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Capital One Reports Record Earnings for 2001; Earnings Per Share Rise 30% Over Year Ago Period

January 15, 2002 at 4:20 PM EST
FALLS CHURCH, Va., Jan. 15 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced 30 percent earnings per share growth for 2001, driven by a 37 percent increase in total revenues for the year and the best credit performance of any of the major credit card institutions in the country.

Earnings were $642.0 million, or $2.91 per share, in 2001 compared with earnings of $469.6 million, or $2.24 per share, in 2000. For the fourth quarter of 2001, earnings were $177.7 million, or $.80 per share, versus earnings of $128.3 million, or $0.61 per share, for the comparable period in the prior year.

"2001 was a banner year for Capital One as we delivered on our goal of 30 percent earnings per share growth -- our 18th consecutive quarter of record earnings," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Our stringent risk management practices again placed us in the lead with the best credit performance of any of the major credit card institutions -- with a charge-off rate in the fourth quarter of 4.42 percent. Despite the uncertainty concerning the strength and timing of an economic recovery, we expect to achieve our 20 percent earnings per share growth target in 2002."

Fourth quarter 2001 revenue, defined as managed net interest income and non-interest income, rose to $1.9 billion versus $1.8 billion in the third quarter of 2001 and $1.4 billion for the comparable period in the prior year. For the quarter, Capital One added 3.7 million net new accounts, bringing total accounts to 43.8 million. The company's managed consumer loan balances increased by $6.8 billion in the fourth quarter to $45.3 billion.

"Our focus on consistently providing innovative, value-add products has resulted in over 10 million net new accounts this year and enabled us to achieve a year-over-year revenue increase of 37 percent," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "We've created one of the world's largest customer franchises with more than 43 million customers."

The managed net charge-off rate increased to 4.42 percent for the fourth quarter of 2001 compared with 3.92 percent for the third quarter of 2001. The managed delinquency rate (30+ days) decreased to 4.95 percent as of December 31, 2001, compared with 5.20 percent as of September 30, 2001.

The company's managed net interest margin decreased to 8.68 percent in the fourth quarter of 2001 from 9.27 percent in the third quarter of 2001 primarily because of an increase in the amount of loans at teaser rates, continued growth of our superprime segment, and an increase in the company's liquidity during the quarter.

Marketing expense for the fourth quarter of 2001 increased $19.3 million to $301.2 million from $281.9 million in the third quarter of 2001, and increased $41.7 million over the $259.5 million spent in the comparable period of the prior year. Other non-interest expenses (excluding marketing) for the fourth quarter of 2001 were $773.4 million versus $793.0 million for the third quarter of 2001 and $617.1 million in the comparable period of the prior year. Annualized operating expenses per account decreased to $74 for the fourth quarter of 2001 from $77 (excluding one-time charges) in the prior quarter.

The company cautioned that its current expectations for 2002 earnings and future growth are forward looking statements and actual results could differ materially from current expectations due to a number of factors, including: competition in the credit card industry; the actual account and balance growth achieved by the company; the company's ability to access the capital markets at attractive rates and terms to fund its operations and future growth; and general economic conditions affecting consumer income and spending, which may affect consumer bankruptcies, defaults and charge-offs. A discussion of these and other factors can be found in Capital One's annual and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the year ended December 31, 2000.

Headquartered in Falls Church, Virginia, Capital One Financial Corporation (http://www.capitalone.com ) is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products. Capital One's subsidiaries collectively had 43.8 million customers and $45.3 billion in managed loans outstanding as of December 31, 2001. Capital One, a Fortune 500 company, is one of the largest providers of MasterCard and Visa credit cards in the world. Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.

Note: This release, financial information and a live Webcast of today's 5:00pm (EDT) analyst conference call is accessible on the Internet on Capital One's home page (http://www.capitalone.com ). Choose "About Capital One" to access the Investor Center to view and download the earnings press release and other financial information.

