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Capital One Reports Record First Quarter Earnings

April 16, 2002 at 4:08 PM EDT
FALLS CHURCH, Va., Apr 16, 2002 /PRNewswire-FirstCall via COMTEX/ --

Earnings Per Share Rise 26% Over Year Ago Period

Capital One Financial Corporation (NYSE: COF) today announced its 19th consecutive quarter of record earnings, driven by a 38 percent year-over-year increase in total revenues, and another quarter of superior credit performance. The company also announced that it is launching a $500 million publicly marketed mandatory convertible transaction.

Earnings for the first quarter of 2002 were $188.0 million, or $0.83 per share, versus earnings of $143.6 million, or $0.66 per share, for the comparable period in the prior year. Earnings in the fourth quarter of 2001 were $177.7 million, or $.80 per share.

"Capital One achieved its 19th consecutive quarter of record earnings despite our increase in marketing expense to a record $354 million -- an accomplishment that demonstrates our ability to both deliver results today and invest in our future. As a result, we remain confident we will achieve our 20 percent earnings per share growth target in 2002," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "I'm equally pleased that once again our stringent risk management practices enabled us to achieve superior credit performance -- with a charge-off rate of 4.00 percent."

First quarter 2002 revenue, defined as managed net interest income and non-interest income, rose to $2.1 billion versus $1.9 billion in the fourth quarter of 2001. In the first quarter, Capital One added 2.8 million net new accounts, bringing total accounts to 46.6 million. The company's managed consumer loan balances increased by $3.3 billion in the first quarter to $48.6 billion.

"Each quarter, our earnings performance solidifies our position as an industry powerhouse -- which is remarkable given the recent economic uncertainty," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Capital One's broad-based growth, coupled with our improved brand recognition, continues to fuel our success. A rapidly growing number of customers world-wide are turning to Capital One for financial products and solutions."

The managed net charge-off rate decreased to 4.00 percent for the first quarter of 2002 compared with 4.42 percent for the fourth quarter of 2001. The managed delinquency rate (30+ days) decreased to 4.80 percent as of March 31, 2002, compared with 4.95 percent as of December 31, 2001. The company also further strengthened its balance sheet by increasing the allowance for loan losses by $150 million.

The company's managed net interest margin increased to 8.87 percent in the first quarter of 2002 from 8.68 percent in the fourth quarter of 2001 primarily because of a decrease in the company's cost of funds.

Marketing expense for the first quarter of 2002 increased $52.4 million to $353.5 million from $301.2 million in the fourth quarter of 2001, and increased $122.3 million over the $231.2 million spent in the comparable period of the prior year. Other non-interest expenses (excluding marketing) for the first quarter of 2002 were $806.4 million versus $773.4 million for the fourth quarter of 2001 and $687.0 million in the comparable period of the prior year. Annualized operating expenses per account decreased to $71 for the first quarter of 2002 from $74 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, 2001.

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 46.6 million accounts and $48.6 billion in managed loans outstanding as of March 31, 2002. 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 5:00 p.m. (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


                                                       2002           2001
    (in millions, except per share data and as noted)   Q1             Q4

    Earnings (Managed Basis)
    Net Interest Income                             $1,120.9         $982.9
    Non-Interest Income                                959.9          941.5
    Total Revenue                                    2,080.7        1,924.5
    Provision for Loan Losses                          617.6          563.3
    Marketing Expenses                                 353.5          301.2
    Operating Expenses                                 806.4          773.4
    Income Before Taxes                                303.3          286.6
    Tax Rate                                            38.0%          38.0%
    Net Income                                        $188.0         $177.7


    Common Share Statistics
    Basic EPS                                          $0.86          $0.83
    Diluted EPS                                        $0.83          $0.80
    Dividends Per Share                                $0.03          $0.03
    Book Value Per Share (period end)                 $16.69         $15.33
    Stock Price Per Share (period end)                $63.85         $53.95
    Total Market Capitalization (period end)       $14,079.3      $11,695.2
    Shares Outstanding (period end)                    220.5          216.8
    Shares Used to Compute Basic EPS                   217.5          214.7
    Shares Used to Compute Diluted EPS                 226.6          223.4


