adopt better-targeted campaigns and customer +offers. Or we drive non-advertising revenues +which are not directly related to volume such as +partnerships, affiliates and ecommerce. Both of +these factors link directly to our Customer Value +Strategy and therefore we are focused on +understanding how RPM trends over time. The final +reason that this metric could move is changes in +page views, and therefore it is important that RPM +performance is considered alongside page views. +Ideally both of these KPIs would trend upwards +over time. +Total average UK page views per month +(m)1 +(21)% +(2022: 0%) +Customer registrations +(m) +12.3 +(2022: 12.5) +Revenue per 1,000 pages +(£) +£8.18 +(2022: £7.36) +Non-financial KPIs +As our strategy progresses, we are considering +evolving our KPIs. One of the key KPIs we are +tracking and considering regularly is RPM – revenue +per thousand pages. RPM is a yield measure and +gives the financial return from digital pages traded. +This has now been included as a strategic KPI and +is described below. Customer registrations were +critical to the Group’s success when the Customer +Value Strategy was relatively nascent. We have +now achieved a critical mass of registrations and +therefore this will be the last year we report on it +within the Annual Report. +1. The non-financial target relates to UK page views +which are more significant to revenue, whereas +worldwide page views are disclosed throughout +the Annual Report as an indicator of the total +reach of our content. +Key performance indicators continued +964 +1,217 +1,210 +1,234 +870 +2019 2020 2021 2022 2023 +8.18 +7.36 +7.55 +5.88 +7.02 +2019 2020 2021 2022 2023 +12.3 +12.5 +9.1 +5.0 +0.8 +2019 2020 2021 2022 2023 +Target: Year-on-year growth in total UK page views. +Why it matters to us: Page views are a strong +measure of whether customers like our content +online. As a customer views more pages, we get +to know more about them – and can collect more +valuable data. However, in 2023 we have seen +some major online platforms, most notably +Facebook, deprioritise news. This has massively +reduced the referral traffic to our site and impacted +page views by 24% globally. We are now focused +on securing our audiences to ensure a more direct +relationship, while also increasing the amount of +content our audience consumes. We’re doing this by +using data to give customers more of the content +they like to read, driving more interactions +and engagement. +21 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_24.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_24.txt new file mode 100644 index 0000000000000000000000000000000000000000..509c2d67294dc598c70949c710fe07aee412043b --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_24.txt @@ -0,0 +1,72 @@ +BUILDING LONG-TERM RESILIENCE +Financial review +Looking back over the year, we have made +demonstrable progress to ensure the business +is more resilient and able to continue its digital +transformation. During a year of macroeconomic +uncertainty and some significant shifts across +the media sector, we delivered a resilient +financial performance and made significant +progress in resolving the long-standing +uncertainties. +We concluded the 2019 triennial valuation, +along with the 2022 valuation, for the MGN +pension scheme, and have subsequently +reached agreement in principle with our other +schemes and are expected to be concluded +satisfactorily by the 31 March 2024 due date. +This provides a clear view of our future pension +commitments which will materially step down +from the current rate of £60.0m in 2028. +In December, the High Court’s judgment on +the Group’s historical legal issues (HLI) provided +clarity around time limitation. This has resulted +in a material reduction in the cost of settling +outstanding claims and should largely bring an +end to future claims. This has led to a £20.2m +year-on-year release in the HLI provision. We +expect the majority, if not all, of the issued +claims to be resolved during 2024 and 2025 +which is a much shorter time frame than +previously anticipated. Resolving these two +matters has reduced uncertainty and allows +us to plan more effectively for the long term. +The macroeconomic environment in 2023 +impacted advertising spend, and there was +a material step down in digital referral traffic +from major platforms such as Facebook, +which has deprioritised news content. This has +driven a 24% year-on-year decline in digital +page views, which alongside depressed open +market yields (year on year decline 25%), +adversely impacted digital revenue, which +declined by £22.4m or 15% to £127.4m in 2023. +Conversely, our data-driven revenues +performed robustly, only declining 4% year-on +year, to now represent 43% of digital revenues +(2022: 38%). To compensate for the industry +headwinds we took clear actions to continue +to diversify our digital revenues and trade +our digital assets harder. We prioritised areas +within our Customer Value Strategy which +are higher yielding and within our control. +As a result revenue per thousand pages +(RPM) across our digital estate increased +by 11%. These actions have resulted in +improved resilience, with areas of strong +growth including curated marketplaces, +ecommerce and affiliates. +Darren Fisher +Chief Financial Officer +Revenue +568.6M +5.4% decrease on 2022 +43% +of digital revenues +now data driven +5% increase on 2022 +Adjusted operating margin +17.0% +0.6pp decrease on 2022 +22 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_25.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_25.txt new file mode 100644 index 0000000000000000000000000000000000000000..133dbc426242b2162ebb23187454009d8e404e80 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_25.txt @@ -0,0 +1,75 @@ +Financial review continued +We continued to invest in our digital expansion. We launched our three US-based sites, invested +in Curiously, our social-first, video-focused brand, and invested in new products to develop our +curated marketplace capability. +The print business remained robust and delivered £438.8m (2022: £448.6m) of revenue, +representing just over 75% of the Group’s revenue with a strong performance in circulation and +print advertising. The teams have access to a significant amount of data which has built up over +many years and this is used to determine optimal levels of availability and cover price increases. +These dynamics have offset the volume decline with circulation revenue growing 1.6%. Print +advertising declined by £10.3m, or 11.9% year-on-year; this was a solid performance, +outperforming volume trends which were down 17% year-on-year. +Focus on efficiency +Through our cost action plan we continue to focus on efficiency, setting up our operations +to adapt and thrive in a fast-paced and competitive digital landscape. At the start of the year +we committed to reducing total operating costs by 5-6%, and on a 52 week like-for-like basis we +achieved a 5.7% reduction. Inflation moderated through the year following the material increase in +the cost of newsprint in 2022, some of which unwound in 2023. Overall newsprint costs reduced by +21%, mainly driven by the decline in production volumes. We have implemented restructuring and +efficiency programmes and as part of these, headcount has reduced by 14% over the year. Our +largest operating cost, labour, reduced by 5% year-on year. Together these actions have driven +higher levels of efficiency, protecting the strong operating margin of 17% and mean we are better +positioned for the long term. +Strong balance sheet +The Group has a robust balance sheet with a closing cash balance of £19.9m, and net debt of +£10.1m (inclusive of £0.9m restricted cash). The Group has £30.0m drawn down on its revolving +credit facility. The Group’s revolving credit facility of £120.0m is in place until November 2026. +Cash management remains a priority. Group cash conversion was strong at 95% supported +by efficient working capital management. Pension scheme contributions during the year were +£60.0m, HLI claim settlements totalled £4.6m and we incurred £18.8m of restructuring payments. +Together these non-operating cash outflows amount to £83.4m. +In December 2023 the Group completed a £605.4m capital reduction, converting the entirety +of the share premium account into distributable reserves, which will support the payment of +dividends into the future. This did not involve any return of capital or payment to shareholders. +Looking ahead +The strength of our print business underpins the cash generation and profitability of the Group. +We will continue to carefully balance cover price increases and availability to deliver a robust +circulation performance despite the falling demand for print. Print revenue funds the Group’s +financial commitments and enables investment as we continue to build our digital business. +This year we will continue to invest in product and new markets including the US and developing +the AI-powered Mantis ad tech. We will also increase our use of AI tools to support increased +productivity in the newsrooms, under the continued guidance of our journalists. +Across our digital business we continue to build a more sustainable higher-quality digital mix, with +43% of digital revenue now data-driven. The depressed open market yields, compounded by the +decline in page views, have reinforced the benefits of our data-driven Customer Value Strategy. +This strategy will continue to increase yields and grow data-driven revenues. +As communicated in 2023, we have already actioned a further programme of cost reduction +for 2024, which we are confident will support a 5-6% in-year reduction in our operating costs and +protect our operating margin. Savings have been generated throughout the business and include +further steps in creating a digitally-led editorial business, for example the creation of a single +video studio. +Summary income statement +Adjusted 2023 +£m +Adjusted 2022 +£m +YOY change +% +Statutory 2023 +£m +Statutory 2022 +£m +YOY change +% +Revenue 568.6 601.4 (5.4) 568.6 601.4 (5.4) +Costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Associates 2.9 2.8 3.6 1.4 1.4 0.0 +Operating profit 96.5 106.1 (9.0) 46.1 71.3 (35.3) +Finance costs (3.5) (2.8) (25.0) (9.4) (5.1) (84.3) +Profit before tax 93.0 103.3 (10.0) 36.7 66.2 (44.6) +Tax charge (24.6) (18.8) (30.9) (15.2) (13.9) (9.4) +Profit after tax 68.4 84.5 (19.1) 21.5 52.3 (58.9) +Earnings per share +– basic (p) 21.8 27.1 (19.6) 6.8 16.8 (59.5) +23 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_26.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_26.txt new file mode 100644 index 0000000000000000000000000000000000000000..414df8998f7facf975cbd5b098942140d17c0957 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_26.txt @@ -0,0 +1,56 @@ +Financial review continued +The results have been prepared for the 53 weeks ending 31 December 2023. The comparative +period has been prepared for the 52 week period ending 25 December 2022. The additional week +contributed £6.2m of revenue and £0.8m of operating profit. The impact of revenue and costs is +shown on a like-for-like basis in the table on page 26. +Group revenue fell by £32.8m or 5.4% to £568.6m with print down 2.2% and digital down 15.0%. +Adjusted costs decreased by £23.1m or 4.6% to £475.0m, partially offsetting the decline in revenue. +This was driven by the reduction in circulation volumes and a small unwinding of some of last year’s +newsprint cost inflation, alongside the ongoing cost reduction programme. Statutory costs were +lower by £7.6m or 1.4%, with the increase in operating adjusted items of £15.5m (£48.9m in 2023 +versus £33.4m in 2022) partially offsetting the reduction in operating costs. +Adjusted operating profit decreased by £9.6m or 9.0% to £96.5m, driven by the decline in revenue +partially offset by the savings in costs. The adjusted operating margin of 17.0% in 2023 compares +to 17.6% for 2022. Statutory operating profit decreased by £25.2m or 35.3% primarily due to the +increase in operating adjusted items which include restructuring charges in respect of cost +reduction measures and impairment of the finance lease receivable and recognition of onerous +costs following the sub-lessee of a vacant print site entering administration, partially offset with +the release of the provision for historical legal issues. +Adjusted earnings per share decreased by 5.3p or 19.6% to 21.8p. Statutory earnings per share +decreased by 10.0p to 6.8p, principally due to the decrease in operating profit. +Revenue +2023 +£m +2022 +£m +YOY change +% +Print 438.8 448.6 (2.2) +Circulation 312.5 307.7 1.6 +Advertising 76.6 86.9 (11.9) +Printing 20.2 23.1 (12.7) +Other 29.5 30.9 (4.5) +Digital 127.4 149.8 (15.0) +Other 2.4 3.0 (16.9) +Total revenue 568.6 601.4 (5.4) +Revenue declined overall by £32.8m or 5.4%. +Print revenue decreased by £9.8m or 2.2% (2022: down 3.5%). Circulation performance was strong +with revenue up 1.6% (2022: down 1.7%) driven by carefully considered cover price increases, which +were above recent historical levels, offsetting the ongoing decline in circulation volumes. +Print advertising revenue declined by £10.3m or 11.9% (2022: down 15.9%); but outperformed the +print volume decline of 17%. During the year the strongest performing sectors for print advertising +include food retail, travel, the government and entertainment and media, which is very similar to +the prior year. +Print revenue also includes external or third-party printing revenues and other print-related +revenues which decreased by £4.3m, or 8.0% (2022: increased 10.4%). These revenues are +largely contracted on a cost-plus basis, and reflect the external market demand for print. +Digital revenue decreased by 15.0% to £127.4m (2022: 1.0% increase). Revenue has been impacted +by lower advertising demand during a period of macroeconomic uncertainty alongside a +material reduction in page views. Major platforms including Facebook have deprioritised news +content over the year which in turn has driven a reduction in referral traffic for publishers across +the sector. These changes have adversely impacted our revenues which were directly impacted +by page view volume. Strategically driven or ‘data-led revenues’, which are more resilient and +higher yielding, performed robustly. Data-driven revenues were £55.3m, down 4.0%, and now +represent 43% of digital (2022: 38%). +24 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_27.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_27.txt new file mode 100644 index 0000000000000000000000000000000000000000..c5e58e8939da749380117ae228ad7800bc5eff87 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_27.txt @@ -0,0 +1,69 @@ +Financial review continued +Costs +2023 Adjusted +£m +2022 Adjusted +£m +YOY change +% +2023 Statutory +£m +2022 Statutory +£m +YOY change +% +Labour (223.0) (234.7) 5.0 (223.0) (234.7) 5.0 +Newsprint (59.5) (75.4) 21.1 (59.5) (75.4) 21.1 +Depreciation and +amortisation (21.6) (20.2) (7.0) (21.6) (20.2) (7.0) +Other (170.9) (167.8) (1.9) (219.8) (201.2) (9.2) +Total costs (475.0) (498.1) 4.6 (523.9) (531.5) 1.4 +Adjusted costs of £475.0m (2022: £498.1m) decreased by £23.1m or 4.6%. On a 52 week like-for-like +basis adjusted costs declined by 5.7%. Labour costs decreased 5% as we implemented our +restructuring and efficiency programme with headcount falling by 14% over the year. Newsprint +costs reduced from lower volumes, and an unwinding of some of last year’s newsprint cost inflation. +Statutory costs were lower by £7.6m or 1.4%, a less significant reduction due to higher operating +adjusted items which were £15.5m higher (£48.9m in 2023 compared to £33.4m in 2022). +Operating adjusted items included in statutory costs above related to the following: +Statutory 2023 +£m +Statutory 2022 +£m +Provision for historical legal issues 20.2 (11.0) +Restructuring charges in respect of cost reduction measures (26.9) (15.5) +(Impairment of sublease)/sublet of closed print plant (19.4) 16.6 +Other property-related costs (8.0) (4.6) +Pension administrative expenses and past service costs (5.5) (14.8) +Other items (9.3) (4.1) +Operating adjusted items in statutory costs (48.9) (33.4) +The Group has recorded a £20.2m decrease (2022: £11.0m increase) in the provision for historical +legal issues relating to the cost associated with dealing with and resolving civil claims in relation to +historical phone hacking and unlawful information gathering. This material reduction is driven by +the judgment handed down during December 2023 in respect of test claims. As a result of the +ruling, all claims issued after 31 October 2020 are now likely to be dismissed other than where +individuals can demonstrate specific exceptional circumstances, and therefore this has +significantly reduced the amounts that are expected to be paid out. +Restructuring charges of £26.9m (2022: £15.5m) principally relate to cost management actions +taken in the period. +Following the sublet of the vacant print site during 2022 which resulted in the reversal of an +impairment in right-of-use assets of £11.0m and previously onerous costs of the vacant site of +£5.6m, the sub-lessee entered into administration during 2023. As a result, the corresponding +£10.8m finance lease receivable has been impaired along with the subsequent recognition of +onerous costs of £8.6m of the vacant site during the period. +Other property-related costs comprise the impairment of vacant freehold property costs (£4.3m), +vacant freehold property-related costs (£1.4m) and onerous lease and related costs (£2.6m) less +the profit on sale of assets (£0.3m). In 2022, other property-related costs related to the impairment +of vacant freehold property (£4.2m) and plant and equipment (£0.8m) less the profit on sale of +impaired assets (£0.4m). +Pension costs of £5.5m (2022: £14.8m) comprise pension administrative expenses (2022: £4.2m). 2022 +also included £10.6m of past service costs relating to a Barber Window equalisation adjustment. +Other adjusted items comprise the Group’s legal fees in respect of historical legal issues (£5.3m), +adviser costs in relation to the triennial funding valuations (£2.5m), internal pension administrative +expenses (£0.6m), corporate simplification costs (£0.5m), and other restructuring-related project +costs (£0.7m) less a reduction in National Insurance costs relating to share awards (£0.3m). In +2022, other adjusted items comprise the Group’s legal fees in respect of historical legal issues +(£5.2m), adviser costs in relation to the triennial funding valuations (£1.6m), less a reduction in +National Insurance costs relating to share awards (£2.7m). +25 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret instrument is a "violin". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_28.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_28.txt new file mode 100644 index 0000000000000000000000000000000000000000..105cf3785a3b73da96be0530881ec5608e3eaca2 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_28.txt @@ -0,0 +1,73 @@ +Financial review continued +The Group excludes adjusted operating items and the pension finance charge from the adjusted +results. Adjusted items relate to costs or income that derive from events or transactions that fall +within the normal activities of the Group, but are excluded from the Group’s adjusted profit +measures, individually or, if of a similar type in aggregate, due to their size and/or nature in +order to better reflect management’s view of the performance of the Group. +Items are adjusted on the basis that they distort the underlying performance of the business +where they relate to material items that can recur (including impairment, restructuring and tax +rate changes) or relate to historical liabilities (including historical legal and contractual issues, +defined benefit pension schemes which are all closed to future accrual). +Other items may be included in adjusted items if they are not expected to recur in future years, +such as property rationalisation and items such as transaction and restructuring costs incurred +on acquisitions or the profit or loss on the sale of subsidiaries, associates or freehold buildings. +Management excludes these from the results that it uses to manage the business and on which +bonuses are based to reflect the underlying performance of the business and believes that the +adjusted results, presented alongside the statutory results, provide users with additional useful +information. Further details on the items excluded from the adjusted results are set out in note 35. +Like-for-like comparison +53 week +FY 2023 +YOY +% +LFL 52 week +FY 2023 +YOY +% +Digital (15.0) (15.2) +Print (2.2) (3.5) +Circulation 1.6 0.0 +Advertising (11.9) (13.0) +Group revenue (5.4) (6.5) +Adjusted operating costs YoY decline % (4.6) (5.7) +Adjusted operating profit bridge +£6m +£(13)m +£30m +£1m +£(33)m +£106m +£97m £(10)m +FY22 Revenue +mix +Inflation +& volume +Investment Efficiencies Other FY23 +Net cost saving of £23m +Adjusted operating profit of £96.5m was down £9.6m or 9.0% reflecting the decline in revenue +of £32.8m or 5.4%, mitigated by a £23.1m or 4.6% decrease in operating costs. This meant that +adjusted operating margin decreased by 0.6 percentage points from 17.6% in 2022 to 17.0% in 2023. +The net cost saving of £23m was driven mainly from efficiencies (£30m). Half of these efficiencies +related to labour costs which were lower following the cost reduction programmes with the +balance coming from the rationalisation of our property portfolio and other operational costs. +Investments were made into our US operations and youth brand, Curiously, alongside some +digital product development. +Reconciliation of statutory to adjusted results +Statutory results +£m +Operating adjusted +items +£m +Pension finance +charge +£m +Adjusted results +£m +Revenue 568.6 - - 568.6 +Operating profit 46.1 50.4 - 96.5 +Profit before tax 36.7 50.4 5.9 93.0 +Profit after tax 21.5 42.4 4.5 68.4 +Basic earnings per +share (p) 6.8 13.6 1.4 21.8 +26 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_29.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_29.txt new file mode 100644 index 0000000000000000000000000000000000000000..95510edf7519e39c0e066bd978def5cb943655be --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_29.txt @@ -0,0 +1,60 @@ +Financial review continued +The results have been prepared for the 53 weeks ending 31 December 2023 and the comparative +period has been prepared for the 52 week period ending 25 December 2022. The revenue and +costs have been adjusted to show the numbers on a like-for-like basis. The additional week added +£6.2m to revenue and £0.8m to operating profit. +Balance sheet and cash flows +Historical legal issues provision +The historical legal issues provision relates to the cost associated with dealing with and resolving +civil claims in relation to historical phone hacking and unlawful information gathering. Payments of +£4.6m have been made during the year and the provision has decreased by £20.2m, driven by the +judgment handed down on the test claims during December 2023. At the year end a provision of +£18.2m remains outstanding and this represents the current best estimate of the amount required +to resolve this historical matter. Further details relating to the nature of the liability, the calculation +basis and the expected timing of payments are set out in note 27. +Decrease in accounting pension deficit +The IAS 19 pension deficit (net of deferred tax) in respect of the Group’s defined benefit pension +schemes decreased by £36.8m from £113.9m to £77.1m at the year end. The decrease in the deficit +is due to the net aggregate of many factors, mostly notable changes in market conditions leading +to an increase in discount rate, returns on the schemes’ assets, Group contributions and the +easing of inflation. We concluded the 2019 triennial valuation, along with the 2022 valuation, for the +MGN pension scheme, and have subsequently reached agreement with our other schemes which +are expected to be completed by the 31 March 2024 due date. The Group now benefits from an +agreed position on future pension funding commitments. +During 2022, similar to the West Ferry scheme, the Trustees of the Express Newspapers Senior +Managers Pension Fund purchased a bulk annuity (at no cost to the Group) and the scheme +now has all pension liabilities covered by annuity policies. Group contributions in respect of the +remaining four defined benefit schemes in 2023 were £60.0m (2022: £55.1m). Contributions in +2024 are expected to be £60.9m under the current schedule of contributions for the four schemes. +Deferred consideration +Deferred consideration is attributable to the acquisition of Express & Star. The third and final +payment of £7.0m was made on 28 February 2023. There is no remaining liability in relation to +deferred consideration. +Profit to cash measure +This ratio is a measure of our effectiveness at working capital management. It is calculated as our +adjusted operating cash flow as a proportion of adjusted operating profit. +In order to calculate this measure, adjusted operating cash flow has been aligned to the definition +of adjusted operating profit. The change is largely driven by the exclusion of the cash flow impact +of restructuring payments and other items classified as adjusted items in the income statement. +This has resulted in an increase in adjusted operating cash flow in 2022 from £64.8m to £92.1m. +2023 +£m +2022 +£m +Adjusted operating profit 96.5 106.1 +Depreciation and amortisation 21.6 20.2 +Adjusted EBITDA 118.1 126.3 +Working capital movements (3.9) (12.3) +Lease payments (5.3) (6.7) +Capital expenditure (15.4) (13.3) +Other 1.3 0.9 +Associates (2.9) (2.8) +Adjusted operating cash flow 91.9 92.1 +Profit to cash ratio 95% 87% +During the year, adjusted operating profit was £96.5m (2022: £106.1m) and the adjusted operating +cash inflow was £91.9m (2022: £92.1m) with a profit to cash ratio of 95% reflecting ongoing cash +management. Working capital improved year-on-year, predominantly from excess newsprint +inventories which built up during the escalation of the war in Ukraine in 2022 partially unwinding +during 2023. +27 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_3.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_3.txt new file mode 100644 index 0000000000000000000000000000000000000000..2ab48a598ff68ed7cfd250fa8008749ce128daa5 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_3.txt @@ -0,0 +1,22 @@ +DEVELOPING +OUR AUDIENCE +Page 7 Page 9 +FOCUSING +ON EFFICIENCY +Page 11 +How we’re equipping ourselves for success in a +challenging and competitive market by managing +our cost base carefully and organising ourselves +to better serve a digital audience. +How we’re generating income beyond advertising +with new revenue streams such as ecommerce +and affiliates, while ensuring our printed +products continue to drive revenue. +How we have responded to a major shift in online +traffic trends by strengthening our secure +audience and deepening our relationship +with new demographics. +DIVERSIFYING +OUR REVENUE +1 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_30.