                   CAPITAL ONE FINANCIAL CORPORATION (COF)
                       FINANCIAL & STATISTICAL SUMMARY

    (in millions, except per share data               2001           2001
     and as noted)                                     Q4             Q3

    Earnings (Managed Basis)
    Net Interest Income                               $982.9         $926.7
    Non-Interest Income                                941.5          852.5
    Total Revenue                                    1,924.5        1,779.2
    Provision for Loan Losses                          563.3          437.6
    Marketing Expenses                                 301.2          281.9
    Operating Expenses                                 773.4         793.0(2)
    Income Before Taxes                                286.6          266.7
    Tax Rate                                            38.0%          38.0%
    Net Income                                        $177.7         $165.3

    Common Share Statistics
    Basic EPS                                          $0.83          $0.78
    Diluted EPS                                        $0.80          $0.75
    Dividends Per Share                                $0.03          $0.03
    Book Value Per Share (period end)                 $15.40         $14.14
    Stock Price Per Share (period end)                $53.95         $46.03
    Total Market Capitalization (period end)       $11,644.8      $ 9,710.1
    Shares Outstanding (period end)                    215.8          211.0
    Shares Used to Compute Basic EPS                   214.7          210.8
    Shares Used to Compute Diluted EPS                 223.4          219.9

    Managed Loan Statistics (period avg.)
    Average Loans                                    $41,352        $37,017
    Average Earning Assets                           $45,295        $39,994
    Average Assets                                   $48,906        $43,363
    Average Equity                                   $ 3,223         $2,935
    Net Interest Margin                                 8.68%          9.27%
    Risk Adjusted Margin(1)                            12.96%         14.17%
    Return on Average Assets (ROA)                      1.45%          1.53%
    Return on Average Equity (ROE)                     22.05%         22.53%
    Net Charge-Off Rate                                 4.42%          3.92%
    Net Charge-Offs                                   $456.9         $362.7
    Cost Per Account (in dollars)                     $73.69         $81.03

    Managed Loan Statistics (period end)
    Reported Loans                                   $20,921        $17,480
    Securitized Loans                                 24,343         21,009
    Total Loans                                      $45,264        $38,489
    Delinquency Rate (30+ days)                         4.95%          5.20%
    Number of Accounts (000's)                        43,815         40,145
    Total Assets                                     $52,506        $44,497
    Capital, Including Preferred Interests          $3,422.2      $ 3,081.9
    Capital to Managed Assets Ratio                     6.52%          6.93%

    (1) Risk adjusted margin is total revenue less net charge-offs as a
        percentage of average earning assets.
    (2) Includes one-time charges of $38.8 million.


                   CAPITAL ONE FINANCIAL CORPORATION (COF)
                       FINANCIAL & STATISTICAL SUMMARY

    (in millions, except per share data               2001           2001
     and as noted)                                     Q2             Q1

    Earnings (Managed Basis)
    Net Interest Income                               $823.7         $759.3
    Non-Interest Income                                796.3          747.1
    Total Revenue                                    1,620.0        1,506.4
    Provision for Loan Losses                          379.1          356.5
    Marketing Expenses                                 268.7          231.2
    Operating Expenses                                 721.6          687.0
    Income Before Taxes                                250.5          231.6
    Tax Rate                                            38.0%          38.0%
    Net Income                                        $155.3         $143.6

    Common Share Statistics
    Basic EPS                                          $0.74          $0.70
    Diluted EPS                                        $0.70          $0.66
    Dividends Per Share                                $0.03          $0.03
    Book Value Per Share (period end)                 $13.02         $11.81
    Stock Price Per Share (period end)                $60.15         $55.50
    Total Market Capitalization (period end)       $12,666.5      $11,509.1
    Shares Outstanding (period end)                    210.6          207.4
    Shares Used to Compute Basic EPS                   209.1          204.8
    Shares Used to Compute Diluted EPS                 221.2          217.8