    Managed Loan Statistics (period avg.)
    Average Loans                                    $46,688        $41,352
    Average Earning Assets                           $50,538        $45,295
    Average Assets                                   $54,258        $48,906
    Average Equity                                    $3,572         $3,223
    Net Interest Margin                                 8.87%          8.68%
    Risk Adjusted Margin(1)                            12.78%         12.96%
    Return on Average Assets (ROA)                      1.39%          1.45%
    Return on Average Equity (ROE)                     21.06%         22.05%
    Net Charge-Off Rate                                 4.00%          4.42%
    Net Charge-Offs                                   $466.7         $456.9
    Cost Per Account (in dollars)                     $71.33         $73.69


    Managed Loan Statistics (period end)
    Reported Loans                                   $24,428        $20,921
    Securitized Loans                                 24,136         24,343
    Total Loans                                      $48,564        $45,264
    Delinquency Rate (30+ days)                         4.80%          4.95%
    Number of Accounts (000's)                        46,623         43,815
    Total Assets                                     $55,381        $52,506
    Capital, Including Preferred Interests          $3,778.4       $3,422.2
    Capital to Managed Assets Ratio                     6.82%          6.52%

    (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


                                                       2001           2001
    (in millions, except per share data and as noted)   Q3             Q2

    Earnings (Managed Basis)
    Net Interest Income                               $926.7         $823.7
    Non-Interest Income                                852.5          796.3
    Total Revenue                                    1,779.2        1,620.0
    Provision for Loan Losses                          437.6          379.1
    Marketing Expenses                                 281.9          268.7
    Operating Expenses                                 793.0 (2)      721.6
    Income Before Taxes                                266.7          250.5
    Tax Rate                                            38.0%          38.0%
    Net Income                                        $165.3         $155.3


    Common Share Statistics
    Basic EPS                                          $0.78          $0.74
    Diluted EPS                                        $0.75          $0.70
    Dividends Per Share                                $0.03          $0.03
    Book Value Per Share (period end)                 $14.14         $13.02
    Stock Price Per Share (period end)                $46.03         $60.15
    Total Market Capitalization (period end)        $9,710.1      $12,666.5
    Shares Outstanding (period end)                    211.0          210.6
    Shares Used to Compute Basic EPS                   210.8          209.1
    Shares Used to Compute Diluted EPS                 219.9          221.2


    Managed Loan Statistics (period avg.)
    Average Loans                                    $37,017        $33,440
    Average Earning Assets                           $39,994        $36,180
    Average Assets                                   $43,363        $38,820
    Average Equity                                    $2,935         $2,608
    Net Interest Margin                                 9.27%          9.11%
    Risk Adjusted Margin(1)                            14.17%         14.23%
    Return on Average Assets (ROA)                      1.53%          1.60%
    Return on Average Equity (ROE)                     22.53%         23.83%
    Net Charge-Off Rate                                 3.92%          3.98%
    Net Charge-Offs                                   $362.7         $332.8
    Cost Per Account (in dollars)                     $81.03         $77.38


    Managed Loan Statistics (period end)
    Reported Loans                                   $17,480        $16,327
    Securitized Loans                                 21,009         18,956
    Total Loans                                      $38,489        $35,283
    Delinquency Rate (30+ days)                         5.20%          4.92%
    Number of Accounts (000's)                        40,145         38,146
    Total Assets                                     $44,497        $40,587
    Capital, Including Preferred Interests          $3,081.9       $2,840.1
    Capital to Managed Assets Ratio                     6.93%          7.00%