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_30.txt new file mode 100644 index 0000000000000000000000000000000000000000..062fed2b60306af2e8e000aee8a2a66d9715b84f --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_30.txt @@ -0,0 +1,50 @@ +Cash balances +Net debt at the year end is £10.1m (inclusive of £0.9m restricted cash), from a net cash position of +£25.4m at the end of 2022. The Group has £30.0m drawn down on its revolving credit facility, with +the overall total cash position of £19.9m at the year end. The Group has a revolving credit facility +of £120.0m, which expires during November 2026. +Cash generated from operations on a statutory basis was £76.4m (2022: £80.1m). The Group +presents an adjusted cash flow which reconciles the adjusted operating profit to the net change +in cash and cash equivalents, which is set out in note 36. A reconciliation between the statutory +and the adjusted cash flow is set out in note 37. The adjusted operating cash flow was £91.9m +(2022: £92.1m). +Dividends +The Board proposes a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence). The final +dividend, which is subject to approval by shareholders at the Annual General Meeting on 2 May +2024, will be paid on 31 May 2024 to shareholders on the register at 10 May 2024. +An interim dividend for 2023 of 2.88 pence per share was paid on 22 September 2023 (2022: 2.88 +pence per share). +In proposing a final dividend of 4.46 pence per share for 2023 (2022: 4.46 pence per share), the +Board has considered all investment requirements and its funding commitments to the defined +benefit pension schemes. +Financial review continued +Uses for cash +The table below shows how the Group is using the cash generated from operations to meet its +financial obligations. Adjusted cash generated from operations is adjusted operating cash flow +excluding the impact of net lease payments and capital expenditure. +2023 +£m +2022 +£m +Adjusted cash generated from operations 112.6 112.1 +Pension payments (60.0) (55.1) +Historical legal issues (4.6) (9.0) +Restructuring (18.8) (13.8) +Capital expenditure (15.4) (13.3) +Final payment on acquisition (7.0) (17.1) +Other (19.2) (21.2) +Cash flow before returns to shareholders (12.4) (17.4) +Dividends paid (23.1) (22.9) +Cash flow after returns to shareholders (35.5) (40.3) +Net (debt)/cash (10.1) 25.4 +Material uses for cash include pension contributions totalling £60.0m (2022: £55.1m) and restructuring +payments of £18.8m (2022: £13.8m) which mainly relate to cost reduction programmes implemented +at the start of the year. The final payment on acquisition of £7.0m (2022: £17.1m) relates to the +Express & Star. Other comprises professional fees in respect of historical legal issues and triennial +funding valuations of £7.8m (2022: £6.8m), net lease payments of £5.3m (2022: £6.7m), interest +paid on borrowings of £3.1m (2022: £1.9m) and other movements which account for the balance +of cash flows. +The Group paid a dividend in the period of £23.1m (2022: £22.9m). +28 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret transportation is a "bike". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_31.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_31.txt new file mode 100644 index 0000000000000000000000000000000000000000..ec03acbc149e2ef2eb7bc5a6df03550fb0a2cd5c --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_31.txt @@ -0,0 +1,22 @@ +Current trading and outlook +We remain focused on delivering our Customer Value Strategy and the areas within our control, +building a more resilient growing digital business and delivering efficiencies. The sector-wide +decline in referral traffic will impact Q1 2024. We expect growing momentum across our digital +business thereafter. As previously announced we have made our operations better suited for +a digital world and are on track to deliver a 5-6% reduction in full-year operating costs in 2024. +Our financial priorities remain profitability and cash. Next year we expect working capital +requirements excluding provisions to be broadly neutral, and a small step down in our capital +expenditure. We have started the process to sell a number of our freehold properties which +will support cash generation. Our financial commitments for the year ahead are similar to 2023, +including the pensions contributions which will be broadly unchanged; we expect an acceleration +in the resolution of existing HLI claims and a further £13m restructuring outflow relating to +severance payments for the recent change programme. +Trading performance across the first two months of 2024 has been robust, with print advertising +and digital performing well. We are on track with our full year outlook, but continue to operate in +an uncertain macroeconomic environment. +Darren Fisher +Chief Financial Officer +5 March 2024 +Financial review continued +29 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_32.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_32.txt new file mode 100644 index 0000000000000000000000000000000000000000..f26d205e0a65356bad5c50872f181d6a49fd0624 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_32.txt @@ -0,0 +1,63 @@ +We aim to act with integrity at all times – not just +because we have a responsibility to stakeholders, +whose lives we affect through our operations and +journalism, but because it’s simply the right thing to do. +In 2023, we built on the progress we made in 2022, +when we introduced a new formal framework to guide +our approach to responsibility and sustainability, +by identifying disclosure gaps and enhancing our +reporting. In particular we focused on progressing our +environmental reporting in 2023, as we implemented +the systems and gathered the data that will guide us +on our path to net zero. +A RESPONSIBLE, +SUSTAINABLE BUSINESS +Responsible business overview +Our responsible business framework +CREATING TRUSTED, QUALITY CONTENT +PROTECTING THE ENVIRONMENT +OPERATING WITH INTEGRITY +• sustainability +governance +and management; +• privacy and security; +• political considerations; +• the supply chain (shared); +• human rights; +• labour rights; and +• health and safety. +See page 36. +• maintaining independent +journalism, campaigning +and the role of a free +press in society; +• product stewardship; +• fair and ethical conduct; +• innovation; and +• making a wider +economic contribution. +See page 32. +• GHG emissions; +• energy and climate change; +• waste; +• biodiversity; +• other emissions, effluents +and pollution; +• water; +• the supply chain; and +• speaking up for +environmental issues in +our editorial content. +See page 46. +• supporting diversity +and inclusion; +• attracting, developing +and retaining talent; and +• supporting a positive +culture and wellbeing. +See page 40.DEVELOPING OUR TEAM +Our responsibilities… +In 2023 we installed 9,000m2 of solar panels at our +owned print sites in Oldham, Watford and Glasgow +30 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information30Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_33.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_33.txt new file mode 100644 index 0000000000000000000000000000000000000000..8769a3d90308ea1f42e02505d4ea2da6efbba087 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_33.txt @@ -0,0 +1,102 @@ +OUR STAKEHOLDERS +Our business and brands touch the lives of: +Our people… who work from home and in our offices, in communities +and at print facilities – around the UK, Ireland and US; +Our customers… who give us their data and expect us to look after it, and +who also expect to see themselves represented in our +business, brands and journalism; +Our communities… whose voices we amplify and whose stories we share in +good times and bad; +Our advertisers and +media partners… +who expect our platforms to respect and promote their +messages in a way that’s safe and secure for their +own customers; +Our suppliers and +publishing partners… +many of whom are experiencing increased costs and +supply challenges; +Our shareholders… who are invested in the success of our business; +Pension funds and +their members… +who expect us to deliver on pension commitments and +treat them fairly; and +Government and +regulators… +who we work with to protect journalists and our brands +while setting out plans to bring tighter regulation to global +tech platforms. +Our section 172 statement can be found on pages 85 to 87. It sets out how the Board has, in +performing its duties over the course of the year, considered the matters set out in section 172 +of the Companies Act 2006, alongside examples of how each of our key stakeholders has +been considered and engaged. +We report against the Sustainability Accounting Standards Board (SASB) framework on +page 205. +Building on our responsible +business framework +To ensure that people find our strategy +credible and believe in our purpose, we must +act responsibly with the communities and +society we serve, our teams and the planet. +As a regulated news publisher in an era of +global tech platforms and ‘fake news’, the +responsibility is greater than ever. We must +continue to enlighten, empower and entertain +people everywhere through brilliant journalism +they can trust, and maintain a position +from which we can hold power to account. +Formalising our approach to +responsible business +In 2022, we carried out a detailed materiality +assessment and created a framework to +formalise our approach to being a responsible, +sustainable business – making it easier to +manage and measure our progress. It provided +a clearer articulation of our approach to +environmental, social and governance (ESG) +issues, ensuring it aligned with our purpose +and business strategy, as you’ll see over +the following pages. +This formal framework set out an approach +to responsible business that we had already +in many ways exemplified, for example by +upholding regulations and codes of conduct, +representing and campaigning on behalf of +those who need our voice, and producing our +printed newspapers with as low a carbon +footprint as possible. +In 2023, we built on the framework by +commissioning a gap analysis to define where +disclosure gaps exist against the methodologies +recommended by Sustainalytics, MSCI and +the Sustainability and Accounting Standards +Board (SASB). As a result, we have enhanced +reporting in many of these areas, though in +some – in particular those involving complex +editorial decisions – we agreed as a business +to maintain existing levels of disclosure. +We’re committed to continually challenging +and improving the standard of our reporting, +making sure we stay focused on the issues +that matter most to our stakeholders. +Overview of materiality +Our 2022 materiality assessment +included a review of current policies and +direct engagement with our key internal +and external stakeholders to establish +their priorities in relation to the long- +term sustainability of our business. +In 2023 our Sustainability Steering +Committee reviewed the material +issues within our responsible business +framework and concluded that they +reflect the current ESG challenges and +opportunities affecting Reach and our +stakeholders. We will keep the relevancy +and importance of these issues under +continuous review throughout the +coming year. +Responsible business overview continued +31 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #1 is a "clock". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_34.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_34.txt new file mode 100644 index 0000000000000000000000000000000000000000..97fc2f9dbe8a60cd660d3baa1212dbbeb7d32b2a --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_34.txt @@ -0,0 +1,30 @@ +Responsible business continued +Relevant UN SDGs +MyLondon crime reporter talking +to police about knife crime in shops +and restaurants around Croydon +We give a voice to others with our +trusted, quality content +Our titles connect people and communities +across the UK, Ireland, US and English-speaking +countries around the world. We have a +responsibility to our communities to deliver +accurate, independent journalism everybody +can trust and cover the issues that matter +most to them. +Whether it appears in print or online, our +journalism can give a voice to others, and +draw attention to, or amplify, the causes they +care for as we campaign, lobby and fight on +their behalf. At a time when misinformation +and disinformation threaten the credibility +of the industry, our commitment to creating +trusted, quality content as a regulated news +publisher ensures people and communities +have a news provider who will serve and +stand up for them. +CREATING TRUSTED, +QUALITY CONTENT +32 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret fruit is a "lemon". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_35.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_35.txt new file mode 100644 index 0000000000000000000000000000000000000000..560eee2f71e279b02871818d8a19ebbb66dcce20 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_35.txt @@ -0,0 +1,103 @@ +Responsible business continued +Creating trusted, quality content +Playing our part in +a changing industry +We’ve always been proud of the prominent +role our brands play in the vibrant and +energetic free press that underpins our +democracy – and understand the rights, +privileges and responsibilities it brings. +We’re committed to upholding the highest +ethical standards of journalistic practice. As +part of that commitment, we’re a member of +the Independent Press Standards Organisation +(IPSO): an independent regulator of most of +the UK’s newspapers and magazines. As we +say in our annual statement to IPSO: we have +‘no appetite for behaviours or decisions that +knowingly lead to the publication of inaccurate, +misleading or distorted information’. +In 2023, IPSO notified us of outcomes in respect +of 81 complaints, some of which were received +in previous years. These are as follows: 17 +complaints have been upheld by IPSO with +the requirement to publish a full adjudication +or correction; and 13 where the Committee +deemed that sufficient remedial action +(SRA) had been taken by the publication. +49 complaints were not upheld and 65 were +resolved during the referral period. This is a +significant improvement against outcomes +last year – 62% of complaints not being upheld +in 2023 compared with 48% for the same +period in 2022. +Legal and ethics standards +In 2023, our legal and editorial induction +programme became a mandatory part of the +onboarding process, ensuring all new editorial +colleagues receive training in legal and +editorial standards and ethics. +The training touches on all elements of media +law, with modules on IPSO and the Editors’ +Code as well as on Reach’s required editorial +standards. Monthly legal training has been +provided, with a specific focus this year on +refresher training for colleagues as well as +specialist sessions for our magazine teams. +Alongside the training programme, all editorial +employees are sent a monthly legal bulletin +highlighting issues and updates – readership +is mandatory and timely compliance is +monitored and logged. +Regulated by IPSO +While we believe in holding ourselves to high +standards, we’re also an active member of +IPSO, which acts as an independent regulator +across many UK titles and enforces the Editors’ +Code of Practice. +HOW WE ARE USING AI +Our editorial leaders formed a +cross-functional AI steering committee +in January 2023, focusing on productivity, +innovation and governance. The group +has worked together to accelerate AI +experimentation and boost productivity +gains with a primary focus on editorial +uses of generative AI. The main objective +of the group was to develop ways for AI +to support journalists in their daily work, +in combination with continued editorial +judgement and approval. We are rapidly +scaling the most promising AI applications +and in 2024 we will be looking beyond the +editorial teams to explore productivity +gains in other departments. +In 2023, 6,000 articles were written with +the support of AI tools, generating 50m +page views. Our editors notified readers +when we began using AI and made a +public commitment that every piece of +AI-supported content will continue to be +overseen and approved by a journalist. +“We’re committed to +upholding the highest +ethical standards of +journalistic practice.” +We submit an annual statement to IPSO that +sets out how we maintain editorial standards, +our record on editorial compliance during +the year, including any details of complaints +upheld against us and how we handle them, +and training programmes for our journalists. +We publish the statement on our website. +Editorial freedom +Reach is home to many brands that differ in +audience and political ideology but which are +all built on the principles of freedom of speech +and editorial independence. We welcome +lawful expression from different perspectives, +without exclusion. With no single title or +contributor representing Reach as a whole, +we are greater than the sum of our parts. +33 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_36.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_36.txt new file mode 100644 index 0000000000000000000000000000000000000000..6f0d7a91ec6522651629029fb915ae25d692bcfc --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_36.txt @@ -0,0 +1,68 @@ +Day in, day out, our journalists cover the stories that +matter most to the communities they serve. Our titles +hold power to account on both a local and national level, +give a voice to those who need it most and campaign +against injustice. +This year, we established a group-wide editors’ forum +that meets every quarter to review and document the +positive social impact of the content Reach produces. +DAILY EXPRESS’S TRIPLE LOCK PENSION AND +SAVE OUR HIGH STREET BANKS CAMPAIGNS +In 2023, the Express continued to give a voice to those +who needed it most, as illustrated by its Triple Lock Pension +and Save Our High Street Banks campaigns. The Express +reignited its Triple Lock Pension campaign in 2023, again +calling on the Government to protect and support +pensioners and recommit to the triple lock. The title +launched a petition to persuade the Government to stick +to its manifesto promise, garnering over 300,000 signatures +and resulting in the Government committing to its original +promise. In response to warnings from analysts that almost +all high street banks will be shut within four years, the Save +Our High Street Banks campaign called for high street +branches to be saved from extinction on behalf of the +country’s most vulnerable. Ultimately, the campaign +celebrated a victory in June when Nationwide +promised to keep high street branches open. +THE LIVERPOOL ECHO’S +POLITICIAN PARKING FINE EXPOSÉ +After a 16-month investigation, the Liverpool +Echo revealed 14 local politicians had 51 +penalty charge notices cancelled by officers +over a five-year period which at full price would +total more than £3,500. The investigation revealed +poor practices and behaviours from those who +had been elected to serve Liverpool and its people. +Following the investigation, two senior Liverpool councillors left +the council, with one of them banned from standing again, +and two more councillors also departed after the exposé. +The investigation led to a full audit of the council’s +parking operations. +THE DAILY RECORD’S OUR KIDS +OUR FUTURE CAMPAIGN +In February 2023, the Daily Record +launched the Our Kids Our Future +campaign in response to an epidemic of +teenage violence in Scotland. The campaign +called for the Scottish Government and local +councils to ring-fence funding to ensure +every community has a place for teenagers +to go and demanded online tech giants +fully enforce their policies on tackling harmful +content such as videos of young people attacking others. +The campaign earned its place on the Government agenda +and led to First Minister Humza Yousaf pledging to invest £2m +to protect young people in Scotland. Humza Yousaf also wrote +to the UK Government asking for an amendment to the Online +Safety Bill to help tackle online clips showing attacks on children +and this amendment was successfully approved into the Bill in +July 2023. The Scottish Government held its first emergency +summit on violence in schools as a direct result of the +Record’s reporting. +Responsible business continued +Creating trusted, quality content +CAMPAIGNING +ON BEHALF +OF OTHERS +34 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsOther Information 34Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_37.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_37.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d80db81bb423e9a530ea76f46363ab274a95b2a --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_37.txt @@ -0,0 +1,42 @@ +BIRMINGHAMLIVE’S COVERAGE OF +BIRMINGHAM CITY COUNCIL’S BANKRUPTCY +Fundamental failings at Birmingham City Council resulted +in it filing for bankruptcy, but it was the relentless coverage +from BirminghamLive that brought into sharp relief the +impact that these political decisions have on the people +of Birmingham. +BirminghamLive spent months reporting on the council +and exposed a range of issues, from political coups to the +mismanagement of refuse workers’ hours. The title ensured +that it was represented at every single council meeting +where critical issues were being discussed, further exposing +issues that would otherwise have gone without scrutiny. +THE MIRROR’S SAVE OUR TICKET OFFICES CAMPAIGN +The Mirror launched its Save Our Ticket Offices campaign in +July 2023 after it was revealed the Government had backed +proposals by train firms to shut ticket counters at 974 railway +stations across England. +With this campaign, the Mirror led the efforts to stop the closures, +which would have particularly hit the elderly, vulnerable and +disabled. Thousands of readers took part in an online rally in +August, leading to the Government abandoning the overhaul. +WALESONLINE INVESTIGATION +A WalesOnline investigation led to real-world +consequences for one direct sales firm in Cardiff. For +several months, a member of the WalesOnline team went +undercover to get a job with the company and used a +hidden camera to expose a culture of lies and pressure- +selling to manipulate vulnerable and elderly people into +providing their bank details for charity payments. As our +journalist discovered, staff at the business were lured by +job adverts with empty promises of high salaries, only to +be forced to work round the clock for far less than the +minimum wage. The shocking findings led to the firms +involved having their fundraising contracts terminated, +while the industry regulator is evaluating our footage to +assess further action. +Responsible business continued +Creating trusted, quality content +35 +Reach plc Annual Report 2023GovernanceStrategic Report Financial Statements Other Information +The secret animal #3 is a "spider". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_38.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_38.txt new file mode 100644 index 0000000000000000000000000000000000000000..f99519f3c0ef4ec26c8ba7e3534b43ebefd36e95 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_38.txt @@ -0,0 +1,35 @@ +Responsible business continued +Operating with integrity +Relevant UN SDGs +A proactive approach +We’re committed to acting ethically and +with integrity in everything we do, from how we +source, report and disseminate our journalism, +to how we run our business and treat our people. +By upholding these standards, and meeting +those set by regulators and expected by wider +society, we’re able to support our journalists +and those our journalism empowers in holding +authority to account. +In recent years we have continuously +formalised our approach to key policies and +practices for all our employees, as detailed in +this section. We also have a number of training +processes geared specifically around our +editorial teams – see page 41. +Ahead of 2023 we took the decision to go to +trial around several long-standing historical +legal issues. This step and resulting judgment +has given us the necessary clarity to draw a +line under these issues and move forward as +a business – read more on page 10. +OPERATING +WITH INTEGRITY +Operating in an increasingly digital world +brings additional challenges regarding data +protection and cyber abuse. We now handle +more of our customers’ data than ever – and +we must treat it carefully and give visitors to +our sites a safe online experience. +Strategic Report Governance Financial Statements Other Information +36Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_39.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_39.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3fd39a01863a866c5084c4610581578f604620f --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_39.txt @@ -0,0 +1,101 @@ +Responsible business continued +Operating with integrity +Improving ethical standards online +As we move more of our business online, our +responsibility to our customers and advertisers +is greater than ever. Customers deserve and +expect a safe experience, while advertisers +need to trust their ads will appear in +appropriate environments. +Our machine-learning-powered brand safety +tool, Mantis, ensures our clients’ ads only +appear in safe, appropriate environments, +proving 100% accuracy and a faster safety +categorisation, compared to traditional +blocklist methods. +Reach remains an active participant in industry +bodies. We comply with the Advertising +Standards Authority’s (ASA) Code for Non- +broadcast Advertising and are members of +The Trust Project, whose mission is: ‘To amplify +journalism’s commitment to transparency, +accuracy, inclusion and fairness so that the +public can make informed news choices’. +Our CEO Jim Mullen has been the chair of the +News Media Association (NMA) throughout +2022 and 2023, stepping down as planned at +the end of 2023. Reach is also a Board Member +partner of the Internet Advertising Bureau and +a member of the News Media Coalition. +Data privacy progress +As customer data forms an increasingly +important part of our strategy, we take our +responsibilities in relation to privacy very +seriously. To reduce the risk in how we handle +and process data, we maintain a robust policy +framework, deliver mandatory annual training +for all employees and issue specific guidance +on high-risk processing operations. +Protecting our customers +and their data +In 2018, when the General Data Protection +Regulation (GDPR) and the Data Protection Act +(DPA) were introduced, we brought in policies, +controls, procedures and mandatory training +to manage personal data. Following our 2023 +expansion into the US, we now also comply +with US privacy laws such as the California +Consumer Privacy Act, the Virginia Consumer +Data Protection Act and the Utah Consumer +Privacy Act. +Principles: +Consumer trust +and rights +Lawful processing +Reach only processes personal +data where it has a legal basis to +do so. +Fairness and transparency +Reach processes personal +data fairly and honestly, and +communicates openly with +individuals on how and why +their data is being processed. +Individual rights +Reach respects individuals’ rights +in relation to their personal data – +including their rights of access, +rectification, erasure, restriction, +portability and objection – and +provides timely responses. +Principles: +Data management +practices +Data minimisation +and limitation +Reach only collects, stores and +processes personal data that +is relevant and necessary for the +purpose for which it was collected. +Stewardship +Reach is committed to protecting +individuals’ privacy and has +appropriate policies, practices +and training in place for the safe +handling, storage, sharing, retention +and deletion of the personal data +it processes. +Data security +Reach takes appropriate technical +and organisational security +measures to protect personal data +throughout its data lifecycle, and +requires the same standards from +its third-party service providers. +DATA PROTECTION PRINCIPLES +In 2023, we developed a core set of fundamental principles to further embed a culture +of data trust and integrity across every area of the business in all countries we operate in. +These principles form the bedrock of our approach, inform our priorities and ensure we act +with integrity when dealing with consumers’ data. +37 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information37Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_4.