    Managed Loan Statistics (period avg.)
    Average Loans                                    $33,440        $30,505
    Average Earning Assets                           $36,180        $32,983
    Average Assets                                   $38,820        $35,303
    Average Equity                                    $2,608         $2,347
    Net Interest Margin                                 9.11%          9.21%
    Risk Adjusted Margin(1)                            14.23%         14.80%
    Return on Average Assets (ROA)                      1.60%          1.63%
    Return on Average Equity (ROE)                     23.83%         24.47%
    Net Charge-Off Rate                                 3.98%          3.75%
    Net Charge-Offs                                   $332.8         $285.9
    Cost Per Account (in dollars)                     $77.38         $78.26

    Managed Loan Statistics (period end)
    Reported Loans                                   $16,327        $15,572
    Securitized Loans                                 18,956         15,979
    Total Loans                                      $35,283        $31,551
    Delinquency Rate (30+ days)                         4.92%          4.72%
    Number of Accounts (000's)                        38,146         36,462
    Total Assets                                     $40,587        $36,749
    Capital, Including Preferred Interests          $2,840.1       $2,547.7
    Capital to Managed Assets Ratio                     7.00%          6.93%

    (1) Risk adjusted margin is total revenue less net charge-offs as a
        percentage of average earning assets.
    (2) Includes one-time charges of $38.8 million.


                   CAPITAL ONE FINANCIAL CORPORATION (COF)
                       FINANCIAL & STATISTICAL SUMMARY

    (in millions, except per share data                               2000
     and as noted)                                                     Q4

    Earnings (Managed Basis)
    Net Interest Income                                              $716.1
    Non-Interest Income                                               696.5
    Total Revenue                                                   1,412.5
    Provision for Loan Losses                                         329.1
    Marketing Expenses                                                259.5
    Operating Expenses                                                617.1
    Income Before Taxes                                               206.9
    Tax Rate                                                           38.0%
    Net Income                                                       $128.3

    Common Share Statistics
    Basic EPS                                                         $0.65
    Diluted EPS                                                       $0.61
    Dividends Per Share                                               $0.03
    Book Value Per Share (period end)                                 $9.94
    Stock Price Per Share (period end)                               $65.81
    Total Market Capitalization (period end)                      $12,989.3
    Shares Outstanding (period end)                                   197.4
    Shares Used to Compute Basic EPS                                  197.0
    Shares Used to Compute Diluted EPS                                210.4

    Managed Loan Statistics (period avg.)
    Average Loans                                                   $26,377
    Average Earning Assets                                          $28,188
    Average Assets                                                  $30,234
    Average Equity                                                   $1,865
    Net Interest Margin                                               10.16%
    Risk Adjusted Margin(1)                                           16.32%
    Return on Average Assets (ROA)                                     1.70%
    Return on Average Equity (ROE)                                    27.51%
    Net Charge-Off Rate                                                3.98%
    Net Charge-Offs                                                  $262.3
    Cost Per Account (in dollars)                                    $78.09

    Managed Loan Statistics (period end)
    Reported Loans                                                  $15,113
    Securitized Loans                                                14,411
    Total Loans                                                     $29,524
    Delinquency Rate (30+ days)                                        5.23%
    Number of Accounts (000's)                                       33,774
    Total Assets                                                    $33,286
    Capital, Including Preferred Interests                         $2,061.0
    Capital to Managed Assets Ratio                                    6.19%

    (1) Risk adjusted margin is total revenue less net charge-offs as a
        percentage of average earning assets.
    (2) Includes one-time charges of $38.8 million.


                      CAPITAL ONE FINANCIAL CORPORATION
                         Consolidated Balance Sheets
                          (in thousands)(unaudited)


                                                                 December 31
                                                                    2001

    Assets:
    Cash and due from banks                                        $355,680
    Federal funds sold and resale agreements                         19,802
    Interest-bearing deposits at other banks                        331,756
      Cash and cash equivalents                                     707,238
    Securities available for sale                                 3,115,891
    Consumer loans                                               20,921,014
      Less:  Allowance for loan losses                             (840,000)
    Net loans                                                    20,081,014
    Premises and equipment, net                                     759,683
    Interest receivable                                             105,459
    Accounts receivable from securitizations                      2,452,548
    Other                                                           962,214
        Total assets                                            $28,184,047