    (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


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

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


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


    Managed Loan Statistics (period avg.)
    Average Loans                                            $30,505
    Average Earning Assets                                   $32,983
    Average Assets                                           $35,303
    Average Equity                                            $2,347
    Net Interest Margin                                         9.21%
    Risk Adjusted Margin(1)                                    14.80%
    Return on Average Assets (ROA)                              1.63%
    Return on Average Equity (ROE)                             24.47%
    Net Charge-Off Rate                                         3.75%
    Net Charge-Offs                                           $285.9
    Cost Per Account (in dollars)                             $78.26


    Managed Loan Statistics (period end)
    Reported Loans                                           $15,572
    Securitized Loans                                         15,979
    Total Loans                                              $31,551
    Delinquency Rate (30+ days)                                 4.72%
    Number of Accounts (000's)                                36,462
    Total Assets                                             $36,749
    Capital, Including Preferred Interests                  $2,547.7
    Capital to Managed Assets Ratio                             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
                         Consolidated Balance Sheets
                          (in thousands)(unaudited)


                                                             March 31
                                                               2002

    Assets:
    Cash and due from banks                                 $350,738
    Federal funds sold and resale agreements                  13,260
    Interest-bearing deposits at other banks                 105,063
      Cash and cash equivalents                              469,061
    Securities available for sale                          3,175,366
    Consumer loans                                        24,427,642
      Less:  Allowance for loan losses                      (990,000)
    Net loans                                             23,437,642
    Accounts receivable from securitizations               2,218,472
    Premises and equipment, net                              789,572
    Interest receivable                                      148,547
    Other                                                  1,026,051
       Total assets                                      $31,264,711


    Liabilities:
    Interest-bearing deposits                            $14,633,871
    Senior notes                                           5,422,896
    Other borrowings                                       4,879,427
    Interest payable                                         173,659
    Other                                                  2,475,226
       Total liabilities                                  27,585,079


    Stockholders' Equity:
    Common stock                                               2,214
    Paid-in capital, net                                   1,532,034
    Retained earnings and cumulative
     other comprehensive income                            2,180,336
       Less: Treasury stock, at cost                         (34,952)
       Total stockholders' equity                          3,679,632
       Total liabilities and stockholders' equity        $31,264,711



                      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
    Accounts receivable from securitizations               2,452,548
    Premises and equipment, net                              759,683
    Interest receivable                                      105,459
    Other                                                    962,214
       Total assets                                      $28,184,047


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


    Stockholders' Equity:
    Common stock                                               2,177
    Paid-in capital, net                                   1,350,108
    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)


                                                             March 31
                                                               2001

    Assets:
    Cash and due from banks                                  $49,842
    Federal funds sold and resale agreements                 247,676
    Interest-bearing deposits at other banks                 492,390
      Cash and cash equivalents                              789,908
    Securities available for sale                          2,112,180
    Consumer loans                                        15,571,754
      Less:  Allowance for loan losses                      (597,000)
    Net loans                                             14,974,754
    Accounts receivable from securitizations               1,492,818
    Premises and equipment, net                              709,207
    Interest receivable                                      108,944
    Other                                                    614,194
       Total assets                                      $20,802,005


    Liabilities:
    Interest-bearing deposits                             $9,390,524
    Senior notes                                           5,040,761
    Other borrowings                                       1,845,509
    Interest payable                                         135,863
    Other                                                  1,940,103
       Total liabilities                                  18,352,760


    Stockholders' Equity:
    Common stock                                               2,086
    Paid-in capital, net                                     974,503
    Retained earnings and cumulative
     other comprehensive income                            1,519,855
       Less: Treasury stock, at cost                         (47,199)
       Total stockholders' equity                          2,449,245
       Total liabilities and stockholders' equity        $20,802,005



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


                                                      Three Months Ended
                                                    March 31       December 31
                                                      2002            2001

    Interest Income:
    Consumer loans, including fees                  $836,955       $736,677
    Securities available for sale                     42,344         38,980
    Other                                             27,931         28,961
      Total interest income                          907,230        804,618


    Interest Expense:
    Deposits                                         178,163        176,619
    Other borrowings                                  51,056         42,084
    Senior notes                                      93,904         96,135
      Total interest expense                         323,123        314,838
    Net interest income                              584,107        489,780
    Provision for loan losses                        347,212        305,889
    Net interest income after
     provision for loan losses                       236,895        183,891