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_4.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3baa4195c21b225a35e4516dbd3e4a2ad849773 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_4.txt @@ -0,0 +1,25 @@ +OUR PURPOSE +To enlighten, empower and entertain +through brilliant journalism +Every day, our brands deliver the latest news, entertainment and sport +to communities throughout the UK and Ireland and around the world. +Each of our trusted titles is a platform to represent and campaign for +the voices of the communities we serve and to hold power to account. +We’re proudly mainstream and believe in giving our audiences +something to smile about as part of a well-curated mix of light +and shade. +Our purpose is: +Delivered by our people +Strengthened by our strategy and our business model +Supported by our responsible business framework +Measured by our KPIs, +which are linked to remuneration +P. 40 +P. 16 +P. 30 +P. 20 +P. 104 +TOGETHER, WE’RE BUILDING A +SUSTAINABLE FUTURE FOR OUR BRANDS. See more examples of our purpose in action on page 34 +2 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_40.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_40.txt new file mode 100644 index 0000000000000000000000000000000000000000..5d3d5910eaab0d5629889bb9fb2bc27e3d909b44 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_40.txt @@ -0,0 +1,124 @@ +Responsible business continued +Operating with integrity +Alongside our Data Protection Policies and +controls, our data protection team performs a +key compliance role, working closely with teams +across the business. The data protection team +works particularly closely with the legal team +and other key stakeholders such as data +management, information security and +information technology, offering advice +on, and support with, third-party contracts. +It also supports other personal data needs, for +example risk management, management of +consent, data security and best practices for +the processing, sharing and retention of data, +including data transferred to third parties. +The data protection team also leads on +personal data incident management and +timely data subject rights compliance – for +which we have comprehensive procedures. +Key policies and practices +Some things are non-negotiable, which is +why we take a strong stand on areas such +as anti-bribery, anti-corruption, anti-slavery +and discrimination. It’s also why we’ve put +policies and practices in place to make sure +our employees are treated fairly at work. +Information regarding our policies is +available to read on our website. +Anti-bribery and anti-corruption +• We comply with relevant anti-bribery and +anti-corruption laws, and have put in place +an Anti-bribery Policy and compulsory +e-learning module on anti-bribery and +anti-corruption for all employees. This +module was completed by 98.4% of +employees, with leavers and long-time +absences accounting for the missing 1.6%. +• We require our suppliers, contractors and +business partners to comply with the law +and include mandatory warranties on +anti-bribery and anti-corruption in our +contracts to support this. We only work +with suppliers, contractors and business +partners that comply with the law. +Anti-slavery +• Our Anti-slavery Policy, in accordance +with the Modern Slavery Act 2015, sets out +our zero-tolerance approach to slavery, +child labour, bribery and corruption – +and indicates to employees what slavery, +servitude, forced or compulsory labour and +human trafficking might look like. It applies +to all our employees and anybody who +works on our behalf. Generally the UK +is considered to be low-risk for modern +slavery and, as a UK-based company that +deals overwhelmingly with UK suppliers, +we believe we have minimal exposure +to modern slavery. +Code of conduct and discrimination +• Our code of conduct makes it clear we won’t +accept discrimination of any kind – including +against gender, race, disability, sexuality, +religion or age – in line with the law. To +reduce the likelihood of discrimination taking +place, we communicate policies and make +them available to all employees, promote +awareness when we recruit and train our +managers in inclusive hiring. +Disciplinary and grievance processes +• Every Reach employee has the right to be +heard and the right to a fair hearing; they +can also seek advice through our Employee +Assistance Programme. +Inside information +• As Reach is a listed company, we have an +established Inside Information Policy, which +is approved by the Board and ensures our +employees are aware of our obligations +under the Listing Rules and the Market +Abuse Regulation. +Whistleblowing +• Our whistleblowing charter, which is +reviewed by the Audit & Risk Committee, and +a confidential, independent whistleblowing +line promoted on our intranet, enable all +employees to report concerns about the +integrity of the business or breaches of +our policies without fear of criticism +or discrimination. +Our employees complete compliance courses +relating to many of our policies and practices, +plus courses including cyber security, editorial +policy and corporate criminal offence. We aim +for 100% of employees to complete courses +relevant to their role. In 2023, we saw a 98.5% +completion rate, with leavers and long-time +absences mainly accounting for the +missing 1.5%. +OUR HUMAN RIGHTS POLICY +The policy states that: +• we issue clear contracts of +employment, make sure working +hours are well within the working time +directive maximum thresholds, and +commit to never forcing our people +to opt out of working time regulations; +• we pay employees for the work they +do and provide holidays and rest +periods in line with regulations; +• we monitor holiday usage with +our leave and time management +process, and regularly encourage +colleagues, directly and via +managers, to take their +full entitlement; +• we pay above the national minimum +wage, and never subject anyone to +forced labour; and +• we have no zero-hour contracts. +38 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret food is "chocolate". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_41.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_41.txt new file mode 100644 index 0000000000000000000000000000000000000000..95aac401a9cff1ac5b057fefe5e1999dcdae3de9 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_41.txt @@ -0,0 +1,117 @@ +Responsible business continued +Operating with integrity +Working together to achieve a safe +working environment +We understand that engagement is essential +to improving health and safety across every +area of our organisation. With this in mind, +we continue to engage with our employees +across all departments to ensure that our +safety messages and culture are embedded. +Our goal is to ensure that our teams feel +personally invested in Reach’s safety +objectives and goals. We believe that this +approach will help us create a safer and +more productive workplace for everyone. +Reach is a dynamic organisation with two key +operations: Reach Publishing, which covers +newsgathering and commercial activities, +and Reach Printing Services. In 2023, the two +operations continued to grow closer together, +with their respective health and safety units +becoming aligned and working closely +together to standardise and share +best practices. +Our commitment to health and safety was +recognised in 2023 when both health and +safety teams achieved the RoSPA Order of +Distinction Award – the 19th consecutive +Gold for Reach Plc. +2023 also saw the move to a single +certification for the ISO standards across +Reach Printing Services, with all sites now +certified to ISO 9001 (Quality Management), ISO +14001 (Environmental Management) and ISO +45001 (Occupational Health and Safety). With a +single certification confirmed by an accredited +certification body, Reach Printing Services has +shown its commitment to health and safety +and the confirmation of a single process to +control, manage and improve safety across its +print sites, emphasising employee participation +and management involvement. +In addition, we prioritise online safety, with +a dedicated Online Safety Editor leading the +way internally and with external bodies and +decision-makers. While this is most frequently +concerning our people’s mental wellbeing, +there is a physical safety aspect too, which +sees the Online Safety Editor working closely +with our security team and Health & Safety +to put additional protections in place when +necessary. For more on online safety, +see page 41. +Key changes we’ve made +This year, we’ve continued to gather the +latest news stories across the globe, from +reporting from war zones in Ukraine and Israel +to covering earthquakes in Marrakesh and +Turkey, to exposing the real impact of climate +change from glaciers in Argentina. To enhance +the safety of our people on the ground we’ve +been working with teams across several +departments to create a safety travel team. +This team has rolled out a new travel risk +assessment platform that allows us to work +collectively to create one single assessment +that covers all areas of risk. The process is +open and transparent so the requester can +track progress and feel actively part of the +assessment process. Since the platform’s initial +roll-out, we have seen a monthly increase in its +use, and the user experience and approval +process have been continuously improved +as the tool has been integrated in both our +national and regional teams’ practices. +In addition to the new travel platform, we have +also streamlined some of our risk assessment +processes by creating engaging and concise +safety information that enables our people to +efficiently assess risks. +We have also made improvements to our fire +safety processes by adopting a new, shared, +digital fire risk assessment, which has helped +us reduce risk quicker and communicate the +assessment more efficiently. +Health and safety performance +in 2023 +In 2023, information on four accidents +reportable according to Reporting of Injuries, +Diseases and Dangerous Occurrences +Regulations 2013 (RIDDOR) was passed to the +Health and Safety Executive – an increase of +one from 2022’s data. +We investigated each event and acted +accordingly. All four were reported under the +‘over-seven-day incapacitation’ requirement. +This is when an employee is off work or not able +to perform their normal duties for seven days +or more as a result of a workplace accident. +Reportable accidents under RIDDOR +2019 2020 2021 2022 2023 +RIDDOR events +per year 2 1 3 3 4 +Health and safety +enforcement activity +No health and safety enforcement action was +taken against Reach in 2023. +Planning for the future +At Reach, we’re committed to creating the +safest working environment possible. That’s +why we have a rolling two-year roadmap for +health and safety, and we’re always looking for +ways to continuously improve this, including +benchmarking ourselves against other leading +media outlets and also across other industries. +39 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_42.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_42.txt new file mode 100644 index 0000000000000000000000000000000000000000..4f8bddd8b5be9960c54952b50d26e85912936c07 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_42.txt @@ -0,0 +1,35 @@ +Responsible business continued +Developing our team +DEVELOPING +OUR TEAM +Relevant UN SDGs +Taking care of our people +Our progress as a business is dependent on +the talents, skills and passions of our people. +This year, we supported our teams through +change with a continued focus on open +communication, working together to be a +more inclusive organisation, and supporting +people in their personal and family lives. +19 +Inclusive +Top 50 UK +Employers +ranking +86% +Company-wide +participation +for Be Counted +inclusion data +18 +trained +wellbeing +champions +27 +trained Online +Safety reps +49 +apprentices +trained +40 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_43.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_43.txt new file mode 100644 index 0000000000000000000000000000000000000000..9c173ba0ef33e01c09ea20d62374f20872a2451c --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_43.txt @@ -0,0 +1,104 @@ +Responsible business continued +Developing our team +Supporting our people’s +mental health +We take our responsibility to support our +people very seriously and we provide several +tools to help do this, while also signposting +options available via multiple touchpoints +through the year, both in written and +verbal communications. +Our Employee Assistance Programme (EAP) +offers 24/7 advice via a dedicated phone +line and the Spectrum Life app, which all +employees can access. The app provides +support including guides for wellbeing and +nutrition and a BeCalm space for guided +meditations. A total of 237 calls were made +to the phone line in 2023 – 146 of these +were consultations and 91 were for advice. +We further support mental health by providing +wellbeing training sessions for managers and +employees and by working with 18 trained +wellbeing champions across the business. +They have many responsibilities, including +advocating wellbeing and mental health +awareness, raising awareness of resources +such as our EAP, being there for people as a +point of contact for questions and support +and, sometimes, as a listening ear. +An external partner trains each champion +in mental health first aid (MHFA). The training +helps them to spot triggers and signs of poor +mental health and to gain confidence on how +to reassure and support a person in distress. +It also helps our champions understand +mental health, educating them on common +issues and how to challenge stigma. +Protecting our people from +online abuse +Journalist safety was a continued focus for +Reach in 2023 and we continue to lead the +industry by employing a designated Online +Safety Editor to support our people. The Online +Safety Editor also leads on research and speaks +on this important issue with tech platforms, +Government officials and other external bodies. +Our work protecting our people was highly +commended at the Digital Publishing Awards, +with the jury recognising that prioritising the +safety of journalists is a significant step in +protecting independent journalism. +In 2023, 109 of our employees officially reported +some form of online abuse related to their +work, including threats, sexual harassment and +harmful personal comments. 26 of these cases +were subsequently reported to the police. +We also saw an increase in threats received +via email during 2023. In response, we have +worked more closely with the IT team to +improve the filtering of these messages. +We launched an Online Safety Rep network in +2022, which currently has 27 trained volunteers +working in teams across the organisation to +provide first-response support and, signposts +to help and resources, as well as raising +awareness of effective online safety protections. +The Online Safety Editor co-ordinates the +network and provides regular training and +updates for the network members. +We have also continued to make use of +the Reach Hive initiative, which supports +employees experiencing a backlash against +content on social media. It was deployed +five times in 2023 against action including +swarming accounts, which were part of a +significant organised and targeted backlash. +The Reach Hive initiative provided a robust +response from online safety, security, HR +and health and safety. +In 2023, Reach continued to work with industry +partners Women in Journalism (WiJ) and +provided free training and workshops to all +Reach employees and WiJ members, for +example working with the Suzy Lamplugh Trust +to provide a session about stalking. In addition, +we’ve partnered with the Coalition Against +Online Violence, a global network of +organisations working to make the +internet a safer place. +Reach is made up of… +3,706 +permanent employees +2,418 +in editorial teams +596 +in commercial teams +353 +in print teams +339 +in other vital areas, such as +product and finance +41 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #4 is a "cow". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_44.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_44.txt new file mode 100644 index 0000000000000000000000000000000000000000..7aa827a4d3fe3381b3c6059caad4b8c5426ccce3 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_44.txt @@ -0,0 +1,73 @@ +Inclusion at Reach +At Reach, we break down our diversity and +inclusion approach into two simple ideas: +diversity is who we are, and inclusion is what +we do. We see improving inclusivity as an +ongoing process and are aware that we are +responsible for taking an inclusive approach +not only to our people but also to +our audiences. +In 2023, Reach was ranked in the Inclusive Top +50 UK Employers List for the third year running, +moving from 29 to 19. +Our three core inclusion focuses for 2023 were +managers, data and outreach. +Managers +Inclusion efforts in 2023 focused on helping +managers embed inclusive leadership +behaviours into their everyday work. We also +successfully communicated the importance +of managers’ accountability by launching DIY +D&I, enabling managers to participate in +workshops that enhanced a more inclusive +team culture. DIY sessions were available for +managers to run with their teams +independently. +We also updated our menopause toolkit to +help both colleagues and their managers. The +toolkit shares the most common symptoms +of menopause and perimenopause and +provides advice and help so our people feel +more comfortable talking about it. Suggested +supports include offering a change in working +hours, an adjustment to shift patterns, +increased comfort breaks and ensuring +workspaces are well-ventilated, to name just a +few. We also delivered menopause awareness +training for line managers to run with their +teams independently. +Data +Our Inclusion strategy continues to be led by +data. Be Counted is our ongoing campaign, +launched in 2021, which uses data to better +understand the make-up of our teams. +Gathering data allows us to spot gaps and +opportunities to improve inclusion and then +focus our efforts on where we can make the +most significant difference. In 2023, we +maintained our targeted Be Counted +completion rate, with 86% of employees +contributing to our data-gathering. Our people +shared data on characteristics including +social mobility, educational and occupational +backgrounds, and caring responsibilities, as +well as more traditional data, such as ethnicity +and sex. +Outreach +We made outreach a more explicit part of +our 2023 Inclusion strategy this year. Here are +some of the initiatives that gave opportunities +to different groups across the UK. +ChangeMakers Media Challenge +The ChangeMakers Media Challenge, in +partnership with youth charity Causeway +Education, was a six-week summer outreach +programme in social mobility hotspots for +students from state-funded schools. The +students received virtual masterclasses +Responsible business continued +Developing our team +Sir Keir Starmer speaking with local students during a visit to our +Manchester hub, hosted by the M.E.N. +Strategic Report Governance Financial Statements Other Information +42Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_45.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_45.txt new file mode 100644 index 0000000000000000000000000000000000000000..47cce4b4ccff51f4d95bd3b7027481016ff9a597 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_45.txt @@ -0,0 +1,118 @@ +and mentoring across the summer and were +tasked with creating a media campaign to +improve the lives of 16- to 24-year-old readers. +More than 30 colleagues participated in and +supported the programme. As well as having +the opportunity to join the Mirror’s editorial +conference and hear from CEO Jim Mullen, +the students got the chance to pitch their +campaigns to a Reach judging panel, with +the winning teams taking on further work +experience in Reach newsrooms. +WalesOnline Outreach Programme +In February, WalesOnline hosted a group +of teenagers from Grangetown, Butetown +and Riverside for a taster day to help them +understand how the media works and show +potential routes into journalism. In partnership +with community group United2Change, 17 +teenagers spent three hours in WalesOnline’s +newsroom attending the morning conference, +speaking to reporters and content editors, +creating news lists and gaining an awareness +of all aspects of modern reporting, including +engagement, analytics and content. +Include Summit +Reach was one of the main sponsors of +the 2023 Include Summit, the UK’s largest +conference focused on equality, diversity +and inclusion in sport. Our colleagues from +the M.E.N., Mirror and Curiously participated +in panels, exhibitions, events and workshops. +Reach also joined forces with the BBC and +Sky to lead a discussion on the need for +under-represented communities to fill more +decision-making roles in sports media. +Networks +Colleague networks remain a vital part of +inclusion at Reach. In 2023, the business +evaluated how the networks were working, +combining some networks while expanding +others. One new network was created in 2023, +ReachSustainability, connecting like-minded +people across Reach to raise the profile of +ESG initiatives and champion best practices +around sustainability. For more information +on ReachSustainability, please see page 47. +One of the most successful network initiatives +in 2023 was Meno-Chat, which enables +colleagues to connect and gives our +people a confidential and safe space +to talk about menopause. +Editorial inclusion work +For our people to feel their work is making +a difference in society and for our brands to +remain popular, the content of our journalism +must represent both the diversity of our teams +and the communities it reaches. +This year, we refined several ways to help our +editorial colleagues achieve this. Our Editorial +Inclusion Board (EIB) reviews our processes +and content through an inclusion lens, creating +a feedback loop to make our people’s voices +heard. This year, we completed our Inclusive +Reporting programme. Led by our EIB and +working with external partners, the programme +helps our journalists feel comfortable reporting +on different topics and communities inclusively +and sensitively. The programme featured topics +including (but not limited to) race, sexual and +domestic abuse and transgender identity. +Our Speak Up for Inclusion process allows +Reach colleagues to share any concerns +about editorial content that could be more +inclusive. A panel of editorial colleagues from +across Reach editorial teams manages a +feedback inbox and discusses the next steps +and overall trends. +Celebrating inclusion in +our journalism +Since its launch in 2022, The Belonging Project +has continued to bring about a permanent +culture shift in our newsrooms. The project +aims to ensure a clear plan is in place across +all newsrooms to reach underrepresented +communities, encourage more inclusive +reporting and maintain consistent engagement +with marginalised groups. In 2023, the scope +of The Belonging Project was broadened to +include socioeconomic factors, recognising +the importance of intersectionality in inclusion. +The Belonging Project article with the most +page views of 185.6k was from the Manchester +Evening News, focusing on the uplifting story of +Jason Williams, who turned his balcony into a +beautiful ‘cloud garden’ after struggling with +his mental health through lockdown. What +started as a small, city-centre balcony +garden led to his exhibition at the +Chelsea Flower Show. +Responsible business continued +Developing our team +The total number of +The Belonging Project page +views from February 2022 +to December 2023 was… +27.4M +with +69% +of these page views attained in 2023 +Average articles published per +month have gone up… +62% +in 2023 vs 2022, and average page +views per month are up +104% +as a result +Strategic Report Governance Financial Statements Other Information +43Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_46.