    Liabilities:
    Interest-bearing deposits                                   $12,838,968
    Other borrowings                                              3,995,528
    Senior notes                                                  5,335,229
    Interest payable                                                188,160
    Other                                                         2,502,684
        Total liabilities                                        24,860,569

    Stockholders' Equity:
    Common stock                                                      2,167
    Paid-in capital, net                                          1,350,118
    Retained earnings and cumulative
     other comprehensive income                                   2,006,163
      Less:  Treasury stock, at cost                                (34,970)
        Total stockholders' equity                                3,323,478
        Total liabilities and stockholders' equity              $28,184,047


                      CAPITAL ONE FINANCIAL CORPORATION
                         Consolidated Balance Sheets
                          (in thousands)(unaudited)

                                                                September 30
                                                                    2001

    Assets:
    Cash and due from banks                                         $64,884
    Federal funds sold and resale agreements                        365,652
    Interest-bearing deposits at other banks                        102,094
      Cash and cash equivalents                                     532,630
    Securities available for sale                                 2,707,564
    Consumer loans                                               17,479,715
      Less:  Allowance for loan losses                             (727,000)
    Net loans                                                    16,752,715
    Premises and equipment, net                                     740,144
    Interest receivable                                             108,868
    Accounts receivable from securitizations                      1,949,361
    Other                                                           722,155
        Total assets                                            $23,513,437

    Liabilities:
    Interest-bearing deposits                                   $11,075,499
    Other borrowings                                              1,810,208
    Senior notes                                                  5,462,025
    Interest payable                                                148,931
    Other                                                         2,033,481
        Total liabilities                                        20,530,144

    Stockholders' Equity:
    Common stock                                                      2,121
    Paid-in capital, net                                          1,154,211
    Retained earnings and cumulative
     other comprehensive income                                   1,872,520
      Less:  Treasury stock, at cost                                (45,559)
        Total stockholders' equity                                2,983,293
        Total liabilities and stockholders' equity              $23,513,437


                      CAPITAL ONE FINANCIAL CORPORATION
                         Consolidated Balance Sheets
                          (in thousands)(unaudited)

                                                                 December 31
                                                                    2000

    Assets:
    Cash and due from banks                                         $74,493
    Federal funds sold and resale agreements                         60,600
    Interest-bearing deposits at other banks                        101,614
      Cash and cash equivalents                                     236,707
    Securities available for sale                                 1,696,815
    Consumer loans                                               15,112,712
      Less:  Allowance for loan losses                             (527,000)
    Net loans                                                    14,585,712
    Premises and equipment, net                                     664,461
    Interest receivable                                              82,675
    Accounts receivable from securitizations                      1,143,902
    Other                                                           479,069
        Total assets                                            $18,889,341

    Liabilities:
    Interest-bearing deposits                                    $8,379,025
    Other borrowings                                              2,925,938
    Senior notes                                                  4,050,597
    Interest payable                                                122,658
    Other                                                         1,448,609
        Total liabilities                                        16,926,827

    Stockholders' Equity:
    Common stock                                                      1,997
    Paid-in capital, net                                            575,179
    Retained earnings and cumulative
     other comprehensive income                                   1,474,024
      Less: Treasury stock, at cost                                 (88,686)
        Total stockholders' equity                                1,962,514
        Total liabilities and stockholders' equity              $18,889,341


                      CAPITAL ONE FINANCIAL CORPORATION
                      Consolidated Statements of Income
               (in thousands, except per share data)(unaudited)

                                                      Three Months Ended
                                                  December 31    September 30
                                                     2001            2001

    Interest Income:
    Consumer loans, including fees                  $736,677       $667,335
    Securities available for sale                     38,980         37,032
    Other                                             28,961         18,323
        Total interest income                        804,618        722,690