    Non-Interest Income:
    Servicing and securitizations                    626,147        635,848
    Service charges and other customer-related fees  502,007        426,832
    Interchange                                       98,096        114,571
      Total non-interest income                    1,226,250      1,177,251


    Non-Interest Expense:
    Salaries and associate benefits                  380,735        374,793
    Marketing                                        353,536        301,160
    Communications and data processing                92,193         86,810
    Supplies and equipment                            84,507         84,430
    Occupancy                                         33,381         42,172
    Other                                            215,543        185,202
      Total non-interest expense                   1,159,895      1,074,567
    Income before income taxes                       303,250        286,575
    Income taxes                                     115,235        108,894
    Net Income                                      $188,015       $177,681

    Basic earnings per share                           $0.86          $0.83
    Diluted earnings per share                         $0.83          $0.80
    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
                                                             March 31
                                                               2001

    Interest Income:
    Consumer loans, including fees                          $617,889
    Securities available for sale                             28,234
    Other                                                      3,750
      Total interest income                                  649,873


    Interest Expense:
    Deposits                                                 146,961
    Other borrowings                                          43,900
    Senior notes                                              83,293
      Total interest expense                                 274,154
    Net interest income                                      375,719
    Provision for loan losses                                250,614
    Net interest income after provision for loan losses      125,105


    Non-Interest Income:
    Servicing and securitizations                            553,537
    Service charges and other customer-related fees          396,388
    Interchange                                               74,851
      Total non-interest income                            1,024,776


    Non-Interest Expense:
    Salaries and associate benefits                          325,716
    Marketing                                                231,200
    Communications and data processing                        75,292
    Supplies and equipment                                    73,603
    Occupancy                                                 31,302
    Other                                                    181,134
      Total non-interest expense                             918,247
    Income before income taxes                               231,634
    Income taxes                                              88,021
    Net income                                              $143,613

    Basic earnings per share                                   $0.70
    Diluted earnings per share                                 $0.66
    Dividends paid per share                                   $0.03



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


    Managed (1)                             Quarter Ended 3/31/02

                                  Average          Income/         Yield/
                                  Balance          Expense          Rate
    Earning assets:
      Consumer loans            $46,687,578      $1,672,655        14.33%
      Securities available
       for sale                   3,367,786          42,344         5.03
      Other                         482,290           2,358         1.96
    Total earning assets        $50,537,654      $1,717,357        13.59

    Interest-bearing liabilities:
      Deposits                  $13,505,586        $178,163         5.28%
      Other borrowings            4,925,669          51,056         4.15
      Senior notes                5,429,992          93,904         6.92
      Securitization liability   24,262,546         273,366         4.51
    Total interest-bearing
     liabilities                $48,123,793        $596,489         4.96%


    Net interest spread                                             8.63%

    Interest income to average earning assets                      13.59%
    Interest expense to average earning assets                      4.72
    Net interest margin                                             8.87%

    (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 12/31/01

                                  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 3/31/01

                                  Average          Income/         Yield/
                                  Balance          Expense          Rate
    Earning assets:
      Consumer loans            $30,505,450      $1,235,002         16.19%
      Securities available
       for sale                   1,913,357          28,234          5.90
      Other                         564,592           3,750          2.66
    Total earning assets        $32,983,399      $1,266,986         15.37%

    Interest-bearing liabilities:
      Deposits                   $8,996,414        $146,961          6.53%
      Other borrowings            2,442,200          43,900          7.19
      Senior notes                4,678,452          83,293          7.12
      Securitization liability   14,948,262         233,524          6.25
    Total interest-bearing
     liabilities                $31,065,328        $507,678          6.54%


     Net interest spread                                             8.83%

    Interest income to average earning assets                       15.37%
    Interest expense to average earning assets                       6.16
    Net interest margin                                              9.21%

    (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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