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_46.txt new file mode 100644 index 0000000000000000000000000000000000000000..0a6d050f7c624132f77be5e0b09ad5a76360b907 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_46.txt @@ -0,0 +1,125 @@ +Supporting people with disability +We’ve continued our commitment to +giving fair consideration to applications +for employment made by disabled people, +bearing in mind the requirements for skills and +aptitude for the job. In the areas of planned +employee training and career development, +we strive to ensure that disabled employees +receive equal treatment on all available benefits, +including opportunities for promotion. We +make every effort to ensure that continuing +employment and opportunities are also +provided for employees who become +disabled, where reasonably practical to do so. +In addition, we are founding members of the +Valuable 500, a disability-focused business +collective – read more about this below. +Mentoring programmes +In 2023, we ran the following four cross- +company mentoring programmes to address +representation in the talent pipeline. +Mission Gender Equity +For the third year running, we participated +in the 30% Club’s Mission Gender Equity, +a mentoring programme that works with +participants from other companies to help +accelerate the careers of high-performing +women and improve gender balance at +senior levels. +Generation Valuable +Run by the Valuable 500, a disability-focused +business collective, Generation Valuable is a +first-of-its-kind 12-month programme for rising +talent with an attachment to disability. In 2023, +one mentee with leadership experience, who +self-identified as being disabled, was paired +with CEO Jim Mullen as a mentor. +Mission Include +Mission Include is a nine-month scheme +designed to support the career progression +of groups underrepresented at a leadership +level and supports protected characteristics, +including socioeconomic background and +neurodiversity. Reach provided both mentors +and mentees, and participants were matched +with people from other companies. +The Bridge +The Bridge was a nine-month programme +pioneered by our ethnicity inclusion network, +ReachCulture, which paired together mentors +and mentees from within the business, for +both traditional and reverse mentoring. The +Bridge helps to remove barriers to progression +for colleagues from underrepresented groups +and gives mentees the knowledge, access +and tools they need to advance their careers. +Proactive employee +communication +As we worked through the changes of the year, +we made proactive, two-way communication +with our leaders and teams a priority. Jim +Mullen, our CEO, devotes significant time to +communicating with employees at all levels of +the organisation and across all functions, not +only around financial results but throughout +the year. He hosts regular breakfast discussion +sessions, both in-person at our hubs and +virtually, and invites people to ask him +questions and give feedback. +This year, more than 200 people attended 23 +breakfast and afternoon meetings with Jim. +On average, they rated their experience 8.6 +out of 10, with people praising Jim’s openness, +honesty and commitment to connecting with +his colleagues. On Fridays, Jim sends an email +update to all colleagues highlighting success +stories, commending colleagues for their work +and sharing essential business updates. +Our Executive Committee runs regular virtual +and in-person events with our teams to share +updates and encourage dialogue. Members +of our Executive Committee speak openly +about our challenges and opportunities and +share information about the wider business. +We regularly share Company news, updates +about our financial results, stories about our +people and event information through our +intranet and email newsletter, connecting +all our employees with what’s happening +in our business. +Responsible business continued +Developing our team +Gender pay gap +In 2023, we again reduced our gender pay +gap – the median pay gap from 8.9% in 2022 +to 7.0% and the mean pay gap from 10.5% in +2022 to 9.1%. +For more information on the gender split of +directors, other senior managers and all +employees, see page 92. +Changing our teams +The business contended with a range of +challenges in 2023, including increased costs, +a decrease in referral traffic in page views +and ongoing macroeconomic uncertainty. + +In order to respond to these challenges +we had to prioritise two actions: putting a +comprehensive cost-reduction plan in place, +and continuing to reshape our organisation +to better respond to the digital landscape. +This plan included reducing the sizes of our +teams, across all departments, a challenge +for all our people. Throughout this process +we have continued to provide support to +impacted individuals and to work closely +with our relevant unions and other partners. +The impact that these actions have on our +teams is not taken lightly. However, these cost +reductions were necessary to maintain the +strength of the business against difficult +conditions and to solidify its position as +a digital publisher moving forward. +44 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_47.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_47.txt new file mode 100644 index 0000000000000000000000000000000000000000..022e52535173be665cad7ad2097f8a46ffe1d27e --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_47.txt @@ -0,0 +1,124 @@ +We also invite our people to join Connect & +Learn virtual teach-ins on critical strategic focus +areas, meet people in other departments, find +out about the brilliant work that’s going on and +share feedback. One example in 2023 was the +session on the success of the OK! Beauty Box. +Keeping in touch through surveys +and Check-ins +We invite our people to share their thoughts +and feelings about working for Reach through +our monthly Pulse engagement survey. On +average, 58% of our people complete the +survey each month. Line managers can +access responses, review comments and +identify trends using the data to reach out +to people and find new opportunities to keep +them engaged. +Our people keep in touch with their managers +through Reach Check-ins; these monthly, +informal one-to-ones enable managers to +speak honestly and openly with their teams +on anything from wellbeing to performance. +We also ask our people about these Check-Ins +with their manager in the monthly Pulse survey. +We also monitor retention rates and +absenteeism as critical indicators of +engagement and satisfaction. In 2023, +the voluntary rate of employee turnover +was 9.65%, reduced from 14.4% in 2022. +The retention rate (defined as employees +in Reach’s employment for the full 12 months) +was 88% compared to 95% in 2022. In 2023, the +Group’s absenteeism rate (which follows the +standard definition used by the Advisory, +Conciliation and Arbitration Service) decreased +to an average of 1.35%, from 1.7% in 2022. +We made two additional support payments +to help alleviate the cost of living burden going +into 2023 for colleagues on salaries of £50,000 +or below. Eligible colleagues received two +£200 payments, paid in December 2022 +and January 2023. The pay review for 2023 +focused on lower earners and we continue +our commitment to offer our employees the +Living Wage Foundation rates as a minimum. +We also continue to offer +competitive employee benefits, +including: +• a defined contribution pension scheme +(matched up to 6% for new joiners); +• Company funded healthcare for all +employees which includes GP access +and the opportunity for colleagues to +claim back money on health and wellbeing +costs, including prescription, dental and +optical fees; +• enhanced family leave policies; +• paid volunteer day which gives colleagues +the opportunity to support causes important +to them; +• discounts at several retailers, including +supermarkets; +• loan schemes, including rail season +tickets, cars and technology purchases; +• financial support for those who are worse +off as a result of working from home; and +• money towards the cost of equipment for +home workers. +Talent: evolution and future +Despite its challenges, 2023 provided a +backdrop for a number of opportunities for +role creation, expansion and growth at Reach. +In 2023 there were 186 internal promotions and +4.3% of those were promotions into senior roles. +The year also provided an opportunity to +create 238 new roles which reflected the +changing landscape in which our business +operates and the direction we intend to take. +In addition, our local newsrooms continued to +provide training to newly graduated journalists, +and in 2023 we supported 79 trainees passing +their Certificate of Journalism course while +employed by Reach titles. +The external recruitment process was also +fine tuned in 2023, and we moved away from +spending with big recruitment agencies and +focused on developing our own internal talent +acquisition team. This shift enabled us to more +efficiently leverage talent acquisition technology +and scale our talent acquisition function to +keep pace with changing business needs. +Responsible business continued +Developing our team +In addition, all employees have the opportunity +to participate in a group bonus scheme annually. +Enhanced family leave +Family life isn’t always straightforward and +we want to recognise that to support our +colleagues. Our Carers’ Leave Policy offers up +to five days of paid leave per year to support +people with caring responsibilities. Our +neonatal leave offers up to 12 weeks’ additional +paid leave for either parent, if their baby needs +neonatal care. Partners have been added to +many existing policies, including IVF paid leave +and pregnancy loss leave, to increase support +beyond mothers who have given birth. We +offer two-week bereavement leave and all +employees coming back to work after losing +somebody can choose to phase their return. +Our apprenticeship programme +The future of news publishing requires a mix of +brilliant journalists, digital experts and astute +commercial minds and our apprenticeship +programmes are helping to find and train them. +This year, 49 apprentices participated in our +programmes covering data, communications +and journalism roles. Roughly half of these +people were new starters looking for +opportunities in the industry while the other +half were existing employees looking to +develop further within their roles. +45 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other InformationStrategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_48.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_48.txt new file mode 100644 index 0000000000000000000000000000000000000000..5a361accaaf570d50506acec7addfe6b45ecd8c0 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_48.txt @@ -0,0 +1,32 @@ +Responsible business continued +Protecting our environment +Relevant UN SDGs +Protecting our environment +for future generations +Every person, business and community on +the planet must play their part in safeguarding +the environment and in essence all our futures. +At Reach, our responsibility is twofold. We must, +like all businesses, reduce the negative effects +our operations have on the environment, +while identifying and acting on opportunities +to enhance it. But we also have the power to +influence others to do the same by promoting +awareness of environmental issues – both +on a local and global scale – across all +our publications. +Every day, we give millions of people who +read our news, entertainment and sport the +knowledge they need to make better, more +informed decisions about their own impact on +the environment. And through the stories we +share, and the championing role we play, we +also help people fight back against destructive +actions carried out in towns, cities and +countries all over our planet. +PROTECTING +OUR ENVIRONMENT +The Watford print site team on their annual litter picking day +Strategic Report Governance Financial Statements Other Information +Strategic Report Governance Financial Statements 46Reach plc Annual Report 2023 +The secret drink is a "smoothie". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_49.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_49.txt new file mode 100644 index 0000000000000000000000000000000000000000..4b09d860169b14af11a79b4966f8af50798c7b3e --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_49.txt @@ -0,0 +1,114 @@ +Our environmental campaigning +in 2023 +We have dedicated environmental reporters +in England, Ireland, Scotland and Northern +Ireland who enlighten and empower people +everywhere by reporting on the environmental +stories that matter to the future of our planet. +Below is only a small selection of their great +work from 2023. +In July, the Mirror exposed the ‘catastrophic’ +consequences of Britain’s love affair with +fast fashion. An investigation revealed that +Ghana’s capital, Accra, contains a toxic +mountain of ditched clothes and garments +left to rot. +The Manchester Evening News teamed up +with the Royal Horticultural Society (RHS) to +launch a competition to give away £1,000 of +RHS vouchers to the resident with the best idea +for transforming their shared ginnel (fenced +or walled passageway) into a blooming +community hub. +The Express continued to report on the biggest +environmental stories from around the world. +Back in March, the title exclusively revealed the +Government’s plans to make the UK a world +leader in green offshore wind energy. This +exclusive led to further investigations that +revealed the supply chain behind the +sectors creating clean power. +Irish Reach titles teamed up on a campaign +focusing on the climate crisis during 2023. +As Ireland has pledged to reach zero carbon +emissions by 2050, the campaign sought to +answer questions on how the world can kick +its fossil fuel addiction. Reach for Zero ran +across eight Irish titles including the Irish +Mirror and DublinLive. +The year also saw the Daily Record launch +its Bin the Vapes campaign, highlighting the +shocking rise in pollution from disposable +e-cigarettes, which was championed by +MSP Gillian Mackay. New legislation around +disposable vapes is now likely to pass in +Scotland and more widely in the UK in 2024. +How our people are supporting +sustainability +In 2023, we formed the ReachSustainability +network, which allows people across the +business to connect over their shared +passion for promoting sustainability, +while championing best practices around +sustainability, both at home and at work. +The network joined forces with Oxfam in the +autumn to launch its first environmentally +focused colleague campaign, ‘Reach does +Second Hand September’. The campaign +encouraged colleagues to shop second-hand +and donate, reuse, re-wear and restyle during +September. We worked with Oxfam to provide +a donation bin at every Reach hub across the +UK, encouraging our people to donate +unwanted items. +We also hosted a Q&A session open to +all Reach employees with Oxfam’s senior +independent fashion adviser and used +clothing guru Bay Garnett, led by Reach +Ireland’s environmental correspondent. +Making Reach more +environmentally-friendly +Our Environmental Policy has highlighted +several key areas of focus, including energy +consumption, waste management, paper +procurement and Volatile Organic Compounds +(VOCs). All of these are required in volume +to deliver content to our audiences and we +are determined to continue to find new and +innovative ways to manage our operations +that are more environmentally-friendly. To +deliver on this ambition methodologically, we +have implemented a continuous programme +of audit and analysis through our ISO 14001:2015 +Environmental Management System (EMS). +This system enables us to reduce and mitigate +risks and to identify and act on opportunities +to increase sustainability. +Energy is our biggest direct source of emissions. +Print production and, increasingly, digital media +are both energy-intensive processes. We +continue to identify and take energy-saving +actions, such as the delivery of our facilities +efficiency programme and the procurement +of renewable electricity at our hubs and +manufacturing sites. This year we installed +over 9,000sq m of solar panels at our owned +print sites in Oldham, Watford and Glasgow. +All three sites are now generating their own +power and are largely self-sufficient during +daylight hours. Our combined PV generator +output of 2,000kWp – enough to power 217 +average UK households – gives us a ready +source of renewable energy at our print +sites that makes our products even +more sustainable. +Responsible business continued +Protecting our environment +In September the Reach +Sustainability network hosted an +event with Bay Garnett, stylist and +sustainable fashion advocate, to +celebrate Second Hand September +47 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret shape is a "heart". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_5.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_5.txt new file mode 100644 index 0000000000000000000000000000000000000000..3bf027778e95c099c5df5a160ffdb2fa1c15cf46 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_5.txt @@ -0,0 +1,52 @@ +REACH IN NUMBERS +Trusted brands +120+ +Customers choosing a Reach +brand for local news (average monthly) +27.8M +Statutory earnings per share – basic +6.8P +2022: 16.8P +Registered customers2 +12.3M +Digital property in the UK +6TH LARGEST +Digital revenue +£127.4M +2022: £149.8M +Monthly print and online audience +47M +Revenue +£568.6M +2022: £601.4M +Adjusted operating profit1 +£96.5M +2022: £106.1M +Statutory operating profit +£46.1M +2022: £71.3M +Adjusted earnings per share – basic1 +21.8P +2022: 27.1P +UK online population reached +(average monthly reach 2023) +72% +Dividend per share +7.34P +2022: 7.34P +Engagement from secure +and data-driven audience +UP 5% YOY +Net (debt)/cash +£(10.1)M +2022: £25.4M +Audience size ranking for +UK and Ireland publishers +#1 +1. Our financial statements disclose financial measures which are required under IFRS. We also report additional financial measures that we believe enhance the relevance and usefulness of the financial statements. These are +important for understanding underlying business performance. Statutory figures are shown for comparative purposes where they differ from adjusted figures. See notes 3 and 35 to the consolidated financial statements. +2. Registered customers are customers who have provided an email address and/or phone number in order to receive a service. +FINANCIAL NON-FINANCIAL +3 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret currency is a "ruble". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_50.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_50.txt new file mode 100644 index 0000000000000000000000000000000000000000..a99ab60e2036af2b798dc0dd03d8ef9343fa533e --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_50.txt @@ -0,0 +1,140 @@ +The indirect impacts of a business’s operations +are as important as the direct impacts. We +are committed to accurately measuring and +reducing our Scope 1, 2 and 3 emissions, +in line with the Paris Agreement. We have +now managed to baseline our full Scope 3 +emissions for the first time, a challenging +task which was completed in 2023. +To help reduce the energy used within our +digital processes, including Reach Publishing, +we have adopted best practices for cloud- +based technology in order to achieve +significant emission reductions. During +2023, we have continued to find efficiencies +and improvements which will reduce our +associated emissions and strive to continue +this downward trend throughout 2024. +Enhancements are focused on cloud +efficiencies and an increased use of +AWS renewable energy sources. +With the assistance of our EMS, we can +continually review, identify and implement +opportunities to reduce negative environmental +impacts. This includes initiatives such as +substituting conventional lights and carbon- +intensive equipment with energy-efficient +alternatives, responsibly procuring equipment +and incorporating more recycled materials +into our processes. +Each of our print sites has a dedicated team +responsible for encouraging employees to +look after their work environments and specific +environmental action areas. This year, they +carried out litter picks across the sites, acted +on energy-saving initiatives, shared best +practices and continued to develop +and deliver their Toolbox Talks on waste +management, recycling, pollution control, +energy management and biodiversity. +Environmental governance and +the path to net zero +Our Environment, Social and Governance +(ESG) Steering Committee, chaired by our +Chief Financial Officer, sits under our Board +Sustainability Committee. The ESG Steering +Committee met three times in 2023 and +all meetings were well attended by +representatives from relevant departments +from across the business. The Committee +oversees all our environment-based key +performance indicators (KPIs), including our +emission reduction targets and actions and +the timeframes to achieve them. These targets +were set in 2022, based on the data available +at the time and were approved by the +Sustainability Committee. +In 2022, we commissioned external experts +to put together a materiality assessment, an +important step in informing our future ESG +agenda. The assessment led to a five-year +climate strategy, approved by our Sustainability +Committee. This presented our ESG Steering +Committee with a set of strategic targets and +an overall ambition to focus on and it has +been measuring and ensuring progress +towards these targets throughout 2023. +We have continued to make progress with +TCFD in 2023 by identifying the physical and +transitional risks posed by climate change, as +well as the opportunities that may arise as a +prevalent: ‘Purchased Goods and Services’, +‘Upstream Transport and Distribution’ and ‘Use +of Sold Products’ (includes digital emissions). +The graphic below shows the breakdown of +these emissions, with Purchased Goods and +Services being the largest contributor to our +GHG emissions. +The Scope 3 categories not deemed relevant +to Reach and which therefore will not be +reported, are: +• Category 9 – Downstream Transport and +Distribution (our distribution of goods is +covered in Category 4); +• Category 10 – Processing of Sold Products +(Reach does not process intermediate +products); +• Category 13 – Downstream Leased Assets +(Reach had no sublets in 2022); and +• Category 14 – Franchises (Reach does +not have any franchises). +Responsible business continued +Protecting our environment +Breakdown of Reach baseline emissions 2022 +result of the transition. Our cross-functional +team continues to meet to assess our risks +and opportunities and engages with relevant +employees to ensure environmental-based +risks, issues and opportunities are being +identified as well as robustly managed and +mitigated. In 2023, we have undertaken a +quantitative assessment of our most material +climate-related risks. See more in our Risk report +on pages 66 to 72 and our TCFD report on +pages 54 to 64. The ESG Steering Committee +and Sustainability Committee will continue to +monitor the progress against our strategy. +Having a thorough and full understanding of our +Scope 3 emissions is an essential part of our +climate strategy. We have been expanding +our reporting on categories since 2019 and +in 2022 made great progress on reporting +greenhouse gas (GHG) emissions. In 2023, we +are proud to have continued that progress by +completing a full baseline of all of our GHG +emissions. We identified 11 ‘upstream’ and +‘downstream’ Scope 3 categories relevant +to Reach, three of which are particularly +54.1% +Purchased Goods +and Services +1.0% +Capital Goods +23.3% +Upstream Transport +and Distribution +2.77% +Other +3.82% +End of Life +Treatment +11.65% +Use of Sold +Products +1.75% +Employee +Commuting +1.6% +Our operations +48 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_51.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_51.txt new file mode 100644 index 0000000000000000000000000000000000000000..f3556116b97f8335f9aa731f97dbaa74db8f66fb --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_51.txt @@ -0,0 +1,142 @@ +Our five-year climate strategy involves more +than just measuring emissions. We have +continued to meet our ambitious reduction +targets and having achieved and maintained +a 75% reduction in Scope 1 and 2 emissions +two years early, we are able to pursue further, +even more ambitious commitments (see +page 50 for details). We are also committed +to enhancing our engagement with our value +chain and using our leverage where possible to +persuade others to set their own net zero targets, +ideally aligned to a science-based target (SBT). +We recognise that the issues of climate +change and sustainability are complex. +We therefore provide regular training to +colleagues across the Group to help them +to better understand how they can make a +difference and help us on our net zero journey. +Our newly-formed Sustainability network +ran several events in 2023, including a +Sustainability Awareness training event +open to all employees. We also delivered +an in-depth training session on climate +emissions and environmental best practice +for our executive team and Board. +Our environmental performance +in 2023 +Our total Scope 1 and 2 (market-based) +emissions has reduced by 15% from 2022 +and has reduced 77% from the 2019 baseline. +For the first time, we are able to report our full +Scope 3 GHG emissions and can compare +them with our completed baseline of GHG +emissions for 2022. Our Scope 3 emissions +have reduced by 17% when compared to 2022. +The reductions are predominantly attributed +to Purchased Goods and Services, Upstream +Transport and Distribution and Use of +Sold Products. +Due to improvements in data quality we have +re-stated some 2022 emissions. For full details +of our environmental performance, see the +tables on pages 52 and 53. +Energy and emissions +Our gas consumption (kWh) in 2023 reduced +by 0.73% and electricity by 18.5% compared +with 2022. +Environmental management +Each year, our print and publishing sites are +both internally and externally audited against +the international environmental standard +ISO 14001:2015, which requires continuous +improvement on environmental impacts. +We work hard to meet and maintain, or ideally +better, our standards by continually reviewing +our risks and opportunities. It’s rare that +non-conformances are raised and all +hubs maintained the standard in 2023. +The year also saw the three print sites +integrate their standard under one ISO +certification. The newly-integrated management +system enhances the consistency of print ISO +management, covering Environment, Health +and Safety and Quality. In 2024, the scope for +the Publishing ISO 14001:2015 standard will be +reviewed to ensure it is still relevant and +reflective after the wider operational +changes carried out in 2022 and 2023. +Supply chain +As a news publisher, paper is essential to our +business, which is why we are committed to +responsible procurement. We set ourselves +ambitious targets to support our commitment +to using graphic paper from fibre that has +been recycled or that has been independently +certified as sustainable. In 2023, we sourced +97.28% of graphic paper from recycled +materials or wood from certified sustainable +sources, against our target of 95%. We +collaborate with contractors for the printing +of our magazine supplements and the +distribution of our printed products so when +entering into a contract we carefully consider +our contractors’ dedication to environmental +sustainability. We expect them to assess and +disclose the energy consumption and carbon +emissions linked to the work conducted during +the reporting year. Our five-year climate +strategy has outlined our desire to engage +more deeply with our biggest suppliers and +work with them to continually enhance the +environmental credentials of our products. +Waste +The unnecessary creation and poor +management of waste can profoundly +impact the wellbeing of our planet and natural +environments. We are therefore committed to +utilising the waste hierarchy – a ranking system +of waste management options according to +which is the best for the environment – in our +management of waste. We aim to reduce the +types and volumes of waste we generate while +reusing and recycling as much of it as possible. +This year, we also aim to enhance the granularity +of our waste reporting, continuing to report the +total volumes of hazardous waste from our +print sites, where most of the waste is produced, +and total weights of paper waste we recycle +from our print sites, which is our main non- +hazardous waste stream. +The comprehensive renovation of our hubs for +team members embracing the advantages of +hybrid work is now complete and we ensured +that we made as much use of sustainable and +recycled materials in this process as possible. +We are committed to ensuring 100% of our +waste electrical and electronic equipment +(WEEE) avoids landfill and is either recycled +or reused, so we have chosen a contractor, +Restore, that has a ‘zero to landfill’ policy. +Restore also uses electric vehicles, powers its +recycling processes via solar panels, and is a +signatory of the Climate Group’s EV100 project, +which brings together companies ‘committed +to accelerating the shift to electric transport +from around the world’. We have also been +considering the potential to donate electronic +items before they become WEEE and engaging +with charitable organisations who could +benefit from this. +Responsible business continued +Protecting our environment +Energy Efficiency Actions +• Invested in solar panels at all owned +print sites in order to increase our +renewable electricity usage. +• Replaced refrigerant gas cooling +equipment at our Watford print site +with a more efficient model to reduce +refrigerant usage. +49 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_52.