    Interest Expense:
    Deposits                                         176,619        161,411
    Other borrowings                                  42,084         43,233
    Senior notes                                      96,135         90,225
        Total interest expense                       314,838        294,869
    Net interest income                              489,780        427,821
    Provision for loan losses                        305,889        230,433
    Net interest income after
     provision for loan losses                       183,891        197,388

    Non-Interest Income:
    Servicing and securitizations                    624,915        618,633
    Service charges and other
     customer-related fees                           437,765        428,855
    Interchange                                      114,571         96,702
        Total non-interest income                  1,177,251      1,144,190

    Non-Interest Expense:
    Salaries and associate benefits                  374,793        349,487
    Marketing                                        301,160        281,910
    Communications and data processing                86,810         92,735
    Supplies and equipment                            84,430         77,497
    Occupancy                                         42,172         32,151
    Other                                            185,202        241,117
        Total non-interest expense                 1,074,567      1,074,897
    Income before income taxes                       286,575        266,681
    Income taxes                                     108,894        101,337
    Net Income                                      $177,681       $165,344

    Basic earnings per share                           $0.83          $0.78
    Diluted earnings per share                         $0.80          $0.75
    Dividends paid per share                           $0.03          $0.03


                      CAPITAL ONE FINANCIAL CORPORATION
                      Consolidated Statements of Income
               (in thousands, except per share data)(unaudited)

                                                           Three Months Ended
                                                                 December 31
                                                                    2000

    Interest Income:
    Consumer loans, including fees                                 $679,079
    Securities available for sale                                    25,608
    Other                                                             1,548
        Total interest income                                       706,235

    Interest Expense:
    Deposits                                                        118,072
    Other borrowings                                                 57,699
    Senior notes                                                     71,904
        Total interest expense                                      247,675
    Net interest income                                             458,560
    Provision for loan losses                                       247,226
    Net interest income after provision for loan losses             211,334

    Non-Interest Income:
    Servicing and securitizations                                   291,634
    Service charges and other customer-related fees                 504,239
    Interchange                                                      76,207
        Total non-interest income                                   872,080

    Non-Interest Expense:
    Salaries and associate benefits                                 287,742
    Marketing                                                       259,461
    Communications and data processing                               74,436
    Supplies and equipment                                           76,171
    Occupancy                                                        29,404
    Other                                                           149,302
        Total non-interest expense                                  876,516
    Income before income taxes                                      206,898
    Income taxes                                                     78,621
    Net income                                                     $128,277

    Basic earnings per share                                          $0.65
    Diluted earnings per share                                        $0.61
    Dividends paid per share                                          $0.03


                      CAPITAL ONE FINANCIAL CORPORATION
                      Consolidated Statements of Income
               (in thousands, except per share data)(unaudited)

                                                          Year Ended
                                                 December 31     December 31
                                                    2001            2000

    Interest Income:
    Consumer loans, including fees                $2,642,767     $2,286,774
    Securities available for sale                    138,188         96,554
    Other                                             53,442          6,574
        Total interest income                      2,834,397      2,389,902

    Interest Expense:
    Deposits                                         640,470        324,008
    Other borrowings                                 173,042        202,034
    Senior notes                                     357,495        274,975
        Total interest expense                     1,171,007        801,017
    Net interest income                            1,663,390      1,588,885
    Provision for loan losses                        989,836        718,170
    Net interest income after
     provision for loan losses                       673,554        870,715

    Non-Interest Income:
    Servicing and securitizations                  2,359,930      1,152,375
    Service charges and other
     customer-related fees                         1,680,166      1,644,264
    Interchange                                      379,797        237,777
        Total non-interest income                  4,419,893      3,034,416

    Non-Interest Expense:
    Salaries and associate benefits                1,392,072      1,023,367
    Marketing                                      1,082,979        906,147
    Communications and data processing               327,743        296,255
    Supplies and equipment                           310,310        252,937
    Occupancy                                        136,974        112,667
    Other                                            807,949        556,284
        Total non-interest expense                 4,058,027      3,147,657
    Income before income taxes                     1,035,420        757,474
    Income taxes                                     393,455        287,840
    Net Income                                      $641,965       $469,634