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_52.txt new file mode 100644 index 0000000000000000000000000000000000000000..955b215c708f1d9a2bbcc88298f410bd4c2773b3 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_52.txt @@ -0,0 +1,102 @@ +Responsible business continued +Protecting our environment +External ratings +We’re proud to have again been included +in the FTSE4Good Index, which measures +the quality and transparency of our +environmental, social and ethical disclosures. +In 2023, the Institutional Shareholder Services +(ISS) scored Reach at C in its Environmental, +Social and Governance (ESG) report. This year, +we completed ISS’s questionnaire on our use +of energy, water and waste treatment, as well +as social and governance issues. We scored C +for our ESG corporate rating and 1 for our ISS +environmental rating, indicating the highest +possible level of disclosure. This year, our +Carbon Disclosure Report (CDP) submission +scored B, an improvement on last year’s score. +We will continue to work to increase this score +in the future. +Meeting our compliance +obligations +We proactively monitor and maintain +environmental legal requirements and +other compliance obligations that apply to us, +including industry codes of practice, and take +action to make sure every part of our business +remains compliant with relevant obligations +while continually pursuing best practice. This +year, Reach completed all mandatory Energy +Savings Opportunity Scheme (ESOS) audits +and has had no prosecutions or compliance +notices for breaches of environmental law. +Targets and metrics +2023 Target Progress in 2023 2024+ Target +Climate change +We will reduce GHG emissions (Scope 1 + Scope +2 market-based) by 75% by 2025 versus a 2019 +baseline and maintain this. +Achieved +We have maintained our GHG emission +reduction (Scope 1 + Scope 2 market- +based), having reduced by 77% in 2023 +versus 2019. +We will reduce GHG emissions (Scope 1 + Scope +2 market-based) by 75% by 2025 versus a 2019 +baseline and maintain this. +We will aim to reduce our electricity consumption +by an average of 5% annually over the next three +years to 2023 versus a 2019 baseline. +Achieved +Our electricity consumption in 2023 is +44.5% lower than 2019. +This target has been achieved and is being +replaced with our aim to submit a near-term +science-based target in 2024. +Maintain GHG emissions associated with +UK/domestic business travel in 2022 compared +with 2019, on a like-for-like basis. +Note: Overseas travel is excluded because +the requirement to cover news events +fluctuates year-on-year and is outside +the Company’s control. +Achieved +We have had a 73% reduction in +UK/domestic business travel GHG +emissions versus 2019. +Maintain GHG emissions associated with +UK/domestic business travel in 2022 compared +with 2019, on a like-for-like basis. +Note: Overseas travel is excluded because the +requirement to cover news events fluctuates +year-on-year and is outside the Company’s control. +Environmental management +We are aiming for a combined ISO 14001:2015 +certification for all print sites under our ownership +across the UK within the next two years. +To maintain ISO 14001:2015 to all publishing sites +in scope. +Achieved +ISO 14001:2015 certification was +combined and maintained for +print sites. +ISO 14001:2015 certification was +maintained for publishing sites +in scope. +We aim to maintain the ISO 14001:2015 standards for +our three owned print sites and our publishing division. +We will review the scope of the Publishing +ISO 14001:2015 accreditation to reflect recent +changes to our working environment. +We aim to report GHG emissions on all relevant +Scope 3 categories in 2023. +Achieved +We have fully baselined our total GHG +emissions including Scope 3. 11 out of +15 categories are relevant to Reach +operations. +We will continue to report our full GHG emissions +across all three Scopes. +50 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_53.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_53.txt new file mode 100644 index 0000000000000000000000000000000000000000..293f4c07122002d38ce361196e6105d2de3dbced --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_53.txt @@ -0,0 +1,79 @@ +Responsible business continued +Protecting our environment +Targets and metrics +2023 Target Progress in 2023 2024+ Target +Environmental management continued +This is a new target n/a To have our GHG emissions data +independently verified. +This is a new target n/a To develop the Group’s Sustainability Report. +Supply chain +We aim to use 100% graphic paper (all newsprint +and magazine paper grades) manufactured +from fibre using recycled materials or wood +from certified sustainable forests. We commit +to achieving at least 95% recycled materials +or wood from certified sustainable forests. +Achieved +Achieved 97.28% graphic paper +using recycled materials or wood +from certified sustainable forests, and +we continued to work with suppliers to +maximise this. +We aim to use 100% graphic paper (all newsprint and +magazine paper grades) manufactured from fibre +using recycled materials or wood from certified +sustainable forests. We commit to achieving at +least 95% recycled materials or wood from +certified sustainable forests. +This is a new target n/a We aim to identify and engage with our top 20 +suppliers by GHG emissions, aiming to reduce our +Scope 3 emissions associated with them. +Waste and water +We will reduce our Volatile Organic Compound +(VOC) emissions annually versus the +previous year. +Achieved 64.2% reduction from 2022. We will reduce our VOC emissions annually versus +the previous year. +Maximum of 3% of hazardous waste generated at +print sites under our ownership to go to landfill. +Achieved 1.32% for 2023. Maximum of 3% of hazardous waste generated at +print sites under our ownership to go to landfill. +Biodiversity +This is a new target n/a We will carry out an internal review aiming to better +understand our impact on biodiversity. +Targets and metrics +Environmental performance data +Energy consumption and greenhouse gas +(GHG) emissions tonnes Carbon Dioxide +equivalent (tCo2e) +Methodology +As a large, quoted organisation, Reach plc +is required to report its UK energy use and +carbon emissions based on the Environmental +Reporting Guidelines, including mandatory +greenhouse gas emissions reporting guidance +(March 2019) issued by the then Department +for Business, Energy & Industrial Strategy (BEIS). +Reach’s methodology is consistent with the +World Resources Institute’s Greenhouse Gas +Protocol Corporate Accounting and Reporting +Standard. The data detailed in this table +represents emissions and energy use for +which Reach is responsible, including Scope 1 +emissions (fuels, refrigerants, natural gas and +company car usage), Scope 2, electricity +purchased by Reach during the reporting +period, and Scope 3; all other emissions are +from Reach’s supply chain. +Our offices outside the UK are leased. These +figures are included in the Scope 3 emissions +table. We have used the main requirements +of the Greenhouse Gas Protocol Corporate +Standard to calculate our emissions, along +with the UK Government GHG Conversion +Factors for Company Reporting 2022. Data +was collected internally within Reach and +includes actual data from invoices from +our sites. +51 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_54.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_54.txt new file mode 100644 index 0000000000000000000000000000000000000000..e6b1f73cedd194a491883c14e32e38acecabb274 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_54.txt @@ -0,0 +1,26 @@ +Responsible business continued +Protecting our environment +Consumption GHG emissions (tCO2e) +2023 2022 2019 2023 2022 2019 +UK and Offshore Scope 1 2 +Gas combustion – heating (kWh) 14,161,559 14,265,096 17,359,411 2,591 2,604 3,192 +Oil combustion – electricity generation (kWh) 1,364 84,331 956,029 0.35 22 242 +LPG consumption (kWh) 544,026 1,376,681 333,355 125 317 71 +Commercial vehicles (kWh) 3 1,248,687 1,431,149 3,149,678 294 343 788 +Refrigerant gas loss (kg) 163 324 263 328 608 608 +Total UK and Offshore Scope 1 4 3,338 3,894 4,901 +Global (excluding UK and Offshore) Scope 1 (ROI commercial vehicles only kWh) 6,130 13,233 1 3 +UK and Offshore SCOPE 2 5 +Grid electricity used – location-based (kWh) 28,438,637 34,918,787 51,206,683 5,889 6,753 13,088 +Grid electricity used – market-based (kWh) 28,438,637 34,918,787 51,206,683 9,816 +UK and Offshore Scope 2 (market-based) 6 9,816 +UK and Offshore total Scope 1 and Scope 2 (market-based) 4 3,338 3,894 14,717 +Global (excluding UK) total Scope 1 and Scope 2 +(market-based) 1 3 +UK and Offshore Scope 1 and 2 per million pages printed 7 0.083 0.078 0.171 +Global (excluding UK and Offshore) Scope 1 and 2 per million pages printed 0.00004 0.0001 +Environmental performance data +Energy consumption and greenhouse gas (GHG) emissions tonnes Carbon Dioxide equivalent (tCO2e)1 +52 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret office supply is a "calculator". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_55.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_55.txt new file mode 100644 index 0000000000000000000000000000000000000000..b9346335664f9fef1c113ce926ff08e4b324be21 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_55.txt @@ -0,0 +1,49 @@ +Responsible business continued +Protecting our environment +Waste 2023 2022 2020 +Total hazardous waste from print sites (tonnes) 1,039 1,147 1,379 +Total hazardous waste from print sites to landfill (tonnes) 13.7 19 38 +% hazardous waste from print sites to landfill 1.32% 1.69% 2.80% +Total weight of non-hazardous paper waste recycled (tonnes) 7,543 9,744 10,627 +% non-hazardous paper waste from print sites under our +ownership recycled 100% 100% 100% +% waste electrical and electronic equipment from publishing +sites reused or recycled 100% 100% 100% +% aluminium printing plates recycled 100% 100% 100% +Water 2023 2022 2020 +Total water consumption at all print and major publishing sites +(m3) 19,737 24,857 35,458 +Volatile Organic Compounds 2023 2022 2020 +Emissions of Volatile Organic Compounds (VOCs) (tonnes) 2.6 7.33 10.47 +GHG emissions (tCO2e) +YOY%Scope 3 emissions table 2023 2022 +Scope 3 8,9 +Category 1. Purchased Goods and Services 4 99,169 131,081 -24% +Category 2. Capital Goods 1,967 2,468 -20% +Category 3. Fuel and Energy 4 2,452 3,013 -19% +Category 4. Upstream Transport and Distribution 4 46,727 56,363 -17% +Category 5. Waste 4 250 305 -18% +Category 6. Business Travel 1,662 1,521 9% +Category 7. Employee Commuting 3,430 4,260 -19% +Category 8. Upstream Leased Assets 586 576 2% +Category 11. Use of Sold Products 23,694 28,190 -16% +Category 12. End of Life Treatment of Sold Products 16,342 9,241 77% +Category 15. Investments 1,645 1,253 31% +Total Scope 3 197,924 238,271 -17% +Total Scope 3 tCO2e per million pages printed 0.000010 0.000010 2% +1. GHG emissions and energy consumption are calculated in line with Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance March 2019 using the UK Government’s Greenhouse gas +reporting: conversion factors 2023 (BEIS). 2022 and 2019 GHG emissions used 2022 and 2019 conversion factors from BEIS +2. Scope 1 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent from emission sources that are under the operational control of Reach +3. The Commercial vehicles data in kWh has been added to the reporting table for SECR reporting +4. Scope 1 LPG has been re-stated for 2022. Scope 1 Company car emissions have been re-stated for 2022 as Reach sourced new mileage data and has retrospectively amended emissions +As a result, the Scope 3 Well-to-tank emissions for total UK Scope 1 and Scope 2 energy consumption and emissions have also been restated (these are reported on a market-based basis). Scope 3, Purchased Goods and +Services, Upstream T&D, and Waste have been re-stated for 2022 due to improvements in data quality and methodology +5. Scope 2 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent resulting from the purchase of electricity by Reach for its own use +6. No global (excluding UK) Scope 2 as all UK-based operations +7. To reflect the amended totals associated with the difference in Scope 1 data, the Scope 1 intensity emissions per million pages have also been restated +8. Scope 3 covers other indirect greenhouse gas emissions for which data is currently collected, i.e. where the emissions are from sources that are not owned by Reach and where Reach does not have operational control. +Our Scope 3 records for 2022 and 2023 now represent a comprehensive and complete carbon footprint for all of our Scope 3 emissions. In line with best practice, BEIS, Internal Energy Agency (for international electricity) and +CEDA (for spend-based data) emission factors have been used. Our Scope 3 emissions follow the year 1 January to 31 December +9. Categories 9, 10, 13 and 14 are not relevant to Reach’s business +53 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_56.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_56.txt new file mode 100644 index 0000000000000000000000000000000000000000..2a73f94257a4a7832b4d34614fcb33b1b044eae8 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_56.txt @@ -0,0 +1,99 @@ +PREPARING OUR BUSINESS +FOR THE CHANGING CLIMATE +There is an overwhelming body of evidence +that climate change is already causing +destruction, damage and loss of life globally. +Our industry is currently undergoing a shift +from being largely print-based to primarily +digital. Climate impacts to both print and +digital-based business remain relevant for +Reach and their management is key to ensure +the resilience of operations. Hence, we are +assessing climate impacts in the context of +these changes. +Businesses are exposed to physical climate +risks, including asset damage due to extreme +climate events, often resulting in additional +costs and delays from operational and supply +chain disruption, as well as the risks associated +with transitioning to a green economy and +more stringent policies and regulations. At +Reach, we have developed our understanding +of the most relevant risks and are working on +their management. +Taking action on climate change also presents +businesses with opportunities to ensure +sustainable growth and improve overall +resilience to future changes – and these are +particularly strong for Reach as we transition +to become a digitally-focused business. +We have made much progress in better +understanding our current and future +climate-related risks and are continuing +the work we started in 2022 to ensure that +our business remains resilient in the face of +climate uncertainty. +Summary of our work in 2023 +In 2022, we carried out our initial qualitative +Climate Scenario Analysis (CSA), which +involved a desk-based study and two +stakeholder workshops. The qualitative CSA +included the analysis of risks and opportunities +using different time horizons and two climate +scenarios. We identified three key risks – one +physical (flooding that impacts directly and +indirectly on our operations), and two +transitional (carbon and energy pricing). +We also identified a key opportunity for our +business, which is our strategy to become +a more sustainable digital business. +Following our work in 2022 to identify our +most material physical and transition risks, +we quantified these risks in 2023. This has +improved our understanding of the risks, +started to identify the potential financial +implications on our business and tested +the resilience of our strategy under +multiple climate scenarios. +We also continued to calculate our full +carbon footprint, enabling us to understand +how and where we need to make changes +and investments to reduce our impact on +the climate and our exposure to emission- +related risks. Reach retains relevant records +of previous and ongoing work to support the +TCFD disclosure. +Consistency with TCFD and CFD +We began reporting voluntarily against +the recommendations of the Task Force on +Climate-related Financial Disclosures (TCFD) in +our 2021 Annual Report. This is our second year +of mandatory reporting of TCFD and our work +in this area continues to expand. Additionally, +from this year, Reach is also required to align +its climate financial disclosures with the +Companies (Strategic Report) (Climate-related +Financial Disclosure) Regulations 2022, also +known as CFD. +Following from progress made this year, +we are fully consistent with seven of TCFD’s +recommendations and partially with the other +four, as well as fully complying with all of the +CFD requirements displayed in the table on the +next page. +As a UK premium-listed company, we +report on a ‘comply or explain’ basis against +the recommendations of the TCFD. This is +consistent with the requirements of the UK’s +Financial Conduct Authority. Reach has taken +into account all of the guidance specified by +the Listing Rule 9.8.6R(8). Reach follows the +’Guidance for All Sectors’ TCFD +recommendations. +This section of the Annual Report has been +tailored to account for relevant guidance and +the table below outlines our alignment to both +TCFD and CFD. +Task Force on Climate-related Financial Disclosures (TCFD) +54 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_57.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_57.txt new file mode 100644 index 0000000000000000000000000000000000000000..f395d8a0fd24540f622e9daf20853a36ca975279 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_57.txt @@ -0,0 +1,92 @@ +TCFD recommendation CFD requirement Summary of disclosure and 2023 actions Next steps +Governance: Disclose the organisation’s governance around climate-related risks and opportunities +A. Describe the board’s oversight of +climate-related risks and opportunities +See page 57 +A. A description of the company’s +governance arrangements in relation +to assessing and managing climate-related +risks and opportunities +• Board oversees climate risks and opportunities, led by the +Sustainability Committee +• In 2023 the Board and management undertook training on +climate-related issues +• Continue regular engagement and +delivery of training on climate-related +issues, risks and opportunities more +widely across the Reach team +B. Describe management’s role in +assessing and managing climate-related +risks and opportunities +See page 57 +• Oversight by the ESG Steering Committee; management across +the business involved in identifying, managing and reviewing +climate-related risks and opportunities +• In 2023, we further developed senior management team roles and +responsibilities, and identified ownership for climate risks +• Continue to regularly review climate- +related risks and opportunities +with relevant risk owners and +management team +Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material +A. Describe the climate-related risks and +opportunities the organisation has identified +over the short, medium and long term +See page 60 to 63 +D. A description of i. the principal climate- +related risks and opportunities arising in +connection with the company’s operations, +and ii. the time periods by reference to which +those risks and opportunities are assessed +• Qualitative CSA carried out in 2022 identified our most material physical +and transition climate-related risks and opportunities under two climate +scenarios over the short, medium and long term and recognised climate +change as an emergent risk +• Risks identified will continue to be +regularly reviewed +B. Describe the impact of climate-related +risks and opportunities on the organisation’s +businesses, strategy and financial planning +See pages 60 to 63 +E. A description of the actual and potential +impacts of the principal climate-related +risks and opportunities on the company’s +business model and strategy +(non-mandatory if director provides +an explanation) +• In 2023, we quantified the likely impact of each most material risk at site +and Group level, taking into account the impact in relation to strategy +and financial planning +• Further work is required to fully develop our plan to transition to a +low-carbon economy +• Continue our work to further integrate +insight on climate risks to Reach in our +strategy and financial planning +• We are working to develop and set +emission reduction targets, which will +help us develop our transition plan +F. An analysis of the resilience of the +company’s business model and strategy, +taking into consideration different climate- +related scenarios +C. Describe the resilience of the +organisation’s strategy, taking into +consideration different climate-related +scenarios, including a 2°C or lower scenario +See page 60 +F. An analysis of the resilience of the +company’s business model and strategy, +taking into consideration different climate- +related scenarios +• Our CSA work considers multiple climate scenarios and time horizons +when assessing our climate risks and opportunities +• In 2023, our quantitative analysis has analysed our current operations +and strategy within different climate scenarios (including a 2°C or +lower scenario) +• In 2024: develop and implement +mitigation plans for relevant risks +TCFD report continued +Full alignment Partial alignment +55 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret animal #1 is a "giraffe". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_58.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_58.txt new file mode 100644 index 0000000000000000000000000000000000000000..3b55ab4bd47fb73f3820bea23e6a9c1d732fd797 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_58.txt @@ -0,0 +1,92 @@ +TCFD recommendation CFD requirement Summary of disclosure and 2023 actions Next steps +Risk management: Disclose how the organisation identifies, assesses and manages climate-related risks +A. Describe the organisation’s processes +for identifying and assessing climate- +related risks +See page 59 +B. A description of how the company +identifies, assesses and manages +climate-related risks and opportunities +• Reach qualitatively assessed climate risks and opportunities in 2022 +• In 2023, we continued that work and quantified the most material risks +• Continue to review climate-related +risks as part of our overall risk +management framework +B. Describe the organisation’s processes +for managing climate-related risks +See page 59 +• Climate change is tracked in our emerging risk register, with specific +climate-related risks managed through our risk management +framework and overseen by specific risk owners +• Continue to review climate-related +risks as part of our overall risk +management framework +C. Describe how processes for identifying, +assessing and managing climate-related +risks are integrated into the organisation’s +overall risk management +See page 59 +C. A description of how processes for +identifying, assessing and managing +climate-related risks are integrated +into the company’s overall risk +management process +• Material climate-related risks identified via our CSA work finalised in 2023 +have been included in the business risk registers and are being tracked +by the relevant risk owners +• Continue to review climate-related +risks as part of our overall risk +management framework +• Plan to review and update our climate +scenario work in 2026 as part of a +three-year review process +Metrics and targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material +A. Disclose the metrics used by the +organisation to assess climate-related risks +and opportunities in line with its strategy and +risk management process +See page 64 +H. The key performance indicators used to +assess progress against targets used to +manage climate-related risks and realise +climate-related opportunities and a +description of the calculations on which +those key performance indicators are based +• Scope 1, 2 and 3 GHG emissions monitored and reported annually. +In 2023, we focused on calculating our full Scope 3 emissions +• We have further work to do to define metrics in relation to risks identified +• In 2024: identify additional metrics to +monitor each key risk and opportunity +quantified in our climate scenario +analysis work, and set near-term SBTs +B. Disclose Scope 1, 2 and, if appropriate, +Scope 3 greenhouse gas (GHG) emissions +and the related risks +See page 64 +• See above +• While we monitor Scope 1, 2 and 3 emissions we do not yet explicitly +report climate risks related to Scope 1, 2 and 3 +• Annual calculation of our +Scope 1, 2 and 3 emissions +C. Describe the targets used by the +organisation to manage climate-related +risks and opportunities and performance +against targets +See page 64 +G. A description of the targets used by the +company to manage climate-related risks +and to realise climate-related opportunities, +and of performance against those targets +• 75% reduction of total Scope 1 and 2 GHG emissions by 2025 against +a 2019 base year +• Several other climate-/environment-related targets, e.g. for business +travel and electricity consumption +• In 2024: further work in reviewing +and setting additional targets for +the metrics identified for relevant +climate risks and opportunities +TCFD report continued +Full alignment Partial alignment +56 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret object #5 is a "vase". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_59.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_59.txt new file mode 100644 index 0000000000000000000000000000000000000000..c51510705492645622c9c7ab75b6fbec887e5768 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_59.txt @@ -0,0 +1,116 @@ +Governance +Climate-related risks pose a potential threat +across our business but we have integrated +them into our decision-making across the +business and taken the necessary steps to +align our operations with the latest climate +science to minimise negative impacts. Overall +responsibility and oversight of climate-related +issues is at the Board level, supported by the +management team who regularly assess, +review and monitor these issues and our +approach to tackling them. +Our work in 2023 has focused on strengthening +our understanding and the role everyone +in the business plays in tackling climate- +related issues. We have extended training +opportunities more widely and launched the +new ReachSustainability network to connect +and engage people across the business. The +mission of this network is to raise the profile of +environmental, social and governance (ESG) +initiatives, provide training opportunities and +support across the business and champion +best practice around sustainability. +Board +Since our initial alignment with TCFD in 2022, +our governance structure at Board level has +not changed. The Board’s oversight of all +climate change and environmental issues is +directed by our Chief Financial Officer (CFO), +with ultimate responsibility lying with the Board +Sustainability Committee (the Committee), +which comprises all Board members. The +Committee oversees and recommends for +Board approval the Group’s responsible +business framework and related commitments, +and reviews and challenges any annual +sustainability-related targets. The Committee +is chaired by a non-executive director, Priya +Guha, and met twice in 2023 to review +progress on these issues. +Our Board Audit & Risk Committee (ARC) +is chaired by Anne Bulford and is made up +of independent non-executive directors. It is +responsible for risk management, including +climate-related risks, and reviewing the +content and accuracy of our reporting. Like the +Committee, it has been provided with regular +updates on the TCFD and quantitative CSA +work that has been conducted throughout 2023. +We have not linked executive remuneration +with climate-related issues to date. However +for the 2024 Long Term Incentive Plan, an +environmental metric regarding reductions +in Scope 1 and Scope 2 emissions will be +introduced. Read more on page 126. +Management +Management-level oversight of our climate- +related risks and opportunities is conducted by +our ESG Steering Committee. Chaired by our +CFO, the ESG Steering Committee is made up +of senior managers from across the business +and meets quarterly to review and manage +the Company’s approach to sustainability, +including climate-related issues. The ESG +Steering Committee reports to the +Sustainability Committee. +In 2023, the ESG Steering Committee +worked with an external adviser to quantify +the climate-related risks and opportunities +identified in previous qualitative CSA work. +This puts us in a position to, where needed, +develop mitigation processes and measures +against these risks while also identifying +the links between climate-related risks +and opportunities and our overall strategy +as we transition from print-based to +digitally-based products. +The TCFD Working Group, which focuses on +addressing the requirements set out by the +Task Force, has focused this year on gaps +identified in 2022. There are several teams +across the business which form the TCFD +Working Group and support the ESG Steering +Committee and its sustainability work, +particularly across risk, operations and finance. +Our risk team identifies, manages and monitors +climate-related risk, while our operations team +is responsible for monitoring of GHG emissions +and energy consumption. The operations +team has been consulted and has heavily +contributed to the analysis done to quantify +Next steps – +Governance in 2024 +• Continue to promote training +opportunities more widely across the +business on climate-related issues, +risks and opportunities +• As we grow our understanding +of financial impacts, we will further +develop senior management roles and +responsibilities for how climate-related +issues are monitored and managed +TCFD report continued +climate risks. The operations team also +includes Green Teams at our print sites, +who lead environmental initiatives. +As we progress our understanding of +climate risks and their potential implications, +the finance team plays an increasing role in +identifying and managing them. For example, +the responsibility for overseeing and monitoring +the potential financial effects of climate-related +issues falls to finance. +57 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_6.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_6.txt new file mode 100644 index 0000000000000000000000000000000000000000..74156f879224748cd5502455d187bad08cfa1a98 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_6.txt @@ -0,0 +1,86 @@ +Chairman’s statement +The changing media world +We saw big changes in the media and +wider digital industry in 2023 – and significant +challenges. Most major media organisations +at home and abroad, including Reach, had +to contend with the dual pressures of low +consumer confidence and the dominance of +large tech platforms in deciding how or even +if they would make news available to people. +Against this backdrop, the Board and I believe +that the management team has responded +appropriately to these trends and made the +right plans for the future, enabling the business +to cover financial obligations and support +strategic investment. +Update on pensions and historical +legal issues +In 2023, we oversaw the business as it +navigated and made significant progress +in resolving several long-standing questions. +Following years of preparation and a very +carefully considered decision to go to trial, +we were able to draw a line under our +long-standing historical legal issues. +The judgment we received in December 2023 +represents a watershed moment for us. Most +importantly it has given us clarity around time +limitation for any future claims, allowing the +business to plan with more certainty for +the future. +In October, we were able to conclude the 2019 +triennial valuation for the MGN pension scheme, +and at the same time concluded its 2022 +triennial valuation. Discussions are ongoing +with the Group’s other schemes regarding the +2022 triennial valuations and are expected to +be concluded satisfactorily by the 31 March +2024 due date. +These have been difficult, painful and long- +standing issues for all those involved, both +in the Company and those who have been +affected by them. Resolving them has been +hard work for many, but the greater certainty +for the business is real progress. +Strategy +We are encouraged by the business’s progress +this year in diversifying its revenue, ensuring +that our ad-based model is supported and +strengthened by multiple income streams. +Affiliates and ecommerce have both shown +promising growth, as we have built on our +early success with the OK! Beauty Box and +explored several new opportunities. +It was also good to see our three US sites +launching on schedule and building their +audiences as planned – an important step +in strengthening our customer base. +In Q4, we approved additional investment to +key areas including video, ecommerce and +affiliates, as well as further focus on the youth +and lifestyle audience. +We will also continue to invest in our +successful in-house ad-tech tool Mantis, +which we originally launched in 2019 and have +steadily expanded on. Powered by machine +learning, Mantis has proven to be a valuable +tool for a range of uses, including brand +safety, contextual advertising and driving +page views by recommending suitable +content to our audiences. +The Board and I recognise the importance of +continuing to assess and challenge strategic +progress, especially against the backdrop of +a rapidly shifting landscape. +Regulatory developments +Our CEO Jim Mullen completed his last year +as chair of the News Media Association (NMA) +Board in 2023, a year when we and the rest +of the industry saw positive movement on +several pieces of key media legislation, +DRAWING A LINE BETWEEN PAST AND FUTURE +Nick Prettejohn +Chairman +4 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_60.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_60.txt new file mode 100644 index 0000000000000000000000000000000000000000..77a208a6a153227fca1e206afd6d5d1fac87adea --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_60.txt @@ -0,0 +1,55 @@ +TCFD Governance +Board Management +TCFD report continued +Board +The Board ensures that our governance +framework is implemented through a +programme of action plans and +annual targets. +This year the Board has undertaken +training on climate-related issues. +TCFD Working Group +The TCFD Working Group is made up +of colleagues from Group Finance, +Risk and Audit, Company Secretariat +and Central Services. +Sustainability Committee +The Sustainability Committee is +made up of all Board directors. +It has responsibility to review, +challenge, oversee and +recommend for approval the +Group’s responsible business +framework and related +commitments; review and +challenge annual sustainability- +related targets; and review +and oversee the Group’s +sustainability reporting. +Environmental, Social and +Governance Steering +Committee +The ESG Steering Committee is +chaired by the Chief Financial +Officer and is attended by various +senior managers across the +business. The Committee is +responsible for ensuring that +all climate change and +environmental targets +and legislation are met. +Audit & Risk Committee +The Audit & Risk Committee +is responsible for scrutinising +climate-related and financial +reporting, and for monitoring +our risks. +Executive +management team +The executive management +team supports the Sustainability +Committee by attending each +meeting as required. +Key Direction and oversight Reporting Advice +58 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_61.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_61.txt new file mode 100644 index 0000000000000000000000000000000000000000..f62f8a1efaf23414ec6d8665e1027fdccb45dca7 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_61.txt @@ -0,0 +1,135 @@ +Risk management +Reach’s process to identify and assess +climate-related risks began in 2022 as part +of the qualitative Climate Scenario Analysis +(CSA). In 2023, we continued this work by +conducting a quantitative CSA. The risks +considered in the quantitative assessment +are those that had been identified in 2022 +by the Board and the senior management +team as most material and relevant to Reach. +These are: +• energy pricing; +• carbon pricing; and +• increased flooding. +This work involved engaging with a range +of internal stakeholders (including senior +management, risk operations and finance) +through a series of questionnaires and +workshops to discuss and gather insight +on our level of preparedness to cope with +the different risks. It also involved collecting +and analysing the external climate modelling +data needed to comprehensively assess +our exposure to these risks. We used the risk +framework developed this year to assess all +risks; this supports the integration of climate +risks in the overall assessment and comparison +of different risks. Our risk team is responsible +for the risk management framework, including +climate-related risks. You can read more +details on our approach to CSA in the +Strategy section. +As part of our ongoing work on climate +issues, and in addition to our quantitative CSA +work, we have reviewed the potential overall +implications of current and proposed climate +regulation. As a result, climate change remains +a general emerging risk. The emerging risk +and the individual most material climate +risks assessed are therefore monitored by +our senior leadership team through our risk +management framework, which includes +regularly reviewing the relevance and severity +of external pressures and the environment +within which we are operating. Our work to +improve our risk management processes, +which included further work to understand +more fully the emerging risk of climate +change, has also led to a better embedding +of this emerging risk into our risk management +model; see our risk management process on +page 66 for more on how we manage risk +in general. +Strategy +A key focus for our business strategy at Reach +is to transition away from predominantly +paper-based products towards a digitally- +based platform. We identified in our CSA +work last year that there are climate-related +physical and transition risks relevant to Reach +that are likely to impact our current business +model and our strategy, as well as several +opportunities associated with the transition +to a low-carbon economy. To prepare for +these challenges and opportunities, we have +progressed our CSA work and quantified the +potential impacts of the main climate risks +on our business. +The approach taken in the quantitative CSA +assessment is formed of three parts: exposure +(analysis of how the climate and related +drivers are projected to change); vulnerability +(sensitivity and level of preparedness to a +climate hazard); and risk (combining exposure +and vulnerability results to calculate overall risk). +Exposure modelling – how individual sites/the +business are exposed to each hazard under +different time horizons and global climate +scenarios (a low-carbon scenario of 1.5-2°C +and high-carbon scenario of 4°C) as well as +different business scenarios. The exposure +modelling was informed by climate modelling +data from several sources, including regional +climate models, International Energy Agency +(IEA) projections and EnerFuture data. +Exposure was then analysed and categorised +considering the likelihood of a climate-related +event (e.g. a flood or a carbon price) occurring +in a given climate scenario and time horizon. +Likelihood ratings were assigned based on +existing definitions within Reach’s risk framework. +Vulnerability assessments – how sensitive +the site/business is to a hazard and if there +are any measures in place to reduce the risk. +As part of the vulnerability assessment, print +and office site managers as well as relevant +business units completed a questionnaire that +enabled us to understand how sensitive each +site is to the risks analysed. Vulnerability ratings +were assigned based on definitions within +Reach’s risk framework. +Risk calculation – the vulnerability and +exposure ratings were combined for each site +and risk to obtain a risk score (using Reach’s +risk framework as a reference). Impact in +Reach’s risk framework is analysed based +on financial, strategic (including reputation), +operational and compliance considerations. +Given the risks analysed quantitatively as part +of the CSA work in 2023, focus has been given +to financial impacts. However, considerations +of strategic impacts have also been taken into +account. The description of financial impact in +the risk framework has been applied to assess +the potential magnitude of the impact for +each risk. Read more about our risk +framework on page 66. +The outputs of the quantitative CSA work are +being integrated into Reach’s existing risk +register and framework. +Next steps +We are working to develop a process to +review all identified climate-related risks +and reassess their relevance to Reach +every three years. As the initial qualitative +CSA was carried out in 2022, with the +quantitative CSA in 2023, the next CSA +assessment will be in 2026. Between now +and then we will continuously monitor +the most material climate-related risks +that have been identified (as described +in the Risk management section). +TCFD report continued +59 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_62.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_62.txt new file mode 100644 index 0000000000000000000000000000000000000000..b20baecd64483f1ae99f6be0cb0de38c43c856ed --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_62.txt @@ -0,0 +1,128 @@ +We conducted desk-based research across a +range of the latest climate science published +by international and national organisations. +This gave us an overview of the latest climate +projections across different possible scenarios +and, based on the scenarios envisaged by +these organisations in their research, we +considered two when identifying and assessing +our risks. These scenarios lie at opposite ends +of the spectrum, which enables us to gain +an understanding of the range of potential +climate-related risks and opportunities +relevant to Reach. These scenarios are +potential pathways, rather than projections, +and either are possible. +The scenarios we have looked at: +• Low-carbon scenario: this ‘net zero by 2050’ +scenario assumes that we achieve the goal +of the Paris Agreement, namely that the +global temperature rise is limited to 1.5°C +above pre-industrial levels. In this scenario, +the most likely risks are those associated +with the transition to a lower-carbon +economy, namely higher emission costs, +while physical risks will be lower than in +a high-carbon scenario. For energy and +carbon pricing risks, data from two specific +low-carbon scenarios developed by IEA +were used, i.e. Maximum Ambition (leading +to net zero by 2050) and Enhanced Ambition +(assumes national targets and +commitments are achieved). +• High-carbon scenario: this ‘business-as- +usual’ scenario assumes that climate policies +and other actions taken are insufficient to +achieve the goals of the Paris Agreement +and transition to a low-carbon economy, +and so global temperatures rise to 4°C +above pre-industrial levels. In this scenario, +we expect to see severe physical risks. +The time horizons we have considered: +Near: now to 2030 +Medium: 2030 to 2050 +Long: beyond 2050 +These time horizons align with national climate +targets (for example, the UK’s commitment to +net zero by 2050), potential key target years +for Reach in relation to climate actions, time +horizons where climate drivers are likely to +materialise, and, as far as practical, with +the timeframes used in relevant climate +science publications. +It’s important to note that there are inherent +uncertainties in any climate model outputs for +a specific scenario, given how much depends +on variables such as the speed of the energy +transition, the introduction (or not) of climate- +related policies by governments across the +world, and how quickly the climate changes in +response. Nonetheless, the analysis allows us +to understand the potential consequences +and plan accordingly. +The results of our quantitative CSA work +are summarised for each risk identified in the +table below. Overall, carbon pricing has been +identified as the most relevant risk for Reach. +However, when considering Reach’s strategy +to transition away from paper-based products, +carbon pricing should not represent a +significant financial risk to Reach. In the short +term, Reach could face some risk (moderate +when considering Reach’s risk framework) +from paper consumption, with paper +manufacturers facing higher carbon prices +and passing some of their costs on to Reach, +but carbon prices for paper manufacturers are +currently low or non-existent. As Reach moves +away from print, the risk of facing carbon costs +from paper manufacturers or suppliers of +freight services will fall sharply. +Our quantitative CSA work this year found +that energy pricing should not represent +a significant financial risk to Reach when +considering scenarios including Reach’s +planned actions. Flooding does not present +a significant risk to most of our offices directly, +and although flooding of the surrounding area +is expected for most offices in the future, the +impact is expected to be minimal in most +cases, taking into account existing measures +to continue operations during these events. +Our print sites are not projected to be directly +exposed to flooding under current or future +scenarios, though there is a possible indirect +exposure risk, e.g. the electricity substation +serving one of our print sites is exposed to +surface and river flooding in current and future +climate scenarios. Overall, the future risk of +flooding is considered to be low to moderate +and its financial impacts to be minimal. +The analysis of risks in the near and medium +term under two global climate scenarios has +shown that our current business model and +our strategy are resilient to these main climate +impacts. In fact, our strategy aligns with the +climate actions needed to decrease exposure +to certain transition risks. +Our qualitative CSA work in 2022 showed +that climate change also presents several +opportunities, particularly in a scenario where +we transition to a low-carbon economy. +We used the same approach as with risks +to identify and assess opportunities and to +identify the most significant opportunities +for our business. Our key opportunity, in both +scenarios and across all time horizons, is the +transition from print to digital that is already +under way as we deliver our strategy. This year, +as part of the analysis of carbon and energy +prices, we have identified scenarios that +reduce potential costs. For example, in a +low-carbon scenario, our energy costs would +be lower than current costs in the short and +medium term. +TCFD report continued +60 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret vegetable is "cauliflower". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_63.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_63.txt new file mode 100644 index 0000000000000000000000000000000000000000..342941425ffd32494ad607fcb1cda3a1c992f4d2 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_63.txt @@ -0,0 +1,149 @@ +Table of summary of quantitative CSA work for each risk +FLOODING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Flooding is the major physical +climate-related risk in the UK and +under climate change conditions +it is expected to increase both in +intensity and frequency (projections +show that intense rainfall and flash +flooding could become almost five +times more likely by the end of the +century). Based on findings from the +latest UK Climate Risk Assessment, +in a 4°C scenario damages to +businesses could increase by +around 44% by 2050 and 75% +by 2080. +Reach has offices and print sites in +more than 15 locations across the UK +and Ireland. The level of flood risk +(including surface, river and coastal +flood risk) varies depending on the +site, its location and the systems it +depends on. The direct and indirect +impacts of extreme weather events +were identified as the main physical +risk to Reach. Indirect impacts might +be of most relevance as downtime +in the energy system and blocked +access to sites can cause disruption +to operations. +Risk category: Physical, Acute +Link to existing principal risk: +Supply chain disruption +High carbon and medium term +(to 2050s) +Both low and high-carbon scenarios as +well as near, medium and long term have +been included in the analysis of flood risk. +The most relevant scenario is the high- +carbon scenario (analysed using climate +modelling output from RCP8.5) and the +time horizon at which the increase in the +risk might be significant compared to the +baseline period is the 2050s. +Rating: +This varies depending on the +site but overall it has been +categorised as very unlikely +direct exposure to flood but +possible indirect exposure. +Description: +We have analysed flood +exposure at each individual +site using a range of free and +at-cost datasets, representing +the best flood models available +to assess current and future +flood exposure. For the most +relevant time horizon and +scenario, we have identified two +locations which in the future are +expected to be directly exposed +to flooding (but the vulnerability +of these sites was categorised +as low and hence not at +considerable risk). In addition, +projections show that a number +of sites are expected to be +indirectly exposed to flooding +(i.e. site not expected to flood +but surrounding areas +might flood). +Rating: +The potential impact of a flood +varies per site but overall it has +been categorised as being low +for office sites and major for +print sites. +Description: +A set of vulnerability +considerations were +assessed at site and Group +level to determine the state +of preparedness for flooding. +If a flood event was to occur +at an office site, the level of +impact was categorised as +low as there is generally no +critical equipment that could +get damaged, and employees +have the ability to work from +home. Hence, the overall +impact on operations would be +minimal. At print sites, assuming +a flood event occurs, the +impact was categorised as +major given the potential +damage to material and +equipment and impact on +operations if the energy +system was impacted. +Rating: +Overall categorised as low/ +moderate (ranging between +low to moderate depending +on the site). Financial impact +expected to be minimal in a +future climate scenario and +considering Reach’s strategy +and measures in place. +Description: +Risk per site was estimated +by combining information +on likelihood and impact. +While the risk varies per site, the +overall risk to Reach has been +categorised as low/moderate, +given the mitigation measures +available and the existing +insurance to cover damages. In +addition, given Reach’s strategy +to become a digitally-focused +business, flood risk to print sites +would decrease as the strategy +is implemented. +• Existing working from home +policy for office-based +workers if offices are +inaccessible. +• Existing warning system to +inform employees in the +case that working from +an office is not possible. +• In specific sites, elevation of +water-sensitive materials +and equipment to above +ground-level. +• Back-up power generators +at print sites. +• Contingency plans for print +sites (shifting printing load +between sites). +• Planned move to digital and +reduce reliance on printing. +TCFD report continued +61 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_64.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_64.txt new file mode 100644 index 0000000000000000000000000000000000000000..5f095b99f42723484fb620703fd10ca14a5d1a6a --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_64.txt @@ -0,0 +1,154 @@ +TCFD report continued +CARBON PRICING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Carbon pricing represents a major +climate-related risk in the UK, primarily +due to the UK Emissions Trading Scheme +(UK ETS) that puts a price on emissions +from certain sectors. As of November +2023, the price per tonne of CO2e under +the UK ETS is approximately £40. There +are also carbon prices impacting Reach’s +upstream supply chain partners in +countries in the EU and North America, +and the prevalence of these mechanisms +is growing. +Firms can either face direct or indirect +carbon pricing risk. Direct carbon prices +usually cover large facilities in emissions- +intensive industries, such as electricity +generation and manufacturing. Directly +regulated firms will probably pass their +carbon costs through to their consumers. +Most companies will face indirect risk +from carbon costs passed through +from emissions-intensive suppliers. +Depending on how carbon price +mechanisms evolve, Reach could face +risk from consumption of electricity, +natural gas, diesel, paper and road +freight services. In all such cases, carbon +costs would be passed through to Reach +from the suppliers of these services, +themselves directly subject to a carbon +tax or emissions trading scheme. +Risk category: Transition, Policy and Legal +Link to existing principal risk: +Supply chain disruption, Deceleration +of digital growth. +Low carbon and near term +(up to 2030) +The low-carbon scenario (in enhanced +and maximum ambition) is the one in +which carbon prices increase to the +highest levels. In the near term, Reach’s +direct and supply chain emissions will be +highest as paper products and print sites +remain critical for Reach’s operations. +Consequently, assuming emissions +continue to fall over time, risk will increase +in the short term and peak around 2030. +Rating: +While Reach will not face +direct exposure to carbon +pricing, it is likely to face +exposure to carbon prices +due to costs passed through +from suppliers. The likelihood +has therefore been +categorised as probable. +Description: +Reach sources paper +from several countries that +already have carbon prices +in place (such as the UK, EU +and Canada). Reach is likely +already facing some impacts +due to carbon prices faced +by paper manufacturers. +Reach is also likely already +facing impacts from carbon +prices faced by electricity +suppliers in the UK. In a +low-carbon scenario, +carbon prices in these +regions are expected to +increase considerably in +the near and medium term. +Rating: +Potential impact is moderate, +based on carbon pricing +trends and Reach’s planned +digitalisation actions. +Description: +Reach is transitioning away +from paper products and +will eventually become an +office-based supplier of +digital products. Such +companies are not at +major risk from carbon +pricing unless they have +exceptionally high on-site +energy consumption. +Reach’s greatest source +of risk will be from carbon +costs passed through from +electricity suppliers. If the +UK ETS expands, Reach may +also face significant risk +due to on-site natural +gas consumption and +any remaining road +freight services. +Rating: +Overall risk is categorised +as moderate. +Description: +Assuming a low-carbon +scenario (enhanced ambition) +and currently planned actions, +carbon pricing could represent a +moderate financial risk to Reach. +Even if Reach is not directly +regulated by a carbon price, it +could face some short-term risk +from paper consumption due to +its suppliers passing carbon costs +through. Carbon cost exposure +for most paper manufacturers is +currently low or non-existent but +that is projected to increase in the +future in a low-carbon scenario. +As Reach moves away from print, +the risk of facing carbon costs from +paper manufacturers or suppliers +of freight services is expected to +fall sharply. Reach will soon be +largely built around grid-based +electricity consumption and +cloud-based data storage. While +fossil-fuelled electricity production +can be regulated by carbon +pricing, the Company’s on-site +electricity consumption is unlikely +to be at a level that would cause +carbon pricing to be a major +concern. This is especially so +because the UK power grid is +expected to continue along a +strong decarbonisation trajectory. +• Digitalisation +could reduce energy +consumption from direct +operations, therefore +reducing exposure +to both carbon and +energy pricing. +• Installation of on-site +solar power will reduce +exposure to both carbon +and energy pricing. +62 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_65.