    Basic earnings per share                           $3.06          $2.39
    Diluted earnings per share                         $2.91          $2.24
    Dividends paid per share                           $0.11          $0.11


                      CAPITAL ONE FINANCIAL CORPORATION
     Statements of Average Balances, Income and Expense, Yields and Rates
                      (dollars in thousands)(unaudited)

    Managed (1)                                Quarter Ended 12/31/01

                                        Average        Income/      Yield/
                                        Balance        Expense       Rate
    Earning assets:
      Consumer loans                  $41,352,084    $1,532,978     14.83%
      Securities available for sale     3,187,417        38,980      4.89
      Other                               755,573         4,620      2.45
    Total earning assets              $45,295,074    $1,576,578     13.92%

    Interest-bearing liabilities:
      Deposits                        $12,237,144      $176,619      5.77%
      Other borrowings                  3,495,732        42,084      4.82
      Senior notes                      5,388,881        96,135      7.14
      Securitization liability         21,926,552       278,797      5.09
    Total interest-bearing
     liabilities                      $43,048,309      $593,635      5.52%

    Net interest spread                                              8.40%

    Interest income to
     average earning assets                                         13.92%
    Interest expense to
     average earning assets                                          5.24
    Net interest margin                                              8.68%

    (1) The information in this table reflects the adjustment to add back the
        effect of securitized loans.


                      CAPITAL ONE FINANCIAL CORPORATION
     Statements of Average Balances, Income and Expense, Yields and Rates
                      (dollars in thousands)(unaudited)

    Managed (1)                                Quarter Ended 09/30/01

                                        Average         Income/    Yield/
                                        Balance         Expense     Rate
    Earning assets:
      Consumer loans                  $37,017,405    $1,437,367     15.53%
      Securities available for sale     2,645,982        37,032      5.60
      Other                               330,863         2,646      3.20
    Total earning assets              $39,994,250    $1,477,045     14.77%

    Interest-bearing liabilities:
      Deposits                        $10,537,193      $161,411      6.13%
      Other borrowings                  3,103,263        43,233      5.57
      Senior notes                      5,280,860        90,225      6.83
      Securitization liability         19,472,058       255,508      5.25
    Total interest-bearing
     liabilities                      $38,393,374      $550,377      5.73%

    Net interest spread                                              9.04%

    Interest income to
     average earning assets                                         14.77%
    Interest expense to
     average earning assets                                          5.50
    Net interest margin                                              9.27%

    (1) The information in this table reflects the adjustment to add back the
        effect of securitized loans.


                      CAPITAL ONE FINANCIAL CORPORATION
     Statements of Average Balances, Income and Expense, Yields and Rates
                      (dollars in thousands)(unaudited)

    Managed (1)                                Quarter Ended 12/31/00

                                        Average        Income/     Yield/
                                        Balance        Expense      Rate
    Earning assets:
      Consumer loans                  $26,377,427    $1,146,056     17.38%
      Securities available for sale     1,688,092        25,608      6.07
      Other                               122,192         1,548      5.07
    Total earning assets              $28,187,711    $1,173,212     16.65%

    Interest-bearing liabilities:
      Deposits                         $7,155,771      $118,072      6.60%
      Other borrowings                  3,290,499        57,699      7.01
      Senior notes                      4,084,761        71,904      7.04
      Securitization liability         12,274,193       209,481      6.83
    Total interest-bearing
     liabilities                      $26,805,224      $457,156      6.82%

    Net interest spread                                              9.83%

    Interest income to
     average earning assets                                         16.65%
    Interest expense to
     average earning assets                                          6.49
    Net interest margin                                             10.16%

    (1) The information in this table reflects the adjustment to add back the
        effect of securitized loans.


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SOURCE Capital One Financial Corporation

CONTACT:          Paul Paquin, V.P., Investor Relations, +1-703-205-1039, or
                  Tatiana Stead, Corporate Media, +1-703-205-1070, both of Capital One Financial
                  Corporation

URL:              http://www.capitalone.com
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