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_65.txt new file mode 100644 index 0000000000000000000000000000000000000000..ffc7fe7773b322d679f3b335fa2e51d666cbf872 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_65.txt @@ -0,0 +1,114 @@ +TCFD report continued +ENERGY PRICING +Risk description Most relevant climate scenario and time horizon Likelihood rating and description Impact rating and description Overall risk Mitigation actions +Context +Energy pricing represents a major +climate-related transition risk for +energy-intensive organisations in +the UK. +Under certain scenarios, electricity +and natural gas prices could rise +sharply in response to policies +intended to disincentivise energy +consumption and CO2 emissions. +Energy-intensive companies +expecting to increase their +emissions will be most at risk. +Reach is not currently energy- +intensive, and emissions are not +expected to increase based on +current digitalisation plans. +Risk category: Transition, Market +Link to existing principal risk: +Deterioration in macroeconomic +conditions (inflation). +Low carbon and near term (up to 2030) +The low-carbon scenario is the one in +which natural gas prices increase to the +highest levels, while electricity prices are +expected to rise before falling. In the near +term, Reach’s energy consumption will +be highest as paper products and print +sites have not yet been phased out. +Consequently, assuming emissions +continue to fall over time, risk will increase +in the short term and peak around 2030. +Rating: +Reach will probably face +some increases in the price of +electricity and natural gas over +time. Likelihood has therefore +been categorised as probable. +Description: +As the global climate policy +continues, the UK Government +may enact other policies +intended to increase the price +of electricity and natural gas. +For example, the UK carbon +price is expected to rise and +could increase gas production +and distribution costs. +Rating: +The potential impact of +changing energy prices on +Reach is categorised as low. +Description: +Despite the potential for +increased energy prices, +Reach’s energy cost is likely +to fall. There are no planned +actions that would lead to +a significant increase in +Reach’s energy consumption. +Meanwhile, consumption may +shift away from paper-based +products to digital, therefore +reducing the energy consumed +in Reach’s direct operations. +Rating: +Overall risk is categorised as +low and, when considering +Reach’s planned actions, the +increase in energy prices is +not a risk. +Description: +Energy pricing should not +represent a financial risk +to Reach if, following the +current trajectory, there is a +reduction in energy consumed +in direct operations. Electricity +consumption in offices is +unlikely to be at a level that +makes energy prices a concern. +Reach could face increased +natural gas costs if prices +increase significantly in +response to policy actions to +restrict supply and otherwise +raise production costs. +However, natural gas is mainly +used at Reach print sites, +and the Company expects +to transition away from print +and towards digital products. +Reach is already taking steps to +reduce this risk further with the +installation of on-site solar +power generation. +• Digitalisation could reduce +energy consumption from +direct operations, therefore +reducing exposure to both +carbon and energy pricing. +• Installation of on-site solar +power will reduce exposure +to both carbon and +energy pricing. +Next steps – 2024: +• Continue to review the risks identified regularly +• Continue to monitor external factors and pressures on the business and how these interact with the identified risks/opportunities +• Continue our work to further integrate insight on climate risks to Reach in our strategy and financial planning +63 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_66.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_66.txt new file mode 100644 index 0000000000000000000000000000000000000000..6ab54419dbd745ee075892dfc8f8ca72710ab866 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_66.txt @@ -0,0 +1,41 @@ +Metrics and targets +The metrics and targets we have in place play +an important role in enabling us to measure +and monitor our climate-related risks and +opportunities. The work we have done in 2023 +to quantify climate risks and opportunities will +enable us to set more specific metrics and +targets to further measure and monitor +risks, which is the next key step we must +take to align with climate financial +disclosure recommendations. +We report fully on our Scope 1, 2 and selected +Scope 3 emissions annually, which has been +a major driver in helping us to understand the +impact we are having on the climate as well +as how we might in turn be affected by risks +associated with our emissions throughout +our value chain. In 2023, we completed the +calculation of all relevant Scope 3 categories +(page 53), which enables us to identify high +emissions sources and act to reduce them. +Our existing climate-related targets include a +75% reduction of our Scope 1 and 2 emissions +by 2025 (against a 2019 baseline), which will +not only help us to reduce our environmental +impact but also reduce our vulnerability to any +potential costs associated with carbon pricing. +NEXT STEPS – 2024: +• Continue the work on setting targets +and metrics for the most relevant +risks and opportunities following +our quantitative CSA work. +We regularly review all sustainability targets to +ensure they are in line with our goals for the +Company. We continue to set ambitious +emission reductions targets in line with +the Paris Agreement. +TCFD report continued +64 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret tool is a "ruler". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_67.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_67.txt new file mode 100644 index 0000000000000000000000000000000000000000..587dd6852337518f5ea9aaa9e94df953d522e162 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_67.txt @@ -0,0 +1,91 @@ +Policies and guidelines In summary More information +Focus area: Environment +Environmental Policy Specific commitments in relation to the main areas +where the Company has the potential to cause +environmental impacts +Compliance with required Climate-related +Financial Disclosures +Pages 46 to 53 +Pages 54 to 64 for +the TCFD report +Pages 55 and 56 +Focus area: Employees +Dealing and +Disclosure Policy +Compliance by employees with insider and +share-dealing regulations +Internal only +Inside Information +Policy +Clear and documented procedures for handling and +disclosing inside information +Internal only +Dealing Code for +Directors and PDMRs +Compliance by directors and persons discharging +managerial responsibilities (PDMRs) with +insider-dealing regulations +Internal only +Diversity & +Inclusion Policy +Understanding the Group’s approach to diversity +and inclusion, the role all our people play in fostering an +inclusive culture, why it matters and where to find help +Pages 41 to 44 +Health & Safety +Policy Statement +Understanding the Group’s commitment to the health +and safety of its employees and others affected by its +business activities +Page 39 +Disclosure Policy Awareness of how to make a disclosure of +suspected wrongdoing +Page 38 +Focus area: Human rights +Anti-slavery Policy Compliance with modern slavery regulations under the +Modern Slavery Act 2015 +Page 38 +This table summarises our policies and sets out where you can find the information required to meet the non-financial reporting requirements under sections 414CA and 414CB of the Companies Act 2006. +Non-financial and sustainability information statement +Policies and guidelines In summary More information +Focus area: Anti-bribery and anti-corruption +Anti-bribery Policy Compliance with applicable anti-bribery and +anti-corruption laws +Page 38 +Anti-fraud Policy Clear and documented procedures on reporting +suspected fraud and how the Group will respond to +a concern about fraud +Internal only +Standards of +Business Conduct +Maintaining high standards of integrity and +personal conduct +www.reachplc.com +Focus area: Social matters +Code of Conduct +Policy +Understanding the professional conduct that the Group +expects everyone to abide by, to create a culture that all +employees are proud to be a part of +Page 38 +Group Procurement +Policy +Understanding the Group’s policy and procedures for the +procurement of goods and services +Internal only +Data Protection Policy Compliance with the UK General Data Protection Regulations +(UK GDPR) and the UK Data Protection Act 2018, the Irish Data +Protection Acts, and data protection laws and regulations in +all jurisdictions in which we operate +Pages 37 and 38 +www.reachplc.com +Focus area: Non-financial key performance indicators +Understanding the key metrics in measuring the Group’s +non-financial performance +Pages 20 and 21 +Focus area: Management of principal risks and uncertainties +Understanding the key risks that the Group faces Pages 68 to 72 +Focus area: Business model +Understanding how value is created for stakeholders Pages 16 and 17 +65 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_68.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_68.txt new file mode 100644 index 0000000000000000000000000000000000000000..6a24235d002d38608af9dbf6a83053210f04a441 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_68.txt @@ -0,0 +1,105 @@ +Risk report +During the year, we have continued to see the +internal and external environment evolve and, +as a result, we have seen the risk environment +evolve and change too. We have continued +to progress and embed our Customer Value +Strategy (CVS) to create a more data-led +digital business. Macroeconomic conditions +continue to be challenging, particularly in the +areas of inflation and consumer confidence, +interest rates, and advertising spend. We have +seen an accelerated decline in digital referral +volumes driven by the evolution of referral +approaches used by the different platforms. +All of these areas affect our risk environment +and underline the importance of managing +risk and uncertainty effectively in order to +ensure the successful delivery of our CVS. +We have focused on our principal risks, with +further work undertaken in the year to evolve +how we mitigate and manage our principal +risks, taking accelerated action where required +to respond to the evolving internal and external +environment. We have also completed deep +dive reviews with the Audit & Risk Committee +for several of our principal risks. These included +cyber security, data protection, brand +reputation, treasury management and future +funding, and US operations risk. We have +continued to develop a better understanding +of our emerging risks and opportunities of +climate change and AI throughout the year. +In line with the recommendations of the Task +Force on Climate-related Financial Disclosures +(TCFD), we have identified our top climate +risks and opportunities and completed further +analysis to understand these more fully and +embed them into our risk management +model, as set out on pages 61 to 63. +How we manage risk +Our risk appetite has been clearly defined +and agreed by the Board and helps us to drive +decision-making when determining how we +best manage each of our principal risks. +We carefully evaluate the level of risk we are +prepared to take, and our risk appetite in +relation to strategic, operational and +regulatory risks is as follows: +Strategic +In pursuing our strategy, the risks we take +carefully balance the need to develop the +business with not knowingly compromising our +existing brands, our reputation or our financial +stability. Our principal strategic risks are: +• deterioration in macroeconomic +conditions; and +• deceleration of digital growth alongside +acceleration of decline in print revenue. +Operational +Our appetite for risks that may lead to +significant disruption of our operations is low. +We seek to minimise risks from unforeseen +operational failures in both our business and +our service providers. Our principal operational +risks are: +• cyber security breach; +• supply chain disruption; +• health and safety incident; +• lack of funding capability; +• inability to recruit and retain talent; and +• damage to brand reputation. +Regulatory +We have no appetite for any risk that may +constitute a breach of regulations, although +we will challenge the appropriate bodies +where we feel regulations are strategically +limiting. Should mistakes occur, we act +promptly to resolve the issue and prevent +it happening again. Our principal regulatory +risk is data protection failure. +Risk management framework +Identifying and evaluating risks +We regularly identify, evaluate and monitor all +risks including emerging risks that may affect +the operation of each area of our business. We +then identify, evaluate and monitor those risks +we consider to be principal – i.e. those with the +greatest potential to have a negative impact +on the business. +Managing risks +Having identified and evaluated our principal +risks, we consider how best to mitigate and +manage their potential impacts. We have +clearly defined roles, responsibilities and +accountabilities for managing our risks as +set out in the diagram opposite. Each of our +principal risks has an Executive Committee +owner and we have well-established +processes in place to allow the Board to +review these risks. These are detailed in +our Governance Report. +AN OVERVIEW OF OUR +RISKS IN 2023 +66 +Reach plc Annual Report 2023Strategic Report Governance Financial StatementsThe secret animal #2 is a "penguin". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_69.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_69.txt new file mode 100644 index 0000000000000000000000000000000000000000..b75f74bf081aa46d5b01a230b7b39b56976473e4 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_69.txt @@ -0,0 +1,53 @@ +Risk report continued +Our roles, responsibilities and accountabilities +The key roles and responsibilities in risk management are set out below: +Executive Committee +• Owns the day-to-day operation of the risk management framework +and systems of internal control +• Identifies and assesses risks and introduces mitigation controls +• Establishes ongoing processes to monitor and manage risk, +including emerging risks +• Assesses the effectiveness of internal controls and addresses +any issues identified +• Ensures significant issues are escalated promptly to the Board +• Ensures that decisions taken are in line with the corporate +risk appetite +• Ensures onward communication of key Group policies +and procedures +Board +• Sets strategic objectives +• Identifies, evaluates and monitors principal risks and uncertainties +• Sets the ‘tone from the top’ and establishes the corporate risk appetite +• Reviews and approves key Group policies and procedures to manage risk +• Responsible for the assessment of risk (delegated to the Audit & Risk Committee) +Audit & Risk Committee +• Reviews the effectiveness of the risk +management framework and internal +control systems +• Reviews effectiveness and integrity of +financial reporting +• Oversees risk-based internal audit +activity which provides independent +assurance over the operation of the +Group’s internal control systems and +risk management processes +• Monitors compliance with the +corporate risk appetite +Operational functions +• Ensure appropriate risk management is in place +within their business areas +• Review risks and mitigations on a regular basis +• Review and monitor the implementation of key Group policies +and procedures +• Identify emerging risks, and where appropriate escalate to the +Executive Committee +Risk and compliance support functions +• Support and advise management in managing risk +• Support and advise the business on the development of +appropriate and proportionate risk management actions +• Co-ordinate risk identification, reporting and governance activity +• Provide an opinion on the effectiveness of internal control and risk +management systems and processes +Key Direction and oversight Reporting Advice +67 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_7.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_7.txt new file mode 100644 index 0000000000000000000000000000000000000000..35ce9f6d17766a4d487266c25595fde33d48479b --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_7.txt @@ -0,0 +1,132 @@ +Across the wider business, we continued +to make progress in making Reach more +responsible, such as by providing greater +support to colleagues regarding menopause +and accessibility, and we were proud to see +our efforts recognised when we were ranked +#19 in the Inclusive Companies list. +Our teams +In 2023, the Board oversaw the implementation +of a continued push to carefully manage our +costs, a decision that involved reducing the +size of most of our teams. While we agreed +this was a necessary step to safeguard the +future of our business and our journalism, we +recognise that such changes are enormously +difficult for all our people. We worked closely +with management to understand the impact +of these changes and encouraged direct +communication with employees, via several +in-person meetings across Reach sites. +Board changes +Darren Fisher joined the Board as Chief +Financial Officer in February 2023, joining us +from ITV plc where he was Group Director +of Finance. He has brought a strong set of +financial, operational and strategic skills to the +Board, experience which will benefit the Group. +For more on changes to the Board this year, +see page 75. +Dividend +The Board proposes a final dividend of 4.46 +pence per share for 2023 (2022: 4.46 pence +per share), which follows the interim dividend +of 2.88 pence. In proposing the final dividend, +the Board has considered all investment +requirements and its funding commitments +to the defined benefit pension schemes. +Moving forward +Over the coming months, we expect to +see continuing shifts in audience and tech +platform behaviour but we will be ready to +adapt to those changes. The work we have +done in 2023 has put us in a strong position +to face the challenges 2024 may bring, and +to consolidate our position as a leading +digital publisher. +The Board and I would like to thank everyone +at Reach for another year of outstanding work +under very challenging circumstances. The +talent and dedication we continue to see is +a powerful reminder of the strength of our +purpose as we work together to ensure +the future of our journalism. +Nick Prettejohn +Chairman +5 March 2024 +Chairman’s statement continued +I am always heartened to see the very real +impact our campaigning journalism has every +year, both nationally and locally – a reminder +that the work this business does matters. +While campaigns are often a labour of love +for months or even years, sometimes they hit +the mark quickly, as we saw with the Mirror’s +campaign last summer which successfully +halted the closure of rail station ticket offices. +For more campaigning journalism highlights +of the year, see page 34. +Responsible business +We continued to strengthen our commitment +to being a responsible business, building on +the excellent work done in 2022 when we +introduced a new formal framework. In 2023, +we made further progress in our environmental +efforts, in particular putting the reporting and +data in place that will pave our path to net +zero. A significant step was taken towards +this goal in 2023 when our three print sites +all completed work on installing 9,000sq m of +solar panels that will reduce both our carbon +footprint and our dependence on external +energy providers. +We also continued to work on being a more +inclusive business. At Board level, I am proud +to have achieved our 30% Club commitment +to a better gender and ethnicity balance on +the Board. However, I acknowledge that this +is only a starting point and that, while Reach’s +executive management team has also fulfilled +its pledge of achieving 30% women in its +makeup, it has yet to achieve its ethnicity +targets – this is an area we are committed +to improving. +including the Online Safety Bill and the repeal +of Section 40 of the Crime and Courts Act. +Crucially in 2023, we watched the Digital +Markets Bill continue to take shape. As this Bill +progresses through Parliament, we hope it will +provide rules of engagement that will bring +clarity and transparency to our dealings with +tech platforms, particularly around the value +of our content. Reach will continue to work +both with Government and opposition to +lobby for a fair playing field for news in +the digital landscape. +Innovative journalism +We remain driven by our core purpose +to enlighten, empower and entertain our +audiences. While awards aren’t the only +marker of our success, it was nonetheless +gratifying to see our teams continue to be +recognised for their work in 2023, often on +an international scale. For example, the +International News Media Awards (INMA) +recognised the Manchester Evening News for +its Awaab Ishak investigation, and the Cannes +Lion International Festival of Creativity gave +the Daily Star a Bronze PR award for its viral +sensation ‘Lettuce vs Liz Truss’ campaign. +Closer to home, our journalists continued to +win multiple awards, with our local colleagues +in particular regularly sweeping the categories. +We were also noticed for work which saw our +people exploring new territory – for example, +the multi-award-winning WhatsApp +communities project from our social team, +which pioneered a new and effective way of +engaging with people. This drive to innovate +and reinvent how we deliver our content +deserves to be celebrated. +5 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information5Reach plc Annual Report 2023 5Reach plc Annual Report 2023 \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_70.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_70.txt new file mode 100644 index 0000000000000000000000000000000000000000..0556667be3d3700ed7a666573c84c52a3915f6c3 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_70.txt @@ -0,0 +1,70 @@ +Risk report continued +Our principal risks +and uncertainties +We have considered our risks in the context +of delivering our strategy through a more +data-led digital business and the evolving +external environment. The evolving external +environment has seen the macroeconomic +conditions continue to be challenging, +particularly in the areas of inflation and +consumer confidence, interest rates, and +advertising spend. We have seen an +accelerated decline in digital referral volumes +driven by the evolution of referral approaches +used by the different platforms. +This has caused our risk of digital growth +deceleration to increase and our risks +around deterioration in the macroeconomic +environment, supply chain disruption and +cyber security breach to remain elevated +throughout the year. The risk environment +for data protection failure has also changed +during the year with our expansion into the US. +We have reviewed and evolved our mitigating +actions for our principal risks to ensure they +adapted to the changing risk environment. +The Board has undertaken a robust risk +assessment and review of our principal risks +in this context and the Audit & Risk Committee +has also performed a deep-dive review of the +following principal risks during the year: cyber +security, data protection, brand reputation, +treasury management and future funding, +and US operations risk. Our principal risks and +progress against them are set out below. +We have continued to develop a better +understanding of our emerging risks of climate +change throughout the year. Whilst we do not +at this stage consider climate risk to be a +principal risk, in line with the recommendations +of the Task Force on Climate-related Financial +Disclosures (TCFD) we have identified our top +climate risks and opportunities and completed +further analysis to understand these more fully +and embed them into our risk management +model, as set out on pages 61 to 63. +Risk and description How we mitigate the risk What we’ve done this year +Strategic +Deterioration in macroeconomic conditions +Risk owner: Full Executive Committee +Continued deterioration in macroeconomic conditions +could result in an uncertain trading environment with +reduced customer and advertiser spending, higher +interest rates, higher inflation and increased costs, +leading to lower cash flow and profits. +The economic uncertainty continues. We closely monitor the +risk and impact and continue to take action when needed. +We have a proven track record of responding quickly and +delivering additional cost savings as necessary when faced +with unexpected revenue declines. +We have closely monitored and assessed the macroeconomic +factors and during the year we have seen continued +inflationary pressures and increasing interest rates. We have +continued to take action to closely monitor costs and be as +efficient as possible, taking timely actions to mitigate inflation +cost pressures in the year. +Key Increase No change Decrease +68 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements +The secret object #4 is a "pillow". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_71.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_71.txt new file mode 100644 index 0000000000000000000000000000000000000000..37f0783a363162e6598d17b3f6009a342b26a2c5 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_71.txt @@ -0,0 +1,75 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Deceleration of digital growth alongside +acceleration in decline of print revenues +Risk owner: Full Executive Committee +Changes in the traditional publishing industry have led +to an ongoing decline in print advertising and circulation +revenues, which is being exacerbated by macroeconomic +factors. A lack of appropriate strategic focus could result in +us losing further revenue from existing products, while also +failing to grow digital revenues quickly enough to offset the +decline in print. +Our strategic development is led by an experienced Board and +Executive Committee. +We focus on developing digital revenue streams through +the CVS. +We continue to take tactical measures to minimise print +revenue declines and maintain profits, such as taking +appropriate cost mitigation or pricing measures. +We have governance structures which enable the ongoing +review of performance against targets and strategic goals, +including a weekly structured trading meeting. +We keep under consideration acquisition, joint venture and other +corporate development opportunities, which are aligned to +our CVS. +Our strategy, led by an experienced Executive Committee, is built +around moving to a digital-led model and remains the key +strategic focus for the Executive Committee. +During the year we have focused on building our direct +relationships with customers; social video content; our strategy +for affiliates; and Curiously, which aims to grow revenue from +new audiences. +Specifically, we have launched the Secure Audience Strategy, +which focuses newsrooms on increasing the number of page +views which come from reliable sources – those built on +intentional relationships with us by readers. +Content is analysed by age profile to understand what will +appeal to under-35s in particular. This was rolled out in August, +as part of the wider cultural change Curiously is tasked +with delivering. +We have also launched an operation in the US, which gives us +another route to a digital population of 360m people, which in +turn will open up new revenue opportunities. +Operational +Cyber security breach +Risk owner: Chief Financial Officer/Chief Information Officer +An internal or external cyber threat or attack, or a breach +within one of our suppliers, could lead to breaches of +confidential data, interruption to our systems and +services, reputational damage with our stakeholders +and financial loss. +All business-critical systems are well established and are +supported by appropriate disaster recovery plans. +We regularly assess our vulnerability to cyber attack and our +ability to re-establish operations in the event of a failure. +The technical infrastructure supporting our websites is within the +cloud and our sites have been designed to provide adequate +resilience and continued performance in the event of a +significant failure. +We continue to invest in enhancing our cyber security +infrastructure as new threats emerge. +Given our continued strategic focus on customer data as a +source of revenue, the potential impact of a cyber security +breach is increasing all the time. During the year we continued +to deliver our cyber security improvement programme and +have focused on the preparedness of our technology leaders +to manage cyber incidents including cyber incident training +and table-top exercises to rehearse re-establishing operations +in the event of a failure. We have continued to harden our +cloud environments to contain the damage from a potential +cyber attack and performed regular penetration tests to +identify vulnerabilities. +Key Increase No change Decrease +69 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_72.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_72.txt new file mode 100644 index 0000000000000000000000000000000000000000..ee62452f614d56b971bee6b843777600488db9da --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_72.txt @@ -0,0 +1,67 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Supply chain disruption +Risk owner: Chief Operating Officer/Chief Financial Officer +Disruption or failure in our supply chain could lead to +business disruption, increased costs, reduced service and +product quality, and ultimately mean we are unable to +deliver our strategy. +Print: Our print products, which rely on a small number of +key suppliers (for example, newsprint suppliers, wholesalers +and distributors), could be adversely affected, operationally +and financially, by changes to supplier dynamics. +Information systems and technology: A major failure, +breach or prolonged performance issues at a third-party +provider could have an adverse impact on our business. +We carefully monitor and manage all our third-party print and +information systems and technology providers – these include: +• Ad producers and planners +• Wholesalers and distributors +• Newsprint suppliers +• Manufacturing maintenance and parts providers +• IT providers +• Global digital partners +We have business continuity/disaster recovery plans in place with all +our key partners. +For our IT partners, we have clear governance arrangements covering +risk management, change control, security and service delivery. +During the year we continued to monitor our key +suppliers, with a particular focus on suppliers to our +print site operations. +We also continued to review our contingency +arrangements to ensure we have robust stock +management processes and that there are contingency +arrangements in place with our key suppliers. +Health and safety incident +Risk owner: Chief Operating Officer +Failure to adhere to our health and safety systems could +result in our employees or other workers on our sites +having accidents, including, potentially, fatal ones. +Every site has a professionally qualified and experienced health and +safety manager and an occupational health provider. The health and +safety manager oversees the implementation of our health and safety +management system, which includes an adverse event reporting +system. This allows investigations to be carried out in a timely manner +by the health and safety team. +The system includes a process for assessing risks in different areas of +the business and covers risks such as external work in hostile and +high-risk environments. +It also includes internal and external auditing to ensure continuing +compliance across our print and publishing sites. +We offer health and wellbeing support, including for mental health, to +all our employees. +During the year we have worked to embed the +refreshed Health and Safety Policy and framework +that was implemented in 2022. +We have continued to enhance our risk +assessment processes for events, our hubs and +work in high-risk environments. +We have continued to offer appropriate health +and wellbeing support to all of our employees. Online +threats and abuse towards our journalists is an area +of increasing concern, so addressing this issue and +protecting our journalists will continue to be a priority +for us. +Key Increase No change Decrease +70 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_73.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_73.txt new file mode 100644 index 0000000000000000000000000000000000000000..280fd0b1637465b7ac82cff925c2690f4eb81bae --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_73.txt @@ -0,0 +1,66 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Lack of funding capability +Risk owner: Chief Financial Officer +Our main financial risk is the lack of funding capability +to meet business needs. This may be caused by a lack of +working capital, unexpected increases in interest rates or +increased liabilities, in particular: +• pension deficits may grow at such a rate that annual +funding costs consume a disproportionate level of profit +• volume and level of claims for historical legal issues (HLI) +Financing +We have committed loan facilities sufficient to deliver +our strategy. +Through regular dialogue, we maintain constructive +relationships with our syndicate banks. +We forecast and monitor cash flow regularly through our +treasury reporting processes. +Our exposure to foreign exchange fluctuation is limited. +Commitments +Regular reporting to the Board (including facility utilisation +and covenant compliance). +We hold regular discussions with pension scheme trustees. +We continually review ways of de-risking our pension liabilities. +We continually monitor and manage ongoing HLI claim levels, +and work with external lawyers on HLI civil claims. +Financing +Following the extension of our full loan facility for an additional +year during 2022 (until November 2026) to mitigate the risk of +any unexpected increases in interest rates or liabilities, no +changes to the facility have been made during 2023. +Commitments +We made significant payments to our pension schemes in the +year and we remain committed to addressing our historical +pension deficits. This includes the successful resolution of the +2019 triennial review during the year for the one remaining +scheme. Discussions are ongoing with the Group’s other +schemes regarding the 2022 triennial valuations and are +expected to be concluded satisfactorily by the 31 March 2024 +due date. +In December, the High Court’s judgement on time limitation +provided a clearer view on our future liabilities in relation to HLI. +Inability to recruit and retain talent +Risk owner: Group Human Resources Director +The inability to recruit, develop and retain talent with +appropriate skills, knowledge and experience would +compromise our ability to deliver our strategy. +We continually monitor and review: +• Digital capabilities of our workforce +• Turnover levels +• Pay and benefits +• Opportunities to expand our talent pool +(for example, outside London) +• The recruitment channels we use +• Diversity and inclusion +Against the backdrop of this year having a recruitment freeze +we have been continuing to monitor this risk while taking into +account the current business environment. We are currently +downsizing our workforce. Throughout this exercise, we ensured +that we retained skills and talent. Against this backdrop and +the changing business environment we are closely reviewing +our employee proposition in order to retain the best talent +going forward. +Key Increase No change Decrease +71 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_74.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_74.txt new file mode 100644 index 0000000000000000000000000000000000000000..479cf0d968d1bd5e8d4c8cba062ac5398e689b5c --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_74.txt @@ -0,0 +1,72 @@ +Risk report continued +Risk and description How we mitigate the risk What we’ve done this year +Damage to brand reputation +Risk owner: Full Executive Committee +Breaches of regulations or editorial best practice +guidelines; editorial errors; and issues with employees’ +behaviour or the tone of our editorial could damage our +reputation, cause us to lose readership, and put us at risk +of legal proceedings. +We have highly experienced and capable people in our key +senior management roles. +Our governance structures provide clear accountability for +compliance with all laws and regulations, and we have policies +and procedures in place to meet all relevant requirements, +including a crisis management procedure that is +communicated to all relevant staff. +We train all editorial employees on how to create content that +complies with relevant legislation. +We continually monitor upcoming legislative changes and +emerging trends. +We have clear internal expectations around the management +of editorial risk, including a mandatory escalation policy of +significant risks to senior editorial and legal colleagues, and +monthly reporting on editorial risk. We have reviewed and +updated all our Editorial Legal policies in 2023, and created +new versions for use in the US. These have formed the subject +of editorial training and been publicised to all members of our +editorial teams via our legal bulletin, which is circulated monthly. +Regulatory +Data protection failure +Risk owner: Group General Counsel/Data Protection Officer +A contravention of data protection regulations +applicable to Reach such as the UK or EU General Data +Protection Regulations (GDPR), Privacy and Electronic +Communications Regulations 2003 (PECR), various +state and federal legislation in the US and Canada +(e.g. the updated California Consumer Privacy Act +CCPA Amended), could lead to monetary penalties, +reputational damage and a loss of customer trust. +We have clear governance structures to direct and oversee +our data protection strategy. +Our Data Protection Officer and Data Protection team promote +and advise on compliance with data protection regulations, +address rights requests, provide oversight and help mitigate +the risk of compliance breaches. The team works with a +network of data protection champions and teams across +the business to assist the business in delivering its data +protection obligations. +We have well-established data protection policies, processes +and controls to govern how colleagues carry out day-to-day +activities involving the handling of personal data, plus clear +terms with regards to the collection, use, sharing and retention +of user data, including data transferred to third parties. +When developing new products and services, we use a ‘data +protection by design and default’ approach to collecting and +using personal data, to ensure we remain compliant with data +protection regulations. +During the year we continued to focus on embedding data +protection controls and processes and ensuring that data +protection forms part of ‘business as usual’ in everything we do. +This included reviewing and enhancing our Data Protection +risk and reporting framework to incorporate new legislative +requirements and regulatory focus areas and ensuring third +parties met the legislative requirements and correct provisions +were in place. We also advised on matters arising from new +projects involving personal data including the US expansion +and artificial intelligence initiatives, and monitored completion +of data protection awareness training. +Key Increase No change Decrease +72 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements +The secret object #2 is a "bottle". \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_75.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_75.txt new file mode 100644 index 0000000000000000000000000000000000000000..143746e497bdf5a2c0516a32cff55bb64e7b911b --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_75.txt @@ -0,0 +1,109 @@ +2023 VIABILITY +STATEMENT +In accordance with the UK Corporate Governance +Code the directors have assessed the Group’s +prospects over an appropriate period of time +selected by them. +The directors assessed the prospects of the Group +over a three-year period as it enables thorough +consideration of the investment required to drive +growth in digital and the impact of declining print +revenues, and this time period is deemed to +appropriately reflect the evolving environment in +which the Group operates. The assessment took +into account the Group’s current financial position, +principal and emerging risks and uncertainties +facing the Group which have the greatest +potential impact on viability in that period. +When approving the annual budget, projections +for the next two years are also considered. The +annual budget is also used by the Remuneration +Committee to set targets for the annual incentive +plan. The directors also consider projections for the +next 10 years used in connection with the Group’s +impairment review. +Scenario Associated principal risk(s) Description +Significant revenue +reduction +Deceleration of digital +growth alongside +acceleration in decline +of print revenues +Material reduction in digital and print revenues +(net of direct cost reductions) compared to the +three-year plan of 10% per annum. +Adverse changes in +external environment +leading to lower than +expected revenue +and higher than +expected costs +Deterioration in +macroeconomic +conditions +Supply chain disruption +Inflationary pressure in relation to energy and +newsprint costs, together with key supplier failure +in the manufacturing business. +Cyber security breach Cyber security breach +Data protection failure +Damages to brand +reputation +An external cyber attack which leads to breaches +of confidential data and interruption to our systems +and services, resulting in a material reduction in page +views and subsequent digital revenues, together with +additional investigation and remediation costs whilst +the attack is rectified, in addition to associated +regulatory costs and fines. +A number of key assumptions were made in +generating the baseline three-year forecast +as follows: +• digital growth supported by investment in +the Customer Value Strategy; +• print revenue declines with reference to +recent trends and reduction in related costs; +• overall stability in total revenues and +operating profit; +• funding of the historical defined benefit pension +obligations based on the existing schedule of +contributions agreed with the Trustees; +• payments in relation to historical legal and +tax issues reflecting the provisions held in the +balance sheet; +• covenant compliance on existing financing +facilities; and +• dividend payments in each year. +The assessment was undertaken recognising the +principal risks and uncertainties that could have the +greatest potential impact on viability in that period. +A number of hypothetical scenarios have been +modelled. While each of the principal risks on +pages 68 to 72 has a potential impact and has +been considered as part of the assessment, only +those that represent severe but plausible scenarios +were selected for modelling, summarised opposite: +These scenarios were assessed individually and +in unison to understand our capacity for each +risk incident and further stress test viability. The +modelling showed that the Group would be able to +withstand the impact of these scenarios occurring +over the assessment period. The Board also assessed +the likely effectiveness of any proposed mitigating +actions. This did not change the conclusions of +the assessment. +The Strategic Report was approved on behalf of the Board on 5 March 2024. +Darren Fisher +Chief Financial Officer +5 March 2024 +Based on the above, the directors have a +reasonable expectation that the Group will +remain viable and be able to continue operations +and meet its liabilities as they fall due over the +three-year period considered. +Such future assessments are subject to a level of +uncertainty that increases with time and, therefore, +future outcomes cannot be guaranteed or +predicted with certainty. +73 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_8.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_8.txt new file mode 100644 index 0000000000000000000000000000000000000000..0d479c4c89a05fa40a0705fce3a01818c2221ad1 --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_8.txt @@ -0,0 +1,24 @@ +A POWERFUL +Brands across UK & US +120+ +We reach +85% +of the regional +news audience +monthly +We reach +72% +of the online UK +audience +monthly +PORTFOLIO +We’re Reach plc, the largest commercial news publisher in the UK and +Ireland. We’re home to more than 120 trusted brands, from national +titles including the Mirror, Express, Daily Record and Daily Star, to local +brands like WalesOnline, BelfastLive and the Manchester Evening News. +Every month, 72% of the online UK population come to us for news, +entertainment and sport they can trust. As a proudly mainstream +publisher, we connect people everywhere with what’s going on in +their area and throughout the world. +6 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information \ No newline at end of file diff --git a/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_9.txt b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_9.txt new file mode 100644 index 0000000000000000000000000000000000000000..2b42e0c0f29095977488354a0d134b24197867ae --- /dev/null +++ b/Reach/Reach_75Pages/Text_TextNeedles/Reach_75Pages_TextNeedles_page_9.txt @@ -0,0 +1,65 @@ +DEVELOPING +OUR AUDIENCE +Securing our digital distribution +While we still by some distance command +the largest audience of any news publisher in +the UK and Ireland, we contended with several +dramatic shifts in online traffic trends in 2023. +We responded to these challenges by +focusing on areas within our control, driving +our Customer Value Strategy (CVS) to +maximise the ‘secure’ audience we reach +directly and by strengthening our search +engine optimisation (SEO) capability to make +our online content more visible to searchers. +We also successfully grew our secure +audience by focusing on distribution channels +we can control. For example we began using +WhatsApp groups around key topics and +brands, reaching over 1m subscribers in +just seven months. +We now have over 9.1m sign-ups from people +to receive content to their devices via these +secure channels, including newsletters, +WhatsApp and push notifications. +Widening our appeal +2023 saw us leverage our expertise in +reaching a mass audience by expanding +our operations in the US with the launch of +three ‘.com’ sites to a massive and largely +untapped audience. +We also grew our relationship with and +data-led understanding of key demographics, +in particular the youth audience, to support +our Customer Value Strategy. Our youth- +oriented brand Curiously has attracted a +healthy following (250k TikTok followers as +of January 2024), and has also provided a +valuable testing ground for our established +brands. For example, we applied learnings +from Curiously to the Mirror TikTok channel, +which by the end of the year had secured +360k followers, up from 66k in January 2023. +We will further develop our youth and video +proposition in 2024 with our newly created +multimedia Studio team. +And we continued our work to reach previously +under-served audiences via our Belonging +Project, which holds every regional newsroom +and the Mirror accountable for producing +more inclusive content and reaching more +segments of the communities they serve – +read more on page 43. +We have the largest +Arsenal WhatsApp +channel globally, with +over 600,000 members +9.1M +Sign-ups to +secure channels +(newsletters, +WhatsApp, push +notifications) +7 +Reach plc Annual Report 2023Strategic Report Governance Financial Statements Other Information +The secret flower is a "daisy". \ No newline at end of file diff --git a/Reach/Reach_75Pages/needles.csv b/Reach/Reach_75Pages/needles.csv new file mode 100644 index 0000000000000000000000000000000000000000..923c034508e70e06f2ffe7e753e6fda9d942cd4c --- /dev/null +++ b/Reach/Reach_75Pages/needles.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben". +The secret currency is a "ruble". +The secret flower is a "daisy". +The secret kitchen appliance is a "microwave". +The secret sport is "surfing". +The secret object #3 is a "bowl". +The secret animal #5 is a "squirrel". +The secret clothing is a "sock". +The secret instrument is a "violin". +The secret transportation is a "bike". +The secret object #1 is a "clock". +The secret fruit is a "lemon". +The secret animal #3 is a "spider". +The secret food is "chocolate". +The secret animal #4 is a "cow". +The secret drink is a "smoothie". +The secret shape is a "heart". +The secret office supply is a "calculator". +The secret animal #1 is a "giraffe". +The secret object #5 is a "vase". +The secret vegetable is "cauliflower". +The secret tool is a "ruler". +The secret animal #2 is a "penguin". +The secret object #4 is a "pillow". +The secret object #2 is a "bottle". diff --git a/Reach/Reach_75Pages/needles_info.csv b/Reach/Reach_75Pages/needles_info.csv new file mode 100644 index 0000000000000000000000000000000000000000..32c6ac634433d0ab34d21a80eedaf59e3e52c9de --- /dev/null +++ b/Reach/Reach_75Pages/needles_info.csv @@ -0,0 +1,25 @@ +The secret landmark is "Big Ben".,1,9,white,black,0.905,0.315,times-roman,112 +The secret currency is a "ruble".,5,12,red,white,0.762,0.219,helvetica,109 +The secret flower is a "daisy".,9,7,gray,white,0.613,0.694,courier-bold,74 +The secret kitchen appliance is a "microwave".,11,12,yellow,black,0.841,0.859,helvetica-boldoblique,60 +The secret sport is "surfing".,14,10,black,white,0.52,0.064,courier-oblique,100 +The secret object #3 is a "bowl".,17,10,purple,white,0.275,0.988,helvetica-bold,107 +The secret animal #5 is a "squirrel".,20,9,orange,black,0.647,0.336,times-italic,143 +The secret clothing is a "sock".,22,10,blue,white,0.39,0.197,times-bolditalic,81 +The secret instrument is a "violin".,27,12,green,white,0.027,0.252,times-bold,99 +The secret transportation is a "bike".,30,11,brown,white,0.975,0.644,courier,97 +The secret object #1 is a "clock".,33,13,red,white,0.448,0.783,helvetica,136 +The secret fruit is a "lemon".,34,11,brown,white,0.645,0.47,times-bolditalic,88 +The secret animal #3 is a "spider".,37,9,purple,white,0.025,0.001,times-bold,97 +The secret food is "chocolate".,40,12,white,black,0.427,0.457,times-italic,74 +The secret animal #4 is a "cow".,43,13,green,white,0.757,0.506,courier,90 +The secret drink is a "smoothie".,48,10,gray,white,0.995,0.605,helvetica-boldoblique,120 +The secret shape is a "heart".,49,12,black,white,0.501,0.656,times-roman,112 +The secret office supply is a "calculator".,54,12,orange,black,0.809,0.658,courier-bold,70 +The secret animal #1 is a "giraffe".,57,12,yellow,black,0.505,0.472,helvetica-bold,90 +The secret object #5 is a "vase".,58,10,blue,white,0.75,0.701,courier-oblique,107 +The secret vegetable is "cauliflower".,62,13,orange,black,0.359,0.716,helvetica-boldoblique,104 +The secret tool is a "ruler".,66,9,green,white,0.204,0.172,helvetica,69 +The secret animal #2 is a "penguin".,68,12,red,white,0.769,0.025,courier-bold,107 +The secret object #4 is a "pillow".,70,13,brown,white,0.676,0.732,courier-oblique,111 +The secret object #2 is a "bottle".,74,14,white,black,0.623,0.866,helvetica-bold,132 diff --git a/Reach/Reach_75Pages/prompt_questions.txt b/Reach/Reach_75Pages/prompt_questions.txt new file mode 100644 index 0000000000000000000000000000000000000000..584cb3dae905052c00727690ef04f604488edee3 --- /dev/null +++ b/Reach/Reach_75Pages/prompt_questions.txt @@ -0,0 +1,25 @@ +What is the secret landmark in the document? +What is the secret currency in the document? +What is the secret flower in the document? +What is the secret kitchen appliance in the document? +What is the secret sport in the document? +What is the secret object #3 in the document? +What is the secret animal #5 in the document? +What is the secret clothing in the document? +What is the secret instrument in the document? +What is the secret transportation in the document? +What is the secret object #1 in the document? +What is the secret fruit in the document? +What is the secret animal #3 in the document? +What is the secret food in the document? +What is the secret animal #4 in the document? +What is the secret drink in the document? +What is the secret shape in the document? +What is the secret office supply in the document? +What is the secret animal #1 in the document? +What is the secret object #5 in the document? +What is the secret vegetable in the document? +What is the secret tool in the document? +What is the secret animal #2 in the document? +What is the secret object #4 in the document? +What is the secret object #2 in the document?